BUSINESSES are to be offered discounted loans to help them trim their energy costs under a £200 million deal launched today by Royal Bank of Scotland.
• £200m fund available for firms with turnover of more than £25m
• Investment in Scottish renewables this year is set to top £1bn
• The UK needs to spend £330bn on low-carbon generation by 2030
The state-backed lender is tapping into the £80 billion Funding for Lending scheme to offer reduced-rate loans for UK firms looking to install energy-efficient heating and lighting, or to generate their own power from wind turbines.
Today’s launch of the bank’s carbon reduction fund comes just weeks after the Green Investment Bank (GIB) officially opened for business in Edinburgh. The GIB can lend £3bn of taxpayers’ money over the next three years. Its first investments included £8m for a plant in north-east England that will generate power from waste, and £5m to reduce energy consumption at manufacturing firm Kingspan.
Investment in Scotland’s renewable sector is on track to top £1bn this year according to trade body Scottish Renewables, while the Civil Engineering Contractors Association found the sector accounted for £1 in every £8 spent on infrastructure north of the Border in the past year.
RBS, which claims to have been the biggest lender to UK renewables projects last year, said its fund would be available to companies with a turnover of more than £25m, with a maximum loan term of up to five years.
Chris Sullivan, chief executive of corporate banking at RBS, said: “Businesses of all shapes and sizes can make significant savings from being more efficient as energy costs continue to rise. We hope to offer businesses both an incentive and a solution to transforming their energy use and carbon footprint.”
According to the UK government, demand for power could double by 2050, but it has also committed to slashing greenhouse gas emissions by 80 per cent over the same timescale.
Under measures proposed by energy secretary Ed Davey, consumers will have to pay around £75 more a year by 2020 to fund technologies such as wind farms, nuclear power stations and carbon capture and storage.
Davey said last month’s publication of the Energy Bill heralded a “once-in-a-lifetime transformation” of Britain’s power industry, but utility firms have urged him to move quickly and thrash out the details of the legislation if he is to bring in the necessary investment.
According to the London School of Economics, the cost of meeting future demand with low-carbon power generation could swell to £330bn by 2030.
It was also announced today that green energy firms are to be handed long-term contracts to supply the UK government in an effort to kick-start investment in renewables.
The Government Procurement Service (GPS) is the biggest power customer in the country, spending around £1.5bn a year on gas and electricity.
Under the Energy for Growth pilot scheme, 2 per cent of those needs – equivalent to £25m – are to be met directly from renewables generators, rather than bought on the wholesale market. If the trial is successful, that proportion could be extended to 50 per cent over the next five years. The scheme will initially focus on power sources such as biomass and energy from waste.
Cabinet Office minister Francis Maude said: “This pilot will take us a step further towards our goal of hedging more of our energy needs against future price fluctuations – protecting the taxpayer. And because we will be increasing competition in the energy market there could be a downward pressure on everyone’s bills as well.”
The Scottish Parliament’s economy, energy and tourism committee recently expressed confidence Scotland can meet its target of generating all its electricity needs from renewable sources by 2020 – if it can address planning constraints, skills shortages and access to finance.
RBS said energy is one of the largest costs faced by many businesses, particularly manufacturers.
Jane Stevensen, director of sustainability at accounting firm Grant Thornton, said: “This sort of innovation in sustainable financing has the potential to open up opportunities for businesses at a really advantageous time.”