These times are a changing

Despite Brexit uncertainty, tepid economic growth and dwindling government grants, the case for switching to renewables still stacks up, argues Daniel Bailey from Arkle Finance.

It’s fair to say that summer 2018 has brought the issue of climate change into much sharper focus. Soaring temperatures across Europe and floods in Japan have been responsible for the deaths of hundreds, if not thousands of people.

With each passing year, such extreme weather events can no longer be complacently dismissed as “freak” – and there’s a growing consensus that the time to act on climate change is now.

However making the shift to renewable and low carbon technology is not merely a question of government intervention. Real improvement is taking place on the corporate and grassroots levels too, with businesses both small and large driving market demand for greener alternatives.

For a company pondering the leap to renewable energy technology, the reputational benefits are as obvious – and ever-present – as Britain’s supply of wind.

But with Brexit blowing a chilly blast of uncertainty across corporate Britain, some firms are battening down the hatches and deferring big investment decisions.

Nevertheless, more and more attention is being put on the business case for renewable energy.

Earlier this year, the world’s most powerful wind turbine was installed in Scotland, off the coast of Aberdeen, creating an opportunity that should, in the long-run, benefit consumers, the companies behind them and of course, the planet. Just one turn of the turbines of this 191 metre tall monolith is enough to provide a year’s worth of electricity to the average UK home.

But such an investment is no small undertaking; and in the current uncertain climate a business has to be sure it will reap the benefits.

Companies contemplating capital expenditure rightly focus on the ROI (return on investment). Competition among renewable technology brands has driven down prices and greatly increased efficiency, meaning it now takes less time for green tech to pay for itself. In other words, the returns come sooner.

Meanwhile the febrile economic climate – in which the weak pound has forced up input costs and oil prices remain volatile – means energy self sufficiency brings immediate benefits because of the security and certainty it entails.

Renewables go a long way towards guaranteeing energy security, both on a national level but also on an individual level, with more and more households choosing to install their own solar panels or invest in a wind turbine on their own property.

In 2017 solar power accounted for the biggest single contribution to new global power generation capacity for the second year in a row, according to the United Nations Environment Programme (UNEP). Wind power generation came second.

However, in Britain the days of the generous green incentives that were once offered to help organisations and individuals switch to renewables are all but over.

Business owners can still claim capital allowances when they buy energy-efficient technology, which can substantially reduce the amount of tax they pay, but government grants and dedicated green tax breaks have been pared right back.

Yet the baffling array of initiatives and incentives announced – and withdrawn – over the past decade has left many business owners scratching their heads.

That being said, the tide really has shifted in favour of renewables and the public is behind businesses to adopt more environmentally friendly policies and bypass the government when it comes to investing in green technology. Britain’s financial services sector has stepped up to play its part too, and has developed a range of finance solutions to help businesses fund a switch to green tech.

Last year, Ørsted, the largest energy company in Denmark, announced that it would stop using coal and would sell its oil and gas production. It also published a report in 2017 showing that 82% of people in 13 countries – including the UK, the United States and China – believe that it is an important objective to create a world fully powered by renewable energy.

The Paris Agreement was a landmark step towards that objective, and the combination of public and corporate support for renewables is slowly making the ambitious targets set by politicians seem more achievable.

The decarbonisation of our planet is happening but we should not always rely on our world leaders to make the steps for us. It will take both corporate and consumer efforts to reduce our dependency on fossil fuels.

Daniel Bailey is managing director of specialist lender Arkle Finance