Renewable Energy FAQs

A power purchase agreement is a form of long-term contract between an energy supplier and an energy buyer. The contract stipulates a set price for the purchase of energy over the following 10 – 20 years, giving the supplier a regular buyer for the energy they produce and protecting the buyer against market fluctuation. 

Anglo Scottish has extensive experience brokering power purchase agreements, and can help your business access the best possible terms.

Solar panel finance is a dedicated finance facility designed to assist a business with the purchase of solar panels in the name of increasing their sustainability.

Solar panel finance can cover a small solar cluster or an entire solar farm, giving a business the opportunity to spread the cost of their investment out over the lifetime of the asset.

Discover our solar panel finance page to learn more.  

Heat pump finance is a dedicated finance facility to support businesses that are looking to make the transition from traditional gas and oil heating to a more renewable alternative in the form of heat pumps.

Heat pumps produce heat from the ambient air or the heat present in the ground and are far more efficient than a traditional boiler, making them more sustainable than burning oil or gas to produce heat.

Discover our heat pump finance services.

Similarly, wind turbine finance is a form of finance that enables businesses to spread the cost of purchase of a wind turbine – or even a full wind farm, on or off-shore.

Wind turbine finance agreements typically include the cost of maintenance of the asset during the course of the agreement.

Discover our wind turbine finance services.

Financing renewable energy projects is typically done via asset finance, though these can be financed in a number of ways, depending on whether it suits your business to assume full-time ownership of the asset once the finance repayment plan has been completed.

Finance lease agreements may be used for renewable energy projects, where your business wishes to get access to an asset without assuming the responsibility of ownership.

We also offer a range of hire purchase agreements, wherein your business would assume ownership of the sustainable asset after completing the repayment schedule.

As such, there are a range of methods for financing renewable energy.

Asset management, in a renewable energy context, refers to the maintenance and handling of an asset once your business has gained access to it. For example, wind turbines and solar farms require maintenance and upkeep to eliminate wear and tear from exposure to the elements and continue delivering renewable energy efficiently.

Unless your business specialises in renewables, you’re likely to need the input of professional maintenance staff to support your investment. In many of the renewable energy finance projects we work on, asset management is included in the overall cost of the leasing agreement.

Project finance refers to the process of using finance to fund an entire renewable energy project. While specific finance agreements for renewable assets such as solar panels will cover the purchase (and occasionally, upkeep) of an asset, project finance is a more all-encompassing solution that may also cover the purchase of the land on which the renewable asset will be situated, the development costs associated and more.

Our renewables finance services page contains a wealth of information about the services we can offer. 

Renewable assets, as with any investment, come with their own associated risks. The high capital cost of many renewable assets means that the cost of becoming more sustainable can be daunting for many businesses – particularly SMEs and startups.

The assets are typically situated outside, which means that there is some risk associated with wear and tear from exposure to the elements, though this is unlikely to pose a significant issue, with dedicated maintenance agreements covering the upkeep

In actuality, financing these projects is a good way to negate much of the risk associated with them – spreading the cost of investment over an extended period of time means that your business can maintain a uniform cash flow and budget more effectively for the future.

There may be government incentives available for businesses looking to become more sustainable. These may vary depending on what is available at a certain time and depending on your region of the country.

The GOV.UK website features information of any renewable energy incentives that are active at a given time.

The average payback period for a renewable energy project will vary heavily depending on the size and nature of the project – wind turbines tend to have higher capital costs than, say, heat pumps, and therefore require longer payback periods.

Power purchase agreements can be a good way to expedite the payback period of your renewable project, given that these provide a consistent buyer for any renewable energy produced by your business and resold to a utility company or another third party.

Our team of renewables experts will be able to provide more insight into forecasting depending on your business’ requirements, loan-to-value ratio of your project and more – just get in touch to learn more.

Cost of capital refers to the minimum return that a company would need in order to justify a capital-intensive project, such as the purchase and operation of renewable energy assets.

A number of factors influence the cost of capital, including:

Technology type and maturity
Established technologies like those listed above carry less perceived risks than experimental or emerging sustainable technologies that are new to the market.

Project location
Does your project have any inherent risks location-wise? Offshore wind farms carry higher cost of capital than onshore ones, due to the risk and cost of building such a farm.

Market factors
Wider economic and financial conditions also play a key part in influencing the cost of capital.

Loan-to-value (LTV) ratio
How much of the funding for your project is based on external funding? If a small portion of your project is being funded externally, there is less perceived risk – if your project is being entirely funded via finance, there is higher risk attached to the project and therefore a higher cost.

Calculations of the cost of capital are likely to be far more complex in actuality – and will depend on far more factors, including your business’ financial status at the time of investment.

For many businesses, renewable energy projects serve as an opportunity for diversification, giving them a new revenue source through their ability to generate their own energy and possibly sell that energy back to a third party.

Adopting an increasing percentage of renewable energy over time – particularly when that energy is self-generated – will mitigate the risk of associated with external factors such as fluctuating energy prices.

Renewable energy may also offer your business a differentiating factor in a crowded marketplace – sustainability is increasingly identified as a key purchase driver and could make the difference between your business earning a sale or repeat custom.

External market factors, such as interest rates, are just one element at play when it comes to renewable energy financing.

Interest rates are likely to play a role in the overall cost of your asset finance agreement – higher interest rates could lead to a higher cost of finance.

Asset securitisation refers to when a number of income-generating assets are pooled together and securities (such as bonds) are issued, backed by the cash flows from those assets. The securities can then be sold to investors, who will receive periodic payments as the asset generates money.

In a renewable context, this could refer to a power purchase agreement, where the future cash flow of a given asset is established by regular payment and purchase of energy.

There are a number of trends shaping the renewable energy finance landscape.

In terms of renewable asset trends, emergent technologies like next-generation solar tech, bioenergy from advanced biomass and biofuels and green hydrogen production are all growing in popularity.

When it comes to the actual method of financing, businesses looking to access renewable energy assets and become more sustainable have a wider range of options at their disposal than ever before.

We have witnessed an increase in the number of businesses using a combination of green loans or green bonds and external finance to support their renewable transition.

Similarly, carbon credits, issued by third parties like Carbon Neutral Britain and others, are being purchased to help offset the carbon production attached to certain business activities, working alongside sustainable technologies to reduce companies’ overall emissions.