A Businessperson’s Guide to Renewable Energy
What is renewable energy and why is it needed?
It’s best to start off with the basics. Renewable energy is the term used to describe energy that has been generated from a source that is not depleted after use, such as wind or solar. Not only are renewable energy resources endless, they’re also far less damaging to the environment than fossil fuels.
The UK has set a legally-binding target to reduce overall greenhouse gas emissions by 80% (set against base levels from 1990) by 2050, so it’s crucial that the country becomes less reliant on electricity that is derived from oil and coal. The proportion of the nation’s energy that comes from sustainable sources continues to increase, and as of mid-2015, renewables accounted for almost a quarter of the UK’s energy output. You can keep track of these figures here.
What does the drive towards a green-power revolution mean for businesses?
Having spent so many years burning coal and oil in order to keep the lights on, the time has come for a drastic overhaul, and the only way to achieve this is to invest in the development of green power. It’s inevitable that the introduction of energy and climate change policies will have an impact on business electricity prices in the long run. The government believes that these policies will ultimately drive down energy bills in future, and it is predicted that climate change legislation will result in an 11% reduction in the average household energy bill by 2020 (compared with the price had these policies not been introduced).
The UK’s move towards a greener future has also spawned a new wave of business energy suppliers that pride themselves on sourcing their electricity from the most sustainable sources possible. Eco-friendliness is an increasingly key selling point, and the rise of smaller alternative energy companies has given consumers more choice than ever. You can check out an extensive list of business energy providers by clicking here.
Investing in renewable energy technology
In the summer of 2015, the UK government came in for criticism after announcing measures to control the cost of renewable energy development. First, subsidies for onshore wind farms were withdrawn a year earlier than planned, and this was followed by confirmation that solar energy funding would also be reined in. Changes to the Feed-in Tariff scheme (an initiative we’ll explain in a little more detail shortly) were also outlined in September 2015.
The government acted on the back of a report issued by the Office for Budget Responsibility, which suggested that renewable energy subsidies raised from consumers’ bills could increase, hitting domestic and business energy customers in the pocket. Subsequently, the government insisted that having invested so much money into the development of renewables, companies that specialise in the generation of green energy would need to show that they could flourish without financial support from the state.
According to PwC, between 2010 and the end of 2015, the UK’s investment in renewables will have topped £50 billion. A further £50 billion is predicted to be invested by 2020, although this forecast was made before the government started to announce its cutbacks. In spite of these recent changes, the rise of photovoltaic solar systems has been particularly encouraging. The amount of electricity generated via solar panels almost doubled in 2014, and the popularity of panels continues to rise among households and businesses. Also, despite the withdrawal of funds, the UK still has high hopes for wind power.
5 wind energy facts
- Higher wind speeds equal more electricity generation. In mid-2015, the government confirmed that average wind speeds in the first quarter of the year were measured at 10.6 knots compared to 9.8 knots - the 10-year mean for the quarter.
- Wind energy is the world’s fastest growing source of renewable power.
- According to RenewableUK, a single 2.5MW wind turbine can generate enough electricity to serve more than 1,400 households.
- RenewableUK estimates that the average cost of generating electricity from large-scale onshore wind is around 3p to 4p per kilowatt hour (coal is 2.5p to 4.5p and nuclear is 4p to 7p). Wind turbine costs vary from project to project. You can get a good idea of the capital cost per turbine by checking the Local Government Association’s website.
- Information provided by the European Wind Energy Association shows that the wind power capacity installed across the continent by the end of 2014 would produce enough power to cover 10.2% of the EU’s overall electricity consumption. You can check out the EWEA’s annual reports here.
5 solar energy facts
- Humans have used solar energy for thousands of years. The Greeks designed their towns and homes to face the sun so their buildings would be heated during the winter. Now we do much better than that and use solar photovoltaic panels to harness that same energy.
- Solar is possibly the most abundant natural resource on the planet. It is estimated that approximately 173,000 terawatts of solar energy are constantly hitting the Earth’s surface.
- According to the Energy Saving Trust, a 4kWp solar panel system in the south of England can produce approximately 3,800 kilowatt hours of electricity per year. That’s enough for the entire household’s yearly energy requirements.
- A report by a German Think Tank has predicted a bright future ahead for solar energy. Already an inexpensive form of energy, the report predicts that solar energy will be the cheapest source of electricity for many parts of the world within the next 10 years.
- The world’s largest solar power plant is located in the Mojave Desert in California, and will help reduce carbon dioxide emissions by 400,000 tons per year.
Feed-in Tariffs: What are they all about?
As a business owner, you know that it’s important to be as eco-friendly as possible, and you probably understand the importance of renewable energy technology as we strive for a society that creates far less pollution. But how can your business play its part? What are the logistics of embracing clean energy?
The Feed-in Tariff scheme is a government-led programme that encourages businesses to adopt renewable energy technology. Essentially, businesses that utilise photovoltaic solar panels or wind turbines to generate electricity can get paid for the power that they produce by their energy provider. So not only are you using your own electricity - which will help you to reduce your overall business energy bill - you can also earn money for any of your surplus electricity that is used elsewhere.
You’ll need to check your eligibility dates with your supplier, and once you’re up and running you’ll want to keep track of fluctuations in Feed-in Tariff rates, which tend to rise in line with inflation. You can stay abreast of any changes by regularly checking Ofgem’s Tariff Tables page. Ofgem regulates the scheme, and you can read more about it here.
Changes to the Feed-in Tariff scheme have caused controversy, amid fears that the initiative could be withdrawn completely. It’s certainly worth staying up to date on the latest news developments relating to this programme.
What does the future hold for renewable energy?
While the withdrawal of subsidies is a concern, the amount of money being pumped into renewable energy technology by private investors remains healthy. A report by the Renewable Energy Association and KPMG from July 2015 reiterated the point that solar has come on leaps and bounds, and ground-mounted solar is set to reach “grid parity” by 2020. This suggests that solar power has the potential to be the first renewable form of energy to be subsidy-free.
We know that the UK has set some ambitious targets surrounding the reduction of greenhouse gases, but what’s the rest of Europe doing? As the UK is part of the EU, decisions made in Brussels can have a direct impact on how successful the UK is at creating a more sustainable energy market. By 2020, the EU wants to have reduced its greenhouse gas emissions by at least 20%, while at the same time ensuring that renewables account for one-fifth of all energy consumed across the continent. To achieve its targets, the EU will invest in more efficient buildings, products and transport, and will also focus on delivering the European Strategic Energy Technology Plan, which aims to accelerate the development and deployment of low-carbon technologies. At both EU and UK level, it’s imperative that every possible measure is taken to phase out the use of fossil fuels.
Business energy customers will hope that as sustainable energy technology eventually becomes cheaper, their bills will fall accordingly. We’ve already mentioned that more green-focused electricity providers are entering the market, giving consumers more options when it comes to sourcing their energy. The industry is likely to become even more competitive as these smaller organisations establish themselves, which can only be good news for those looking to find the cheapest business energy tariffs going.