Lack of Government help is stopping manufacturers switching to renewable energy - Daniel Coates

In 2022 energy prices soared out of control but this didn’t translate into a rush of manufacturers and other high energy users switching to renewable energy – a situation that poses a big question, why? Companies can definitely see the benefit of switching.

We’ve invested over £300,000 doing it and now produce most of the electricity we require to operate on a 24/7 basis through a solar power installation and a low carbon gas generator.

The benefits go far beyond cost savings, with the savings we’re making on energy bills helping to reduce manufacturing costs.

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If this was scaled up to a level where the vast majority of manufacturers and high energy users were in a position to switch then the impact would be massive – reduced manufacturing costs alone would help to reduce inflation and ease the cost-of-living crisis, while also making British made products more appealing for export.

A meeting of the new-look Cabinet at 10 Downing Street, London. PIC: Kin Cheung/PA WireA meeting of the new-look Cabinet at 10 Downing Street, London. PIC: Kin Cheung/PA Wire
A meeting of the new-look Cabinet at 10 Downing Street, London. PIC: Kin Cheung/PA Wire

And then there's the environmental impact of a sweeping switch to renewable energy and the impact it would have on the Government achieving its much-vaunted Carbon Zero targets.

So, why aren’t more businesses making the renewable switch? Part of the answer can be seen in the size of investment we’ve made doing it.

It’s a huge amount of money and for many, especially given the current economic situation, it’s prohibitively high. Especially when looked at beside the fact energy prices will fluctuate, both up and down.

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There are alternatives to capital expenditure that can get solar panels installed, but they don’t seem to appeal enough to get enough businesses enthused enough to switch.

At present the other main ways in which a business can switch to solar power are:

Power Purchase Agreement (PPA) – businesses cover the up-front costs of equipment and installation and then charge a per unit price for all electricity produced over a set time period; usually 25-years.

Leasing – a straight rental agreement that sees equipment leased for a set period of time and the renter not paying for any of the power generated. This is very infrequently used.

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If the Government really is serious about moving away from carbon-based energy sources to a renewable, greener future, then it needs to do something drastic and do it quickly. And that action is easily defined – they need to incentivise manufacturers and other high energy users to switch to renewable forms of energy.

How exactly that would look and work probably falls on the shoulders of someone above my pay grade, but I do have a few ideas.

Renewable energy loans, similar to the bounce back ones offered during Covid, would certainly help businesses considering cap-ex.

While for those intent on following the PPA or leasing route then surely there’s scope for the Government working in tandem with suppliers to deliver an incentivised deal that either makes unit prices more appealing or rental terms hard to say no to.

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The aim though had to be the same for all three options – to get high-energy users switching en-masse to renewable energy and with it taking the country one giant step closer to being Carbon Zero.

Daniel Coates is the business development director of Leeds-based LVF Packaging.

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