What are they?
Energy efficiency grants can help fund businesses who want to purchase energy saving equipment or install efficiency measures within their commercial premises to reduce their overall impact on the environment and reduce running costs.
A capital injection can help businesses carry out larger energy efficiency projects or access these resources faster than if they were relying on their existing financial resources. More often than not this non-repayable money comes from a Government source or other business support organisations.
What do they pay for?
Businesses may seek grants to pay towards a range of energy efficiency equipment to replace their existing energy inefficient equipment, which are briefly outlined below.
- Air to Air Energy Recovery – Install equipment relating to recovering energy from warm exhaust air
- Automatic Monitoring and Targeting System – Install systems to monitor and identify and reduce energy wastage
- Boiler Equipment – Install eco-friendly energy efficient commercial boiler systems
- Compact Heat Exchangers –Install equipment to recuperate waste heat from combustion processes
- Compressed Air Equipment – Install equipment relating to energy saving measures when using compressed air in industry
- Compressed Heat and Power – Install Compressed Heat and Power (CHP) plant equipment to generate heat and power
- Heat Pumps – Install air or ground source heat pumps for energy efficient renewable heating
- Heating, Ventilation and Heating (HVAC) – Integrate your heating and cooling systems into a HVAC system to save on energy usage and optimise building environments
- High Speed Hand Air Dryers – Install high speed hand air dryers to reduce energy usage from less efficient models
- Lighting – Install energy efficient lighting solutions and lower energy bills
- Motors and Drives – Install energy efficient electrical motors and drives for your manufacturing processes and vehicles
- Pipework Insulation – Make insulation improvements on pipework to reduce heat loss and save on energy use
- Radiant and Warm Air Heaters – Install environmentally friendly heaters that use biomass or recycled warm air and save on heating costs
- Refrigeration Equipment – Install refrigeration efficiency monitoring and optimisation equipment and reduce refrigeration energy costs
- Solar Thermal Systems and Collectors – Install solar thermal panels and collectors and harness renewable energy to contribute to green energy consumption
- Thermal Screens – Install thermal screens to conserve heat collected from solar activity during the day and reduce energy costs
- Uninterruptable Power Supplies – Install systems to create back-up energy supplies to protect against grid power cuts
- Waste Heat to Electricity Conversion Equipment – Install equipment to harness and convert waste heat into electricity
What type of alternative funding is available for energy efficiency?
If businesses cannot readily access a grant in their sector or region that fits their needs, then the alternative is to take on a repayable business loan. Dedicated energy efficiency loans can be accessed from traditional lenders, such as a bank or commercial finance specialist. There are also a number of bespoke loan products designed for the purchase of commercial energy efficiency equipment from energy loan providers.
The Carbon Trust can offer Government backed interest free loans in and Wales to SMEs to install equipment and systems that will boost energy efficiency leading to cost savings and carbon reduction.
A similar Government backed system is in place where Zero Waste Scotland also offers interest free loans to carry out energy efficiency projects for SMEs in Scotland.
In England, the current funding environment means that most energy efficiency loans are offered by private funding providers.
What are the pros and cons of a loan vs a grant?
Grants – What are the Pros and Cons?
Advantages of taking a grant
- Grant funding is non repayable and means there is no pressure on business cash flow moving forward compared with repaying loans and their associated interest.
- Grant funding typically targets specific areas of energy efficiency projects for business and can allow you to explore and expand new areas of your operation that previously have not been developed and made more efficient.
- If you are awarded a grant from a government backed scheme or enterprise support body, this is considered a vote of confidence from the awarding body in question and means they have backed your business proposition as one that is highly likely to succeed. Details of your receiving an award is often publicised in local press or trade publications and this can be used as a promotional tool to secure new business.
Disadvantages of taking a grant
- Grants usually only offer a percentage of total funding needed for a project, in many cases in the UK match funding of 50% is typical.
- Access to grants is highly competitive. As the money is free you will be competing against other businesses and will need to stand out from the rest of the applicants to be awarded funding.
- Grant funding pots are often restricted to specific sectors or regions for energy efficiency projects, so it means if you do not operate within that sector or geographic region then you are not able to access the funding. Some areas and sectors have less funding than others.
- Grants often come with terms and conditions and restrictions, which means you are only allowed to spend the money on what you specifically applied for. Evidence must be provided to show where the money has gone and sometimes the grant is only released as a reimbursement after the project has been completed.
- It is harder for less established SMEs to access money from grants. More often than not a business needs a track record to prove they will make good use of the money and not see the project fail. Some schemes will only accept start-ups with up to 2 years of trading records as evidence.
Loans – What are the Pros and Cons?
Advantages of taking a loan
- Loans will typically cover your entire project costs meaning you will not need to seek additional funding from elsewhere.
- Loan funding is flexible and can be used for anything relating to energy efficiency in the business and there are typically no restrictions on what areas you may spend the money on that would otherwise be restricted if you were using a grant.
- Loans are not limited by sector and means that certain businesses traditionally excluded from grant opportunities, such as consumer facing cafés and retail outlets can more easily access this type of finance.
- When an interest free loan is offered, businesses can access a lump sum up front to carry out a project and then pay back the money over a number of years without coming at any additional overall cost.
Disadvantages of taking a loan
- Whenever you borrow a loan, you must always pay that money back over a period of time with interest (where applicable) and this can put a strain on business cash flow in the future if trading conditions become tough.
- There are some cases where interest rates for less established businesses can be higher due to the greater level of risk and unsecured nature of the loans for those without a proven track record. Businesses with a good relationship with their bank can typically negotiate to get a better interest rate.
- If you are trying to seek a loan when your business is already facing financial difficulties, there is a chance that you may be refused a loan if your business is deemed too high a level of risk. Access to traditional commercial loans can also “dry up” when there are difficult economic conditions taking place across the UK.
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