If you want to lead your school responsibly and affordably towards being zero-carbon but you’re not sure what that entails; or you’ve already started and want to find out the latest key nuggets, read on…
The whole country needs to decarbonise but schools face some particular challenges and for that reason we thought it would be helpful to have a part of ReEnergise that is focused exclusively on schools. The remainder of the ReEnergise website is still relevant, but if you are working in a school it’s best to start here.
The focus here is on how to reduce your greenhouse gas emissions (GHG) – often referred to as carbon footprint. There are many other things a school could do in the name of sustainability and we would not want to downplay any of them, but our specialisation is carbon reduction.
LET’S START WITH PROJECT FINANCE…
If your school is on fossil fuels and you ever want it to be truly sustainable you’ll have to convert the estate to low-carbon heating. It’s very expensive – akin to doing a new-build in terms of value. Other tasks relating to decarbonisation are usually not as expensive as low-carbon heat installations but can still prove costly. However, help is available in the shape of various grants, subsidies and other options. We can advise you on the options and support you in securing finance.
There are currently at least 6 ways to finance a project, depending on the school’s situation and whether the school is in the public or independent sector. The table below shows the options. Further details are below the table.
|Option||Public Sector||Independent Sector||Comment|
|Renewable Heat Incentive (RHI)||Yes||Yes||A subsidy not a grant. Imminent deadlines.|
|Public Sector Decarbonisation Scheme (PSDS)||Yes||Not usually||In addition to the PSDS, which is a new government initiative for 2020, Salix runs regular grant funding rounds each year. Interest-free loans are also available.|
|Regular Salix grants & interest-free loans||Yes||Not usually||In addition to the PSDS, which is a new government initiative for 2020, Salix runs regular grant funding rounds each year. Interest-free loans are also available.|
|Local authority grants||Yes||Sometimes||Can be used alongside the options above. Grant maintained schools will often be able to access grants for infrastructure improvements and low-carbon projects from their grant authority.
Some county councils also offer grants which can be available to independent schools as well as those in the public sector.
|Bank loans||Sometimes||Yes||A common form of financing for the independent sector.|
|Energy purchase agreements||Yes||Yes||Won’t achieve the same financial savings as the other options but is a way to get projects done that might otherwise be unaffordable. The provider takes most of the risks, compared to the other finance options. See Note 3.|
How to Apply
All of the government schemes offer an online application portal, via the managing agency. Ofgem administers the RHI. Salix administers the PSDS as well as their regular annual grants and loans. In each case it will be the school that needs to submit the application online. However, most applications will require some level of technical support from a suitable consultancy.
This subsidy is potentially very useful. It will often equate in value to the capital outlay, but is paid quarterly in arrears over 20 years, in proportion to how much low-carbon heat is generated. Therefore it is not a way to meet the capital outlay but is a way to render a project affordable in whole-life terms; and in many instances achieve substantial savings over the 20 years.
To demonstrate the value of the RHI, here are some recent examples from school projects, the point being that in each case the RHI is critical to the business case:
|Technology||Site||Capital cost (inc VAT)||RHI||Net Benefit (over 20 years)|
|Biomass||Prep school estate||£1.2m||£855k||£755k|
|Ground Source Heat Pump||Prep main building||£1m||£1.3m||£840k|
|Ground Source Heat Pump||Two boarding houses||£720k||£500k||£240k|
The RHI closes for new entrants on 31st March 2022, having been given a year’s extra grace by HM Treasury in recognition that projects have been delayed because of Covid-19. However there are some project development hurdles that must have been jumped by 31st March 2021 if the extension to 31st March 2022 is to be secured for a given project. In practice, if you have not already started on project scoping and feasibility studies then it’s now too late to have a realistic chance of securing the RHI. If you have already started then it’s likely to be achievable still, but please check with us for all the details of how to secure the RHI.
The Public Sector Decarbonisation Scheme
As part of the drive to kick-start the national economy and put more emphasis on achieving net-zero nationally the government has launched a major programme of funding for energy efficiency and heat decarbonisation projects within the public sector. This is a grant scheme and will be administered by Salix, which makes sense given the experience Salix already has in managing grants and loans for the public sector. The initial budget is £1Bn, although there is now some expectation that further funds will be allocated in due course as part of the government’s 10-Point Plan for a Green Industrial Revolution, which was announced by the Prime Minister on 18th November 2020.
Online details are here.
The general intent is that projects that are already prepared will take priority, so that installation work can commence promptly and more jobs can be created.
There are two funds running in parallel, with a rolling cycle of bidding rounds which opened on 30th September 2020:
- Public Sector Decarbonisation Scheme (PSDS). The main fund is intended to finance project delivery. The final deadline for bids is 11th January 2021. Projects are intended to be completed by 30th September 2021. This is a challenging timeframe for any major heat generation projects.
- Low Carbon Skills Fund (LCSF). The LCSF is a much smaller fund, intended to support enabling consultancy tasks such as scoping and feasibility studies. The deadline for bids is 4th December 2021 (now passed). However, Salix have advised us that bids for the main PSDS fund can also include a proportion of funding to pay for supporting studies and project definition.
Salix awards grants to schools in an annual bidding process. Grants are awarded on a competitive basis nationally and regionally. Salix has strict technical and business case criteria for the projected performance of each type of technology. For example heat pumps bids will need to show the calculations that indicate that the intended project will achieve a saving of at least a tonne of carbon emissions over the life of the new equipment for each £500 of capital outlay. This mechanism is designed to ensure the grant is being deployed cost-effectively. The online application forms give the details for each technology but this is one area that we know can be confusing, so please ask us for guidance if unsure.
One guiding principle is that grant money from two different sources, e.g. local authority and Salix, cannot be used to pay for the same item.
Salix Interest-Free Loans
Salix will offer interest-free loans as an alternative to a grant. Terms are relatively inflexible compared to a bank loan and any project seeking a Salix loan will be subject to similar technical and cost-effectiveness checks as for a grant. Loan terms are usually fixed at 8 years.
Energy Purchase Agreement (EPA)
The concept of an energy purchase agreement is that the 3rd-party pays for and owns the installation and then sells the energy generated back to the school at a price which is low enough to be attractive to the school but high enough to cover the provider’s own costs and also generate a return on investment for the provider. This approach can be used for heat and power installations. Heat purchase agreements usually rely on the inclusion of the RHI, without which they are unlikely to prove cost-effective for either party.
EPAs often offer a buy-out option during the term of the agreement, such that the client school can take over ownership.
The advantages of the EPA route to financing are that it negates the need for the client school to find any capital or take any loan repayment risk; and the agreement is usually structured to offer a degree of immediate savings in operating costs for the school. The quid pro quo is usually that the client school must commit to purchasing a specified level of energy annually, for the term of the agreement. The term tends to be 20-25 years, all depending on the EPA provider.
The main disadvantage is that over the term the school will not save as much money as it would through the other financing methods. This is because the interest rate being charged by the provider will in practice be higher than any bank loan and certainly higher than a Salix interest-free loan. The provider needs to cover their own cost of finding finance, as well as making enough revenue to cover their own running costs and risks; plus make some profit for shareholders. That tends to put the underlying interest rate at between 9-12% (compare a likely bank rate of 3-4%). Some community funding groups offer underlying rates at around 6%, but even that cannot compare with the other loan routes.
Contractually this is also a more difficult financing methodology to set up and manage successfully because it relies on a long-term service level agreement, in which the identification of all the correct detail is vital if the school’s interests are to be safeguarded. This tends to be a more challenging legal endeavour than merely drawing up the contracts for an installation.
Nonetheless this route can at least enable a school to achieve the intended sustainability target when it might not otherwise be feasible if the other financing options are not available or cannot be taken up for some reason.
What does becoming a zero-carbon school mean?
It’s probably open to interpretation but in our view it means this:
All school estates use energy for three functions: provision of power, heat and transport. Being zero-carbon means that the provision of power, heat and transport in the running of the school does not cause carbon emissions.
People also talk about being net zero-carbon, meaning that if there is some function for which the emissions cannot be reduced to zero then something else is done to offset that. But why admit defeat even before starting? Why not embrace the intent of getting all of the power, heat and transport under the control of the school to become zero-carbon?
Corporate Social Responsibility
It’s the excessive carbon in the atmosphere that is causing climate change; and it’s climate change that is going to make large swathes of the planet uninhabitable, unless we can get back on track with the global targets for reduction in carbon emissions that have been proposed by the UN Intergovernmental Committee on Climate Change (IPCC). Arguably this should be of particular concern in schools, because it will be the children in each school who grow up to face the brunt of the issue. According to the published science, a child entering primary school now will face a very different world by the time they leave school at the age of 17 or 18. If you would like to read a snapshot of what that world might look like – based on the published science, try reading The Uninhabitable Earth by David Wallace Wells. He’s a journalist, not a scientist, and he’s good at putting into tangible nuggets what the science is predicting. He brings the issue to life very well. If we believe the science, we should be very concerned. If we’re not sure about the science, but think it might be right, that’s also reason enough to be very concerned.
The UK Government has already said it wants to rid the national infrastructure of fossil fuels. The Clean Growth Strategy issued by the Department for Business, Energy and Industrial Strategy (BEIS) in April 2018 noted the Government’s intent to ‘Phase out the installation of high carbon forms of fossil fuel heating in new and existing businesses off the gas grid during the 2020s, starting with new builds.’ The worst offending fossil fuels used for heating estates are coal and oil, but in subsequent statements the Government has also made it clear that it wants to wean us off all the fossil fuels, including mains gas. Increasingly we can expect to see legislation driving schools in that direction: but it’s challenging and not something to be left to the last minute, so we suggest schools should make a start now, if not already en route
Some of the work required to become a zero-carbon school is expensive. Mindful of that the UK Government does offer significant financial incentives for certain types of project, which makes them affordable. However, schools can do a lot to reduce energy usage without spending much money. For example, it costs time and effort, but not necessarily much money, to run a campaign to get staff and students to become more energy-aware and stop being wasteful. In the end that will save money.
Competition between schools is intense. Logically, as public awareness of the climate crisis deepens, parents and children will start wanting to know what each school is doing to decarbonise. If it is not already, a school’s carbon status and intent will soon become a marketing issue.
What needs to be done in practice to
achieve zero-carbon status?
achieve zero-carbon status?
You are more likely to achieve zero-carbon status affordably and without undue hassle in your school if you are aware of what needs to be done, aware of what support is available outside the school – practical and financial; and you have a plan which is known and understood throughout the school. If you would like a hand with drafting that plan, we can help.
It need not be a minefield. Put simply, a school’s encounter with energy falls into three processes: you buy it; you use it; you generate it. You will need to focus on doing each of those to optimum effect. We see it as a Venn diagram because they overlap and need to be properly coordinated within the school.
The interventions below are what we believe is the bare minimum, if you are serious about becoming zero-carbon:
- Buy grid energy which is 100% renewably sourced whenever possible. A good broker can arrange this for the school at no extra cost compared to buying energy derived from fossil fuels. Some brokers will tell you it cannot be done at no extra cost. If you encounter this, call us and we’ll steer you towards brokers who can get it at no extra cost.
- Check for all the available tax breaks, e.g. correct VAT rates on supply and installations. We can advise on this. It has been our experience in the past few years that school accounts departments often do not know all the nuances of VAT relating to energy.
- Make the energy infrastructure on the estate as efficient as possible. An energy efficiency survey will identify solutions, including quick wins, and be helpful for budget planning.
- Concurrently run a campaign to encourage energy efficient behaviour on the estate: the cheapest, cleanest energy is energy not used.
- The options below – properly implemented – will save money, reduce your carbon footprint, and increase the resilience of your estate.
- Install solar PV on any sites with high power consumption.
- Any significant source of flowing water on your estate could be used to generate power.
- Schools on mains gas. Ideally you should be converting your plantrooms to a zero-carbon alternative. However, if you choose not to do that then you could install Combined Heat & Power (CHP) units in buildings with a high continuous heat load. These systems burn gas to generate power, but also harvest the heat generated. Each £2 of gas in = roughly £1 of heat and £3 of power out.
- Convert as much of the estate as you reasonably can from fossil fuel to a zero-carbon alternative before 31st March 2022 (when the Government subsidy regime closes for new entrants). For any schools still on oil this is the biggest money-saver available: you will save an awful lot of money if you can get it done before that deadline. If you’re on mains gas and you want to be zero-carbon then the subsidy will enable you to get your heating converted affordably.
- Install heat pumps in all new builds and refurbishments. Consider this at the design stage. Please do not install fossil fuel systems in new builds: it’s a wasted opportunity. Even if it means the building project costs more, it will be worth it in the longer term. What is the point in putting up a smart new build which is on the wrong side of history from the moment it’s opened?
- Any significant source of water on the estate could be used to generate heat. It does not need to be fast-flowing.
- If you have spare land which cannot be used for sports or new builds, find out about ‘Grid-balancing’ to generate revenue streams.
- Put EVs on your radar for attention in 2020, including charging points. Ultimately you will need your school transport to be EVs but achieving this is not as urgent as sorting out the heat. Watch out for our Zero-Carbon Power Package, which will be available during 2020.