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Reducing Business Costs – Carbon Reduction and Grants

Reducing Business Costs in Irish Tourism whilst Supporting the Climate Act

One of the greatest challenges for businesses is how to transition to decarbonisation through electrification without massively increasing business costs.

We effectively have 2 key target dates

The key tool government will use to achieve this is to keep increasing carbon taxes to make the use of fossil fuels uneconomic.

So, read between the lines – the target is to reduce fossil fuel (Scope 1) consumption.  The methodology? – Convert to Electricity or Biomass.

What about Scope 2?  Simple – Buy 100% Renewable Electricity, install as much Solar PV as you can (3.6-year payback), and implement a strict energy efficiency regime in your business

The real challenge is eliminating Fossil Fuels

National Hotel Retrofitting Scheme

Hotels are amongst the most energy intensive businesses per square meter per annum given their 24/7 nature and the type of operations internally which can include busy restaurants, heating/cooling, swimming pools, etc.  Hotels can use 500% more electricity than an office.

The IHF is calling for targeted funding for a nationwide hotel retrofitting scheme, managed centrally through a dedicated resource within SEAI and supported by a ring-fenced, multi-year Government grant programme.

GHP believes that this programme should have at its core that at the end of the period the hotels that avail of the funding will be 100% decarbonised.  Those that do not engage will suffer increasing carbon taxes, and other potential regulatory and marketing disadvantages.

GHP estimates that the sector needs c. €450 – €500 million to deliver this result with an annual cost of €50m per annum over the next 10 years.  What % of this should be grant-aided?  This needs to be worked out but at the heart of any funding solution should be additional innovation – paybacks should be based on the savings the investments will make.

E.G.  A Hotel secures €500,000 to eliminate fossil fuel from the hotel.  Government Grant aid of 30% is secured which reduces the capital cost to €350,000.  Additional grants from obligated parties delivers another €25,000 so the net cost is €325,000.  Annual savings expected are €50,000 at NPVs.   If this was funded at a rate of 5% over 10 years, the annual repayments would be €42,000 – delivering an annual net cost reduction of €8,000 (greater when you factor in energy cost inflation) The key is that the savings more than pay for the repayments – a Win Win.

Sounds wonderful, all that is needed is for the hotel to be de-risked – no personal guarantees, and government backed so financial lenders are happy to lend.  3 groups working together – Hotel owners, Government, Lenders – this appears to make a lot of sense and delivers on so many fronts and if linked to a 100% decarbonisation strategy delivers on the Climate Act requirements.

What is available right now for hotels?

The Current Grants available through the SEAI Business Energy Upgrade Scheme range from 20-50% and cover

Plus, there are opportunities to get funding for energy efficiency projects from Obligated Companies – Energy Suppliers

Plus, there is low-cost finance available through the SBCI Energy Efficiency Loan Scheme (EELS) for energy improvements – that does not require personal guarantees

Plus, there are many options available from energy suppliers through ESCO opportunities where the capital costs are born by the supplier and repayments made from savings

It appears the required levers are in place so what is stopping hotels from activating them?  One must ask the hotels themselves.  What is certain is that inaction will only lead to higher costs and carbon tax increases are specifically designed to make it hurt for those businesses that stay with fossil fuels.

If the IHF succeed in securing a ring-fenced fund, great, but it requires owners to engage.

Note; There is one specific grant missing from the SEAI suite – Metering – EI provides a grant of from €5,000 to €50,000 (up to 50%) to EI manufacturing clients and LEO clients under 50 employees can get a 75% grant up to €10,000 – the rest cannot – energy management starts with metering – if you don’t have it, stop talking about it.  Demand access to grants for metering the same as for other business sizes and sectors – used properly meters reduce consumption by at least 5% – do the math!