Energy-saving technologies shunned over long pay-back periods

Strict corporate policies governing the length of return on investment periods are hampering the adoption of energy-saving and renewable energy technologies, according to a new survey from consultancy EnergyTeam.

The survey of more than 110 UK bosses found that 81 per cent would demand a return on investment on new technologies, regardless of the potential long-term cost and carbon savings.

Only five per cent would invest in technologies promising a five-year pay-back period, despite the fact that such technologies would be likely to deliver the greatest cost savings over the full life of the product.

"A lot of companies we come across will not invest in anything that has a longer than three-year return," said Brian Rickerby, joint managing director at EnergyTeam. "Many energy-saving technologies such as new lighting or insulation can deliver big returns within three years, but the larger projects such as CHP [combined heat and power], smart building management systems and solar panels often require longer pay-back periods."

The rising cost of energy has meant that return on investment periods for larger energy-saving projects are shortening, but Rickerby said many firms were still uninformed about the scale of the long-term cost savings that new energy-saving technologies could offer.

He added that the problem was amplified by a lack of awareness over the various tax breaks that are on offer for energy-efficient systems, such as CHP systems and new air-conditioning technologies.

"The Carbon Trust has a long list of products that qualify for enhanced capital allowance, but when we ask customers if they checked the list they have rarely done so," he said. "They will have bought a cheaper version of a technology, when they could have bought a more expensive and more energy-efficient version at a lower cost if they had exploited the tax break."

Rickerby advised that firms keen to exploit potential energy savings should develop a meaningful energy strategy and implement clear energy measurement policies as a first step that should make it easier for the company to justify long-term investments.