The added power of green investment

A new study underlines the environmental, economic and social benefits delivered by renewable energy schemes. It’s a ‘triple bottom line’ we must exploit, say Paul O’Brien and Neil McInroy

The environmental benefits of renewable energy projects are well recognised, but new research provides evidence that they can also be financially viable, create jobs and stimulate local economies.

The Association for Public Service Excellence (Apse) commissioned the Centre for Local Economic Strategies to examine renewable energy schemes from an economic development perspective, which had not been considered in previous studies.

Our report, Powerful Impacts: Exploring the economic and social benefits of renewable energy schemes, shows that renewable energy schemes can save money on fuel bills, help meet carbon reduction targets and generate income. Importantly, it also shows how forward thinking councils have used renewable energy as a catalyst to stimulate employment, training, skills and supply chains locally.

The research uses specifically designed methodology to quantify the environmental, economic and social impact of renewable energy schemes. Return on investment was assessed in terms of; payments from feed in tariffs (FiTs); numbers of people employed and earnings generated; value of supply chains; workforce development, training and skills; as well as savings in carbon emissions. The model built in sensitivity tests for factors liable to fluctuations; principally FiTs rates; borrowing rates; equipment costs; and energy costs.

Our team discovered that £1 investment in those renewable energy schemes that were early to get off the ground delivered an average £2.90 in cashable benefits – an almost threefold return on investment. They calculated that a typical scheme fitting solar pv to 500 homes created 12 jobs. It also saved 650 tonnes a year in carbon emissions.

Researchers also calculated the return on investment in light of latest information on reductions to FiTs for solar schemes and found this falls to £1.50. While this is less attractive than the return on the trailblazing projects, with rapid falls in the cost of solar pv forecast, we believe it still represents a strong business case for investment. Though returns from FiTs might be less, reductions in equipment costs will help reduce investment required.

And it must be remembered that, though the tariff may be lower, the wider benefits associated with renewable energy schemes – reducing energy bills, securing energy supply, tackling fuel poverty, creating jobs and stimulating supply chains – remain.

So if changes to FiTs make renewable energy less attractive to those who are purely commercially motivated, in our view, this is all the more reason for councils to take a leadership role in championing such projects for their wider benefits.

Case study examples from places including Brent, Norfolk, North Lanarkshire and Wrexham demonstrate the impacts renewable energy projects are having across the UK. While the authorities discussed in our report have used solar technology, we believe similar benefits can be derived from other projects such as wind, biomass, electric fleet and energy efficiency schemes.

Apse’s previous publication, The Virtuous Green Circle, set out how a ‘revolving fund’ for investment in sustainable energy can operate in local government. This latest research found that council led projects can help ‘lock-in’ the social and economic benefits of renewable energy schemes.

With attention focused on proposals to cut FiTs and legal cases that have followed, there is a risk that the wider social returns such as jobs safeguarded and new skills developed as a result of initiatives could be overlooked. Retaining original investment plans, despite the lower returns, remains a way in which local authorities can both support local economic benefit and employment in such a difficult financial climate.

The best examples given in the study illustrate the potential to deliver a ‘triple bottom line’ impact, in particular the use of local investment to deliver progressive outcomes and address fuel poverty in disadvantaged communities.

We hope the findings will help secure political and public support for new approaches to the environmental and economic crisis we face. Production of local renewable energy shows the way by which a new green economy can be forged for the benefit of place, people and the local economy, which can only enhance the UK’s ability to participate in the growing green economy globally.

• Find out how to order a copy of Powerful Impacts here.