4.15 The first element of the Programme we discuss is the Energy Efficiency Loan Fund managed by the Carbon Trust. The Carbon Trust has a substantial track record in providing energy efficiency loans to businesses in Northern Ireland. As outlined in its Business Plan for SPP18,
from 2003 to 2012 the organisation provided £20m in interest free loans to 420 businesses, leveraging around £20m in private sector investment and estimated to result in over £100m in lifetime energy cost savings.
4.16 Prior to SPP, the Carbon Trust was funded by INI to deliver both a loan scheme and an energy efficiency support programme which involved site visits, training and delivering events. There was therefore a strong relationship between INI and the Carbon Trust. The credentials of the organisation in delivering this type of scheme were validated in reviews undertaken by Ernst and Young19 in 2013 and KMPG20 in 2014.
4.17 Under SPP, it was agreed that the Carbon Trust would provide interest free loans of between £3k-£400k to businesses using a carbon saving criteria of 1.5tCO2 per £1k lent. The Fund has been managed by a Loan Scheme Manager and Loans Administrator in the Carbon Trust’s Belfast office with financial and technical support brought in from other parts of the organisation. The following outcomes from the Fund were agreed with INI in the funding agreement. It was subsequently agreed21 that INI would provide £1.7m in 2013/14 and
£0.3m in 2014/15.
Table 4-5: Agreed budget and outcomes for the Energy Efficiency Loan Fund
2012/13 2013/14 2014/15 Total
Allocated budget (new capital £m) 1.00 1.00 1.00 3.00
Value of loans committed (£m) 3.96 4.30 4.64 12.90 Expected leveraged co-funding (£m) 7.93 8.60 9.27 25.79 No of loans committed 142 154 166 462
18 Carbon Trust (2012) Request for funding to deliver the energy efficiency interest free loan scheme over the period 2012-15
19 Ernst & Young (2013), Review of Carbon Trust Energy Efficiency Loan Fund 20 KPMG (2014), DETI External Delivering Organisation Inspection Visit – Carbon Trust 21 INI (2014), Amendment to Letter of Offer to the Carbon Trust
Final report
2012/13 2013/14 2014/15 Total
Energy cost savings implemented (£m) 2.64 2.86 3.09 8.6
Carbon savings (ktCO2 pa) 39.3 42.7 46.0 128.0 Lifetime implemented savings (£m) 31.7 34.4 37.1 103.1
Lifetime implemented carbon savings (MtCO2) 0.47 0.51 0.55 1.54
Source: CT Energy Efficiency Loan Fund Business Plan 2012-15
4.18 The interest free loans are available to businesses looking to invest in energy efficiency and low-carbon equipment. Incorporated businesses are required to have been trading for at least 12 months and non-incorporated businesses trading for at least 36 months. The pay- back period is a maximum of four years, which reflects the length of time that new technologies should start generating efficiencies. Loans have been used to fund building technologies such as air conditioning, heating, insulation, heat recovery and lighting. There have also been projects involving industrial process technologies such as materials handling equipment, process controls and refrigeration.
Monitoring performance
4.19 The data in Table 4-6, below, is derived from the monthly monitoring reports from March 2013 and March 2014 provided by the Carbon Trust to INI22. Over the two years, 348 loans were offered, against a target of 324. These had a loan value of £9.7m, which again is higher than the target of £8.3m for the two years. The loans are expected to
result in nearly £5m in annual cost savings, again slightly above target. We note that there are some significant variations between the annual targets in Table 4.5 and Table 4.6. However, we have been assured that the targets and actuals set out below are the most recent agreed figures between INI and the Carbon Trust.
Table 4-6: Energy Efficiency Loan Fund monitoring
Loan Fund Targets
2012-13 target 2012-13 offered 2013-14 target 2013-14 offered 2 year target 2 year actuals New Capital £'000 1,000 1,000 1,000 1,70023 2,000 2,700 Value of loans offered/disbursed £'000 3,960 5,192 4,300 4,525 8,260 9,717 Expected/actual leverages co-funding £'000 1,228 1,610 1,333 1,403 2,561 3,013 Number of loans committed 142 167 182 181 324 348
Energy costs savings identified (£m pa)
2.0 2.60 2.2 2.26 4.20 4.86
Carbon savings identified (ktCO2 pa)
7.92 10.38 8.60 9.05 16.52 19.43
Lifetime implemented 12 15.58 13 13.57 25.00 29.15
22 We have used these months to review end of financial year figures
23 As highlighted earlier, some Year 3 expenditure including new capital for the Carbon Trust was brought forward slightly and therefore was allocated in Year 2 (2013/14)
Final report
Loan Fund Targets
2012-13 target 2012-13 offered 2013-14 target 2013-14 offered 2 year target 2 year actuals savings (£m) Lifetime implemented carbon savings (MtCO2)
0.05 0.06 0.05 0.05 0.10 0.11
Source: Carbon Trust monthly monitoring reports to INI – revised target figures provided by CT in Sept 2014 using revised conversion rates
4.20 The five largest loans are summarised below and provide examples of the types of projects funded over the last two years.
Table 4-7: Largest energy efficiency loan projects offered in 2012-14
Project Loan value (£) Sector
Installation of a replacement gas fired melting furnace for the melting of aluminium. This will be used in the casting of aluminium cylinder heads for the automotive industry.
400k Manufacture of motor vehicles and parts
Setting up an anaerobic digester to supply renewable electricity for the aggregate recycling and concrete production.
390k Manufacture of glass, ceramics & cement
Installation of new energy saving equipment to improve efficiency in cereal production. The equipment consists of a vibronet cereal damping system, an infra-red micronizer with heat recovery system, and flaking mill with hydraulic roll tension.
250k Food processing
Various improvement to boiler system including: boiler plant replacement; upgrading building management systems; increasing levels of automation; installing energy efficient lighting and controls; and converting cooking appliances in the kitchen from electricity to natural gas supply
210k Hotels
Installation of a new 400kw biomass boiler to replace existing oil boilers.
200k Wholesale plant growers
Source: INI monitoring data
4.21 The loans element of SPP is regarded as an extremely important and successful part of the Programme, enabling energy efficiency projects to actually be implemented. We
understand from speaking to the Carbon Trust that there have been high levels of demand over the last two years; on two occasions, a queuing system was introduced whilst the Fund awaited repayments. In these situations, applicants needed to wait until the new funds were available24. Based on feedback from the Carbon Trust we understand that applicants have
been quite patient when these situations have occurred.
4.22 A high level of demand is perhaps not that surprising as it is interest-free money and, in general, businesses continue to face difficulties in accessing finance. Those consulted across SPP believe the loan scheme is well-managed. The loans are performing well, and a low default rate of 5% is reported. There have been reasonably strong links with other parts of SPP and 25% of all loan recipients have also received from at least one other Key Area of SPP support (see Table 4-2).
4.23 Since this funding has been available since before 2012, stakeholders believe that there is good general awareness of the loan scheme across businesses and other delivery
Final report organisations. The Carbon Trust has not had to do any specific marketing (beyond the information on CT and INI websites) as it is already meeting its targets in terms of the number of businesses supported and loans issued.
4.24 The evidence from the monitoring data and stakeholder feedback indicates that the Energy Efficiency Loan Fund has been an important part of SPP. It is helping businesses
to take forward energy efficiency projects and is proving to be very popular. It would appear that the links between the loan scheme and other parts of the Programme are reasonably strong and there have been referrals both ways between the Carbon Trust and INI. There are three main reasons why we feel that, subject to resources being available, this element of the Programme should continue: NI businesses continue to have difficulties in accessing external finance especially for this type of business development activity; there are high levels of demand (illustrated by the need to introduce queuing); and the availability of this support is delivering results within companies, and likely to raise the profile of other related energy and resource efficiency support.
Key findings
Over the two years, 348 loans were offered, against a target of 324. These had a loan value of £9.7m, which again is higher than the target of £8.3m for the two years. The loans element of SPP is regarded to be an extremely important and successful part of the Programme, enabling energy efficiency projects to actually be implemented. Recommendations
R6: Continue to provide an energy efficiency loan fund – this funding was found to be a core part of the SPP. The demand is clearly there and it is enabling energy projects to be
implemented during a time when businesses are still finding it difficult to access business finance.