Explaining the business case for investing in renewable energy

Recent reports by the Intergovernmental Panel on Climate Change (IPCC) claim that we have to cut emissions by 50% by 2030 to reduce the effects of global warming and stay on track to deliver the targets of a net zero world by 2050.

A lot of businesses are now thinking about the social and environmental impact of their activities, in addition to the economic benefits and overall business profitability. Large companies all over the world like Google, WalMart and Amazon are making huge investments in renewables and the respected consultancy, PWC has said that climate tech investment has grown by more than 3750% in absolute terms since 2013. Today, it is still growing 5 times faster than the average rate of all other industry investments.

Clearly, this is an important topic and we all have a responsibility to play our part, but what does that mean for business owners and what they can do to reduce their carbon footprint whilst managing the day to day pressures of managing a business. Well, the good news is that it actually makes good business sense to invest in renewable energy.

Managing your business performance in a different way.

With the increasing pressure of social and environmental issues on your business, it’s important to not just focus on the usual ‘reduce costs and sell more’ approach, but also think about a 3rd dimension of creating a sustainable environment for the future whilst identifying new ways to improve your business performance.

Increasingly, responsible businesses are being run using a method called the ‘triple bottom line’ – they are clearly looking at traditional economic accounting, but are also accounting for the environmental impact of their business, whether that is through renewable energy or waste management for example. Many businesses are now actually turning waste via recycling into an income stream, rather than the historical cost of disposal, which is just one example of how doing the right thing can actually ‘win’ economically.

But it doesn’t stop there – there are also social implications as there is statistical evidence that shows people want to work for environmentally responsible companies; it helps with recruitment and retention. There is also evidence to show that businesses in the supply chain want to work with other responsible businesses, sometimes for legislative reasons, but more often its because they want to be associated with reputable high quality organisations that are focused on ‘doing the right thing’. And finally, more customers will be attracted to responsible businesses and want to do business with them, often prepared to pay a premium to demonstrate their support for sustainable industries.

And the benefits continue as it also helps to enhance your business reputation, both externally and internally, helping to recruit and retain quality staff by demonstrating your Corporate Social Responsibility (CSR) credentials and being seen to be a ‘good business to work with’.

 

What is triple bottom line?

 

Having said all that, the economic opportunities are increasing all the time with clear business benefits that are helping to drive decision making. For example, recent analysis by The Carbon Trust highlighted that a 20% cut in energy costs represents the same profit savings as a 5% increase in sales. It is increasingly clear that doing good business for the environment is also good business for you.

Let’s look at how the numbers work.

Typically, people are paying between 15p and 20p for electricity. By generating your own renewable energy with solar panels for example, you reduce the need to buy electricity at ever increasing prices – that’s already a big win!

Then, if you are using more of the energy you generate on site, you will get a greater return. For example, a large commercial system of 100kw with 95% on-site usage will generate an average of 13.5% return, as well as over 40 tonnes of carbon reduction.

In many cases, businesses can actually make more money in the longer term by reducing their energy bills than many other sales and cost reduction activities.

Other benefits that businesses should consider are things like capital investment allowances. Just like buying plant equipment or machinery, renewable energy will reduce your tax burden. As announced in the recent budget, there will be 100% allowances into next year.

So, there are lots of areas where solar energy alone can provide a big financial win for your business – the economics really do make sense.

What about other renewable options?

Have you considered using solar to give you low cost motoring? By 2030, we won’t be buying cars using fossil fuels anymore – all future car production will be focused on electric. This is a development that is happening right now (and very fast too) with more and more electric and hybrid vehicles becoming available and affordable. With that in mind, if you have solar panels, you can use that energy generated to charge your electric vehicles that won’t cost you anything – there’s nothing more satisfying than refuelling your car for free!

To highlight the business case further, the US Postal Service has just announced a £6 billion investment into electric vehicles as they are so much more efficient to run.

Increasingly, batteries are playing a more important part in renewable energy, enabling you to purchase energy on much cheaper tariffs at off-peak times (often just 4-5p in comparison to the higher typical rates of 15-20p), which means you can store and use that power for your vehicle, home or business use during the day to offset more expensive power. In conjunction with solar, the business case looks even better as the solar panels can also charge up the batteries, helping to provide free energy at all times of the day.

Managing behaviour and power usage

But all of this is all set around the principle that we should all be changing our behaviour to become more environmentally aware and ‘smart’ in our approach to power usage. For example, in a warehouse environment, you could introduce LED lighting, install fast closing shutter doors to retain heat and set up intelligent lighting and heating systems that only come on when you need them. In a domestic setting, you can also make huge savings just by being smart with when you are using power and the appliances that you are using. Again, if you are using solar to generate your energy and using as much of it on site as possible, you’ll make even greater savings.

Socially, everyone should be thinking more about the personal impact they are making on the environment, changing behaviour to consider how they use energy in everyday activities.

There are real benefits in understanding environmental issues at all levels, but we all need to start taking actions now to make a difference – it doesn’t have to cost a fortune to be sustainable and with the longer term benefits clear to see, the future outlook for businesses is much brighter and greener than before.

For more information and advice on your options for investing in renewable energy, please get in touch with the team at Caplor Energy who will be more than happy to help.