Question:
Describe about the value for money and Government sources of finance and funding decision making for Investment Program for Energy Efficiency?
UK is one of the most developed nations of Europe. As the council of UK is looking to improvise its resources like electricity and water conservations which will helps to gain the clean energy system within its public offices and schools and hospitals (Albareda et al. 2010). In order to do so the company is looking for the several prgrammes and the projects this will be helpful in gaining clean energy resources within the UK public offices. This will helpful the company to gain the top position in the EU and world for clean energy resources within the UK public offices (Bladh, 2010). The study will also takes us through the various investment appraisals system which will help to analyse the best alternative programmes for the UK council. The study will also focus on the funding part of the study which will shows the council where to avail the funding.
UK is known for the low carbon economy in the current world market, public sector of UK is looking to lead by examples (Aras and Crowther, 2012). The prime minister of UK Mr. David Cameron on may 2010 has announce that, government offices, schools and hospital will be removed which may become the company to make them greenest government ever. The central government would come up new ideas and new form of energy resources which will help to reduce its carbon dioxide by 11% within the coming 12 months. prime minister of the also committed to 5 year plan to reduce the green house gases by more than 30% in coming years from the public offices, schools and the hospitals (Johansson, 2014).
Local council has announced to invest more than £5 million for the introducing the clean energy system within these local offices. With the help of the project called Greening, Government Commitments is only for the public companies where government is looking to reduce more than 25% of the carbon emission via Led light , water conservation programmes and solar form of energy to save electricity (Bozorgi, 2015). Some of the explains of the public sector organization in UK are been able to successful reduce the energy consumption are Depart of energy and Climate change and Hospital like South Manchester has bale to reduce the electricity by 44% and electricity by 6% which makes the saving worth of more than 400,000 per annum (Easley and O’Hara, 2009).
With the help of case study of the Kent county council, it has been found that, these council has been able to invest in the renewable form of energy and water efficiency improvements across the state and schools by upgrading the street lamp by LED and implementing the large solar PV installations in schools which was one of the project where the council has invested more than 358000 just for 3 years (Bacher, 2009).
Apart from that, another major cases like oxford case of air conditioning system to save 161/Co2 per years which helps the council to gain worth of 42000 per years. However, the government of the local council of the oxford has invested more than 45000 (Barth and Wolff, 2009).
One of the major assessment shows that, making capital investment should be made as per the long term goals not the short goals (Campbell, 2009). The funding requirement considers the actual life of the project in compare top the sources of funding. Budget preparation as one of the major techniques which will help the council to understand which project would be feasible for the UK offices (Amihud and Mendelson, 2010).
Although energy efficiency project gives the long term gain in future which is also an investment opportunity but maintenance of the energy efficiency cost is another major part which is also one of the major concern for the local council (Campbell, 2006). While assessing the energy efficiency schemes maintenance cost and operating cost must need to taken into considerations. With the help of various project appraisals system like NPV (Net present value), Payback period, and IRR will give an insight to the total return on investment in future (Carroll, 2008).
However, each of them has own strengths and weakness:
Payback period: It is one of the most effective ways to understand the ROI return years. The lower the year the higher would be chances of the accepting the project. However, it does not consider the time value of money (Vine, 2008).
NPV: It is one of the most permanent way to appraise the chosen project. It considers time value of money. However, the difference between the cost of energy and differs can be differ from the wider level of inflations (Liddle, 2012).
Apart from the above other major funding would be expected budget for the project will set the standard cost. The expected budget considers the profit and loss statements, balance sheet and cash flow statements (Cheney and Roper, 2010).
The expected budget with more than 3 years would give the idea of the investment and return of investment which will help the council to work as per set standards (La Port et al. 2009).
Expenditure day book: Expenditure day book will have credit and cash information where the local council will be able to understand actual cost spending. Apart from that, with the help of startup funding, council will be able to keep track of the project (Crane et al. 2009). There is been ample evidence which that expenditure day is one of the major information which will help the council and government to understand whether the project is variable or not (Ibrahim and Parsa, 2007).
Apart from the above, public sector organization to fund energy efficiency project along with consideration of risk management , due diligence , audit trail and transparency compliance are some of the obligations which is needed to be fulfill before going to purse the implementation of energy efficiency resources within the UK (Jones, 2010).
Some of the major sources of finance are given below:
Foundation and trust: One of the major funding of the projects comes from the foundation and trusts which regulate and monitor the prudential borrowings (Bozorgi, 2015). For hospitals, NHS is one of the major foundations where the prudential borrowing limited is being reviewed and foundation gives the long term borrowings to the hospital for the implement the energy efficiency project within the public hospitals (Cooper, 2010).
Universities: Another major funding comes from the British universities which take active part in energy efficiency environment to ensure future surroundings would be more energy efficient. The British universities have their own Treasury Management policies which help the council adequately sufficient of the fund for the energy efficiency projects (Kesicki and Yanagisawa, 2014).
Salix scheme: Salix funding is scheme which has been granted by the DECC and which is interest free loans for the energy efficiency projects for public sectors units (Faulkender and Petersen, 2009). Loans are given with certain criteria like maximum period and actual carbon saved by the public companies with programmes like solar and LED lamp (Johansson, 2014).
Salix Scheme has helps the Bristol council for the funding of the up gradation of street light lamp from high energy bulb to the ceramic metal LED lamp (Lopez et al. 2011). This new and advance technology helps them to level the lightening as per the weather conditions which ultimately reduce the energy (Bozorgi, 2015). Salix scheme has funded worth of £ 2.1 million which was now generating annual savings of the more than £5000,00 within the 2 years.
Apart from that, Salix scheme also helps St. Andrews university by funding the with £ 2 million which saves more than 600,000 per annum by installing, boiler , motor control system sand LED lamp within the colleges with average payback period is 4 years (Maignan and Ferrell, 2008).
Green Investment bank of UK: The introduction of this bank is to fund only the energy efficiency projects within and across the UK. The GIB has been one of the major funding houses for the government in order to support the non domestic energy efficiency projects (Lichtenberg, 1977). GIB financing is not only funding the project but also taken initiates to self help implementation of LED street lamp and NHS energy efficiency.
Some of the major work of GIB over the years is very much related to the building remunerations by led lamp and insulation (Van Marrewijk, 2011). Renewable heat and Green transport like bicycle within the university are some of the major landmark achieve by the banks.
Accounting and financing helps the council to understand the actual cost and excepted cost which will be helpful for the implementation of projects (Valerie et al. 2010). The financial statements are very much useful because of the timeliness of the information that helps to gain actual time finishing of the project. Accounting language helps in processing document all aspect of business financial performance from payroll cost, capital expenditure and sale revenue etc (Marić et al. 2011).
Conclusion
From the above study, it has been found that sources finance required for the funding the energy efficiency resources within the UK offices and hospitals. There are various programme like solar panel and LED lamp are some of the major value for money projects which will help the council to earn more than 120000 per annum from the investment of more than 5 million. There has been numerous sources of finance houses like GIB, Foundation like NHS and EIB.
Reference List
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