2nd December, 2013

The Government should "relaunch" the Green Deal for the non-domestic market and enable small businesses to access cheap energy-saving loans in order to stimulate the energy efficiency market, according to a coalition of leading businesses, parliamentarians and civil servants.

The Westminster Sustainable Business Forum (WSBF) and Carbon Connect have today published a report calling on the Government to use a national advertising and a "sector-specific marketing campaign" to drive up demand for the Green Deal scheme in the non-domestic market. The report also urges the Government to stimulate demand for energy efficiency investments among small to medium-sized enterprises (SMEs) through low interest loans. Rather than being funded through Government subsidies, the report recommends these cheap loans are financed by the Green Investment Bank, under guarantee from the Treasury and administered through a new subsidiary set up at the Green Deal Finance Company (GDFC).

Lack of upfront capital

Rising energy costs are cited as one of the biggest barriers of growth by members of the Federation of Small Businesses, but according to today’s report, entitled 'Building Efficiency: Reducing Energy Demand in the Commercial Sector’, "a lack of available upfront capital" is preventing SMEs from investing in energy efficiency.

The report, which has been published following an inquiry into the barriers to energy efficiency investment in the non-domestic sector, also finds that take-up of energy saving measures among businesses is also being hampered by a lack of information and buy-in from top management.

According to the report, there is a strong business case for reducing energy demand in the non-domestic sector; it says it could not only deliver £1.6 billion worth of savings to the commercial sector, but could "neutralise" the threat to the profitability of 'UK plc’ brought on by business’ "increased reliance on electricity, Government policy impacts on energy bills, and future energy price volatility".

Need for education

SMEs, which make up 90 per cent of businesses in the UK, are particularly disincentivised to invest in energy efficiency, according to the report.

"SMEs have trouble seeing the strategic value of energy efficiency – its doesn’t easily relate to their core business values, so there is definitely a need to get the right information out there and educating, but [energy efficiency measures] also require quite a lot of capital upfront so lack of finance is also a barrier," the report’s author Geoffrey Archer, told GreenWise.

Low cost loans

One way of addressing this barrier is by making low cost Green Deal loans available to businesses, the report suggests. Although officially 'open for business’ for the non-domestic market, unlike its domestic counterpart – which has failed to take off since it launched in the January and is now the subject of an industry inquiry to see if loans can be made more affordable – the Green Deal has not been marketed to businesses, nor has the GDFC yet launched a loan product for businesses seeking Green Deal finance. Archer said there was an opportunity to "learn from the domestic side" and relaunch the Green Deal with the SME market in mind.

"This is a realistic proposal. The strength of is that we are calling for an HM Treasury guarantee facility – not a direct subsidy – with the Green Investment Bank providing some finance for a non-domestic subsidiary within the Green Deal Finance Company. There is already a movement within some areas of Government to do this, but it requires a bit of political will to get players into place and get them working together," said Archer.

Golden Rule

As well as low cost loans, the report recommends scrapping the 'Golden Rule’ for the non-domestic Green Deal because this is likely to also be a barrier to take up. Under the domestic Green Deal's 'Golden Rule’, the repayments are set so they do not exceed the savings on energy achieved by the improvements on a typical house.

Other recommendations in the report include an energy efficiency 'hub’ website hosted by the Department of Energy and Climate Change (DECC) providing guidance on all non-domestic energy efficiency schemes and a comprehensive Government database for the energy performance of UK commercial buildings.

In addition, the report, which was sponsored by Siemens and Rockwool, suggests that companies that qualify for the forthcoming Energy Savings Opportunity Scheme (ESOS), which is being set up to help the UK meet its obligations under the EU Energy Efficiency Directive, should be required to get a senior executive such as the chief financial officer or managing director, sign off the 'ESOS Assessor' final report.

DECC declined to comment on the report when approached by GreenWise, saying it had not seen it.

Source: Greenwise 

The Autumn Statement will be live streamed during a policy debate: "What future for ECO?" at the Retrofit Summit on 5 December at the Business Design Centre, London. Jonathan Reynolds MP, Shadow Minister for Climate Change will start the debate with a keynote address, sharing his views and ideas for retrofitting the nation's buildings. The policy debate will include industry experts from the likes of Willmott Dixon, Places for People and Npower.

To view the full speaker programme, CLICK HERE.

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