radically different approach
Under the Energy Efficiency Loan Scheme, which Salix Finance is managing on behalf of DECC, Salix
Finance has been able to provide loans for projects intended to reduce carbon consumption across
broad swathes of the public sector – without the recipient organisation having to match the amount.
Achieve maximum savings for CRC?
It would follow that it would be in the player’s
interests – so far as the dynamics of the table
are concerned – to start off with a high energy
consumption level at the start of the CRC pro-
gramme in order to demonstrate the maximum
possible savings when subsequent consump-
tion levels are reported.
Examination of the published terms of
SEELS shows that the whole of the £51.5 mil-
lions must be allocated to successful appli-
cants before the end of the 2009-10 financial
year - which finishes just as the reference year
for CRC is starting.
Projects financed by Salix need to generate
savings from the moment that the investment
has been made, not least because SEELS
loans start to be repaid at six-monthly inter-
vals irrespective of the volume of energy sav-
ings achieved to that point.
It is therefore in the interests of Salix loan organisations to benefit from SEELS. There
recipients to secure the greatest savings in are bodies, however, which – though recog-
the shortest possible time. It has been argued nisably in the public sector - cannot enter into
that achieving success on this front serves only loan agreements and are therefore unable to
to lower the starting point from which a quali- contract with Salix.
fying organisation’s CRC energy consumption “The energy savings which result from the
is calculated. projects that can be funded will lead to cost
Reference to the framework for calculating reductions and have a long term impact on
CRC league table positioning might suggest their revenue budgets far into the future.”
that it would be better for a participant in the But Mr Keir raised an even more fundamen-
scheme not to take up a Salix loan but to hold tal point so far as the CRC players are con-
off making any CO
2
savings until the first op- cerned. “Carbon savings are achieved from the
erational year. That is probably not what moment that the investment financed by one
DECC had in mind when it formulated its of our loans is in place. Those organisations
scheme with the Treasury. are clearly large consumers of energy or else
they would not be CRC participants. It follows
CRC only affects the largest users
that they can achieve quite considerable en-
ergy savings, and hence cost reductions, at a Alastair Keir, the CEO of Salix
Alastair Keir of Salix Finance was ready to much earlier stage. Finance (above), believes that it
resolve that paradox. He drew attention first to “It makes no sense at all for CRC partici- is worth examining the actual
the fact that the CRC currently only affects pants to hold fire on investment in energy sav- savings achieved under the Salix
around 5,500 of the largest energy users: the ing projects simply to secure a better ranking Energy Efficiency Loan Scheme
work of Salix extends far beyond those con- in the league table. They can be cutting their before a realistic comparison with
sumers into parts of the public sector where energy cost from Day 1. While the bonus pay- other Salix models is possible.
the writ of the Government’s energy capping ments for the most successful CRC players “The notionally shorter payback
scheme does not run. “We are trying to en- will amount to 10% of the carbon tonnage pur- period of the new loan scheme will
courage a broad spectrum of public sector chased in the first full year, and 20% in the not prove a problem.”
The Informed Executive
17
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