Capital investment could cut the public sector’s energy bills by 30%. Bruno Gardner, Director, Energy Efficiency Ventures at the Carbon Trust, looks at what's holding this investment back and how the public sector can unlock serious savings.
The public sector works hard to minimise waste in its operations. And given that public sector organisations spend over £2.5 billion each year on energy use in England alone it is not surprising that this has become an important area to identify and address inefficiencies.
Investing to reduce energy consumption is one of the best uses for public money right now. Energy prices are rising and ambitious targets are being set for carbon reduction. Relatively swift returns on investment provide an easy way to cut costs and free up more money for the delivery of front line services, while also helping public bodies to lead the way towards a low carbon economy.
When it comes to energy efficiency the public sector has a comparatively strong record, with many organisations developing and implementing robust energy efficiency programmes and carbon management plans. In fact at the Carbon Trust we have worked with over 3,000 public sector bodies to help them do exactly this. But there is still a big gap between the total potential opportunity and what is actually being achieved.
We know the scale of opportunity for cutting carbon in the public sector and how this can deliver major cost savings. Over the last 11 years the Carbon Trust has identified £2.8 billion of total lifetime cost savings for public bodies in England (net of project costs), with over £700 million net saved to date. The government has identified that around £1.66 billion of capital investment could cut the public sector’s energy bills by 30%.
In theory taking action should be an easy decision, but in practice this is often not the case. So what is holding this investment back? In our experience there are generally three major barriers to energy efficiency implementation: a lack of awareness of the opportunity; a lack of confidence in manufacturer or supplier claims about energy efficiency; and a lack of available budget or finance.
Although financing is certainly a barrier for public bodies, there are a variety of potential avenues for funding if internal money is not available. Smaller projects can often be funded by Salix Finance, set up by the Carbon Trust and the government to provide interest-free energy efficiency loans. Projects that receive this financing on average pay for themselves within three and a half years, and to date have resulted in cumulative annual savings of £56 million. Subject to public borrowing limits, funding can also be obtained through private sector suppliers and ESCOs, the Public Works Loan Board, a variety of European schemes and the Green Investment Bank.
A wide range of energy efficiency and renewable energy solutions can be attractive in the right circumstances. The challenge for the public sector is identifying the best solution at the best price. Energy efficient lighting, for example, can sometimes offer payback on capital investment in less than two years. Renewable energy projects typically require greater up-front capital investment and generate slower returns, but may provide larger total savings in the long run.
Often public sector organisations need support from expert consultants and technology suppliers to identify opportunities, develop business cases and implement projects. In these cases, implementation becomes contingent on having confidence in suppliers’ claims about a project’s potential energy and cost saving potential.
Unfortunately this is not always easy in the crowded and fast growing energy efficiency and renewable energy supplier market place. Lowest cost does not always translate into highest value, and some suppliers may be tempted to exaggerate potential savings to demonstrate greater value.
This is why the Carbon Trust provides a range of advice to public bodies on the procurement and contract management of energy and carbon projects. We can advise on tendering processes, supplier selection, and contract management – especially important for getting the best out of larger capital schemes.
We have also developed an Accredited Supplier scheme to make it easier for organisations to identify high quality suppliers. Accredited Suppliers must meet or exceed criteria set by the Carbon Trust designed to examine their capability to deliver thoughtful, well-designed energy efficient and renewable energy systems. All Accredited Suppliers are listed on the Green Business Directory, hosted on the Carbon Trust’s website.
Working with reputable, experienced suppliers will help the public sector to identify and implement the best energy efficiency opportunities with confidence. This will help to unlock serious savings – of both carbon and money.