Economy Seven Article – Una Group

Definitely. We started looking seriously at developing renewable energy businesses some time ago and have been on a steep learning curve.
 
Energy costs were, and still are, a big part of our cost base and it is clear this is only going to rise. The 2008 ‘spike’ in prices was not an aberration but the current low prices are - one silver lining from the recession. Once economic growth picks up we can expect a resumption of higher overall energy prices.
 
That leaves businesses with the challenge of how to adapt to the higher price environment and how best to capitalise on it. Unless we manage energy costs they will do real damage to our economy.
 
To give an example, one of our tenants was asked by its US parent company why it was paying so much for energy. The tenant was paying normal UK-level energy prices, but comparison to lower US energy bills caused the parent to question whether to continue investing over here.
 
Developing renewable generation businesses is one way of taking control over these costs. We have started developing sites where small scale plant can be installed to generate electricity from some of our operations’ waste.
 
Such schemes potentially have huge benefits, both for us and the environment. In the long term, disposing of energy rich waste in landfill while importing fossil fuels can never be sensible.
 
Deploying some risk capital to develop investment-ready sites with planning permission, grid connections and basic investment structures in place has worked well. In the couple of years it has taken us to accomplish this, and climb the learning curve, the market has moved decisively in our direction.
 
Newer, more efficient technologies are evolving and Government support schemes have helped underpin the commercial case for investment.
 
Less helpfully, we have had the ‘credit crunch’. All renewable technologies are capital intensive. Access to competitive funds is key to determining how many schemes will be viable and when they will be delivered.
 
We need to deliver them quickly. We are seeing some inflation in the capital costs of renewable projects as everyone suddenly turns to them. The supply chains are clearly stretched.
 
This sounds like great business for those in the supply chain struggling to keep up with demand and rising prices. For everyone else, it is part of the bigger challenge.
 
The UK is behind its competitors in renewables deployment and too much of its waste still goes to landfill. The resulting costs are mounting up for business.
 
The longer we leave it to tackle this decisively, the greater the damage to our competitiveness.