Funding net zero: our low-carbon, low-risk proposal to UK business

By answering the rallying cry of the Committee on Climate Change for more investable propositions – and by listening to the needs of our clients – we have brought to the market a solution that can help overcome the barrier of low-carbon funding, and in turn help deliver net-zero emissions for the country. 

Reaching net-zero carbon emissions by 2050 will require extensive changes across the UK economy. This much we already know.

We know we’ll need to see a radical switchover to low-carbon technologies and the stimulation of new and existing green industries, such as carbon capture and storage, low-carbon hydrogen and heat, electric vehicles and decentralised renewable energy generation.

We also know that major transformations to our infrastructure will be needed to support these new technologies, not to mention the engagement of the general public and businesses to make other necessary changes.

What is perhaps not so clear is exactly how these changes might happen over the next three decades – particularly when you consider the many high-level policy decisions still to be made and the potentially astronomical cost of delivering net-zero carbon.

Estimates for the total investment needed to reach the target range from anywhere between £50bn to £70bn per year until the middle of this century. And whilst some of this investment will come from Government funds, the sheer volume of capital required means that the private sector will be expected to contribute a significant proportion.

However, questions have justifiably been raised over this weighty expectation on UK industry to effectively deliver net zero for the country. With the continued growth of the low-carbon economy currently dependent on clearer and more effective policy that can drive innovation, market development, and ultimately achieve the lower costs that can encourage greater take-up of low-carbon technologies, many businesses may continue to face financial constraints when considering investment in a net-zero strategy.

That is because with the cost of low-carbon technologies, such as batteries, on-site generation, or heat solutions, remaining high when deployed at scale – particularly when you consider the sometimes lengthy payback period it takes to offset the initial cost from resultant energy savings – then there also remains an arguably unattractive level of risk for business to invest en masse.

Recognising this potentially substantial barrier to reaching net zero, especially given the time needed to fully develop markets, supply chains and infrastructure, the Committee on Climate Change last year asserted the following pre-requisite to deliver the Government’s 2050 target:

Investable propositions (i.e. with suitable risk-return criteria to appeal to the private sector) will be needed to bring in the required volume of capital at a relatively low cost

Committee on Climate Change

Net-Zero – The UK’s contribution to stopping global warming

At SMS, with our track record of energy asset funding – including  £1bn invested in smart meters, data and energy efficiency over the past 25 years – we heard this call to action loud and clear, whilst also witnessing first hand the constraints faced by some of our customers when helping develop their energy strategies.

And that is why over the past 12 months, we as a business have mobilised to bring to the market what we believe is a solution that can help overcome this barrier and deliver net-zero carbon emissions for our clients, and for the country as a whole.

Our newly launched Carbon Reduction (CaRe) Asset Funding service makes available innovative, long-term, low-cost funding to business consumers and supply chains, allowing them to deploy their scaled rollout of energy assets at no upfront cost. Combined with the skills and experience of our existing energy services team, who can deliver, manage and fully integrate these low-carbon technologies as part of a holistic energy strategy, it means that we now provide a comprehensive net-zero offering.

As part of this offering, we have identified five initial asset classes that we will primarily be focusing on funding and delivering for our customers. These are:

Generate
With our deep engineering skills and knowledge, and supported by our electricity connection, metering and data services, we manage the end-to-end installation and delivery of distributed renewable generation solutions. These installations are complemented by the introduction of other technology, including a) smart meters to measure and record export of generation to the grid, b) integration of battery storage and demand-side management solutions to maximise the benefit of local generation.

Store
Utilising our national engineering capability and integrated with our delivery of smart metering solutions, SMS will be directly contributing to battery storage market growth over the coming decade and have begun testing and developing trial and proof of concept solutions with our I&C, local authority, and energy supplier customer bases. Grid scale assets are also a key facet of enabling increased renewable generation penetration and part of the SMS asset funding and delivery pipeline. Read about our participation in the pioneering, UK government-backed ReFLEX Orkney project.

Heat
Provision of heat currently contributes around a quarter of all UK greenhouse gas emissions and will take a concerted effort from government, regulator and industry to decarbonise. A holistic approach will enable the integration of increasingly low-carbon power sources into decarbonisation efforts through electrification of heat. We can utilise several low-carbon technologies as sources of heat across your portfolio and offer the option of including electrified heat sources into grid balancing services which can improve the business case without impacting comfort.

Efficiency
We provide a full range of energy efficiency services, from practical guidance and support that helps rationalise consumption, to best practice projects that maximise sustainability and reduce carbon emissions, for example implementation of ISO management systems, employee engagement, and travel and waste management. We also provide turnkey delivery services for a variety of energy efficiency projects, such as LED lighting and smart heating and lighting controls. Read about our LED rollout for UK hotel chain, Travelodge, which was nominated for Energy Efficiency Project of the Year 2019 by Business Green.

For more insights on net-zero strategy, asset funding, and the integration of low-carbon technologies into your business energy portfolio, follow us on LinkedIn or bookmark our News page.