Cost concerns putting companies off energy efficiency

The vast majority of companies have invested in basic energy efficiency measures but are being put off making larger investments because of high capital costs and fears over the length of time it will take to see returns.

That is the conclusion of a survey of more than 250 businesses leaders commissioned by Ernst & Young, which shows that while over 70 per cent of those polled had made basic improvements to temperature controls or lighting, just 12 per cent had invested in more costly energy-saving measures such as microgeneration technologies.

Almost 80 per cent identified concern over the length of time it would take for their investment to show a return as the reason for delaying further measures, while 77 per cent cited high upfront costs as a barrier to investment.

Richard Postance, advisory partner in power and utilities at Ernst & Young, told BusinessGreen that while 95 per cent of businesses expect energy prices to increase over the next five to 10 years businesses were still taking a conservative approach to energy-saving technologies.

“A lot of people have made a start and the things they haven’t done – behavioral change, microgeneration – are pretty hard,” he said. “The problem is people think it’s a future market, even though that’s not the case. Unless something changes, will we really see the energy efficiency improvements we need?”

Postance said more innovation was required from both businesses and policy makers to drive energy efficiency investment, citing EDF’s contract with supermarket Morrisons guaranteeing £1m in annual energy savings, as a prime example of how firms could increase their focus on energy efficiency.

He also advocated wider promotion of the government’s Green Deal energy efficiency loan scheme to the commercial sector.

“Offering the Green Deal business-to-business is a smart move,” he said. “After all, we’re looking to reduce net carbon emissions for the economy and there are some efficiencies that come from scale.”

However, Postance was circumspect about the idea of a not-for-profit organization offering low-cost deals to help companies cover the capital costs of energy efficiency measures, a concept BusinessGreen yesterday revealed some companies were considering.

“Loans come with a risk and I think that risk deserves a return,” he said. “If the other side isn’t getting enough value I’m not sure if it could continue.”

He added that if the finance provided by the national aggregator was coming back to the companies involved, the body would effectively be “enabling those who stand to make money from the value chain to accelerate that”.


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  • 24 Sep, 2011
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