Sustainability and funding

Colin Morrison explores some of the funding options available to schools to help them further their sustainability credentials

With the terrible flooding in Somerset and Wales, we are once again reminded of the challenges we face from global climate change. Promoting sustainable development is the principal aim of the UK’s planning system, with climate change mitigation and adaptation a specific theme in the National Planning Policy Framework. This national requirement has filtered down into every local authority with the result that all local plans contain policies requiring new development to demonstrate that it has considered climate change mitigation and adaptation as part of its proposals.

This creates interesting challenges and opportunities for independent schools that are proposing to refurbish or create new facilities that will require planning permission and/or meet increasingly tough building regulation requirements.

Schools and the education system arguably represent the country’s greatest hope of tackling the challenges of climate change by inspiring the next generation of scientists, engineers, planners, architects and other such disciplines that will be needed to shape our built environment for the next century. Therein lies the opportunity and what better way to stimulate minds and interest than schools taking up the challenge in adapting to future climate change?

Turley Associates Sustainability Service Group provides a wide range of sustainability services to the built environment as part of the planning process and beyond. They have an expert understanding of national and local policy drivers and also the financial and technical challenges this creates for their independent schools clients where budgets might be constrained and yet ambitions are high.

Reducing a building’s use of energy and carbon emissions is one of the most effective climate change mitigation mechanisms. For a school, continual, annual above-inflation rises in energy costs pose a real problem where there are many budgetary demands and so there are clear financial benefits in reducing energy bills. Add to this the educational value in creating more sustainable buildings plus any requirements from planning and/or building regulations and it is no surprise to see a strong desire to act on this issue

Low carbon generation

Whether a school is looking to reduce its energy use across its estate or having to design low energy buildings, it is likely that the design solution may require some form of renewable or low carbon energy generating technology. Clearly there is a financial benefit to the school if a percentage of its heat or energy can be generated and create some form of annual income.

Independent schools have a wide variety of different options for the installation of low carbon and renewable energy systems and there is an increasing variety of funding and delivery mechanisms which can be used to deliver them, be it a self-financed solar photovoltaic array on the school’s roof, a crowd-funded biomass heating system or a community wind turbine within a school grounds.

With the Feed in Tariff (FIT) and the Renewable Heat Incentive (RHI) now established and a growing supply chain for renewable energy technologies, are there any new solutions for schools that might help breach the gap between desire and financial constraints?

Despite FIT reductions since its launch, we continue to see a demand for Solar Photovoltaics (PV) because it is a proven technology with low risk, predictable financial returns and reducing capital costs. The Department of Energy and Climate Change’s (DECC) own calculations published in support of the FIT scheme estimates that the cost of PV dropped by approximately 25% last year alone with a further price reduction of 15% forecast this year. There is also strong anecdotal evidence from the market to suggest these real price reductions are happening.

For other technologies, the Government has also recently announced increases in non-domestic RHI tariffs for ground source heat pumps with continuing support for biomass heating, meaning shorter payback periods and attractive longer term financial returns.

These price reductions and changes to financial support mechanisms suggest that it is worth looking at renewable or low carbon on-site energy generation again even if previous assessments have not proved attractive.

Despite this, access to capital funding is still a real challenge for schools. The market, however, has introduced a number of funding options that independent schools in particular might have more freedom to consider.

Third Party Funding

There are a growing number of private companies willing to fund and install renewable energy technologies onto land or buildings that a school may own. Typically the funder will pay for the installation of the technology in return for the FIT or RHI payment and an annual lease or long-term (typically 20 years or more) power or heat purchasing agreement.

This route has the advantage of not incurring the capital cost of equipment, although the school must accept a lower return in exchange for marginal up-front costs.

There are many such providers in the market offering different approaches and routes to finance. Independent schools are also able to consider longer payback periods when compared to some traditional project delivery vehicles.

Crowd funding and community energy

The last two years has seen a marked increase in the use of crowd funding as a means of securing capital for renewable energy projects where access to finance is an issue or wider community engagement and social benefits are sought.

Crowd funding is a relatively new phenomenon in the UK but less so in Europe and America. It involves establishing a suitable governance and legal structure for a project and then seeking investment from the general public or stakeholders through sale of project equity, sometimes for as little as £100, on the basis of the project’s forecast financial returns and social and environmental benefits.

Crowd funding can be used by an individual organisation to fund a project or by an established fund to raise funds for multiple projects. The recently launched DECC Community Energy Strategy quotes a number of projects in which state schools are a recipient of crowd funding support for energy projects. Independent schools are potentially more flexible in considering this as a funding option should they wish to develop a project and raise funds from key stakeholders for the installation of low carbon or renewable energy technologies.

There are also examples of student and community groups utilising crowd funding for specific projects; this presents the opportunity of linking carbon reduction projects with education and social engagement initiatives and potentially, academic studies associated with climate change, finance and economics.

The growth of crowd funding has been so marked that a recent debate in Westminster brought commitments from treasury representatives to encourage the development of this industry (as well as maintaining vigilance of the sector from a regulatory perspective).

Schools wishing to explore this avenue are advised to do their research, as there are a number of organisations and data sources that may provide useful guidance and advice. There are, of course, advantages and disadvantages with this route but, given the speed with which this funding option has grown in the UK and the growing number of projects and companies utilising this mechanism, it is an option worth considering. After all, creating low carbon schools is the very personification of sustainable development.

 

Turley Associates

Turley Associates has a highly successful track record working with schools, universities and colleges on estate strategies, campus extensions and masterplanning. They are currently working with independent schools, academies, free schools and university technical colleges. Visit www.turleyassociates.co.uk for further information.

Colin Morrison is director of sustainability at Turley Associates. He works widely in the education sector and can be reached by email: cmorrison@turleyassociates.co.uk.

 

Useful information sources

https://www.gov.uk/government/uploads/../20140126Community_Energy_Strategy.pdf

https://www.abundancegeneration.com/

https://www.ukcfa.org.uk/

Turley Associates accepts no responsibility for the content of these data sources and independent schools are advised to seek professional advice before embarking on any third party funding activity.

 

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9 June 2020 11am BST