Can on-site renewable generation protect businesses from prolonged volatility in the wholesale energy markets?
With no immediate sign of wholesale energy prices falling substantially any time soon, there has never been a stronger, or quite frankly urgent need, to install renewable generation on-site.
As the latest IPCC report made clear, the economic benefit of mitigating climate change is very likely to outweigh the cost. This impetus is now being translated into decisions at businesses of all sizes, with the business case for renewables strengthening further.
Additionally, according to NatWest’s Sustainable Business Tracker, the number of SMEs investing in on-site generation is set to double over the next 12 months.
In this article Good Energy takes a look at recent policy developments from the UK government to help guide businesses with making those critical investment decisions.
Recent policy developments
Amid extremely high fossil fuel prices, the UK government have announced some welcome policy changes to help encourage homegrown renewable generation.
One of the central headlines came from the Chancellor’s spring statement, where the government brought forward the implementation date for the business rates exemption for organisations investing in renewable technology including solar PV, batteries, EV chargers and heat pumps to come in from 1st April 2022, rather than 1st April 2023.
Previously, installing renewable technology on-site often led to businesses paying higher business rates. This is because the installation of renewable technology frequently increases the value of the property and therefore attracts a higher rate that businesses are liable for.
Bringing forward this exemption provided certainty and a sense of urgency but also critically strengthened the incentives for businesses considering installing renewable technology on-site.
Separately, the Chancellor used the spring statement to announce VAT relief from April this year, which will see the VAT on small scale renewables and energy efficiency measures go from 5% to 0% over the next five years.
Finally in may last year, Ofgem announced their latest decisions on the wider networking charging reforms. From April this year, Ofgem are committed to reducing the initial up-front costs for businesses installing low carbon technology such as Solar PV and EV charging points.
Strengthening the business case
Installing renewable technology on-site offers numerous benefits for businesses and even more so with the recent high volatile prices in the wholesale markets.
High on the list of advantages include lower utility costs and more predictable prices. There is of course an up-front cost for installation but viewed in the current context of extreme wholesale volatility, the payback period has been accelerated and become a much more attractive proposition.
Another important consideration for the payback period is the potential added value that can be derived if you do come to sell the premises or let to tenants. Having renewable energy on-site can be an attractive proposition for potential investors and represents a shrewd long-term, sustainable investment.
Alongside the rewards of lower costs and more predictable prices, installing on-site generation also enables businesses the opportunity to unlock new revenue streams, via exporting power back to the grid.
As the UK grid moves to a more flexible, responsive system – there will be opportunities for businesses to also support demand side response activities, which could see businesses rewarded for helping the grid manage peak periods of demand.
Finally, installing renewable generation on-site presents an excellent opportunity for businesses to lower their own direct carbon emissions. Consumers are increasingly looking to businesses to demonstrate their carbon reduction activities. Generating homegrown renewable power at your premises can be one of the most powerful messages to retain and acquire consumers.
How Good Energy can help
The company’s aim is to support one million homes and businesses cut carbon from their energy and transport used by 2025.
Good Energy have proudly championed small scale, local renewable generation for over twenty year, helping over 1,700 independent generators get paid a fair rate for their electricity, and will continue to do so, as even more businesses look to invest in their own renewable generation on-site.
To do this, they support businesses by developing exciting product offerings, such as their Smart Export product.
The Smart Export solution will pay users for what they export as opposed to deemed rates. Depending on your individual setup and nature of your business, this could result in a valuable rate of return – turning perhaps previously unused roof space into an additional revenue stream.
Good Energy will be attending this year’s Low Carbon Agriculture Show, helping agricultural businesses to decarbonise and those that generate, make their power pay more. Come and speak to us at stand 516.