The UK renewable energy sector is set to reach £41bn by 2030.
As well as fighting climate change with biomass, hydro, wind, solar and geothermal energy, businesses in the renewable energy sector stand to make a lot of money.
Unfortunately, the high cost of renewable energy assets and the ongoing costs of large-scale projects can be prohibitively expensive for growing businesses.
For example, a single commercial 3.5 megawatt wind turbine can cost more than £3.13m. And wind farms are going to want a lot more than one to generate serious income.
That’s why businesses in the sector rely on renewable energy asset finance.
With renewable energy financing, you can grow your business without worrying about high upfront costs or years spent raising capital.
That means you can get top-of-the-line equipment right away to boost your output and revenue with minimal risk.
What is renewable energy asset finance?
Renewable energy financing lets you get vital equipment and grow your operations without saving up the funds to buy assets outright.
Instead, an asset finance provider acquires the asset on your behalf and leases it to you for much smaller monthly or quarterly payments.
You can put the asset to work generating extra revenue from the moment you receive it.
This often covers the cost of leasing the asset – even before you take the tax benefits for asset finance into account.
Since green energy projects tend to be long term, financing for renewable energy equipment lets you spread costs across a longer period.
This helps reduce your payments and further improve cash flow and budget predictability.
Best financing options for green energy companies
Finance leasing
Under a finance lease, your asset finance provider buys the asset and leases it to you.
You make monthly repayments over an agreed term to cover the asset cost and interest.
But it’s important to remember that you’re usually responsible for insuring and maintaining the asset.
At the end of the lease term you can:
- Continue renting the asset for an extended period
- Return the asset to free up cash flow
- Sell the asset on the provider’s behalf and generate value for your business
Finance leasing is ideal for assets that depreciate quickly, need to be replaced often, or that you don’t necessarily want to keep.
For example, you might use a solar energy finance lease to acquire solar inverter units that handle high voltage. Or you could use a wind energy finance lease to replace small wind turbine units operating in harsher conditions.
Operating leasing
An operating lease is very similar to a finance lease. But it’s generally used for short- to medium-term asset use.
Another difference is that the provider is usually responsible for asset maintenance. This relieves you from extra maintenance costs and associated risks.
Under many operating leases, you can even upgrade to a more advanced model within your rental period.
The shorter lease term and greater provider responsibility means this form of renewable energy asset finance tends to be much cheaper.
That makes it ideal for assets that become obsolete quickly or that you only need for a short-term project, such as temporary solar generators, mobile wind turbines, or energy monitoring and control systems.
But remember that these leases are intended for shorter term use.
If you decide to extend your lease long term, it could cost you more than a finance lease in the end.
Hire purchase
If you need financing for renewable energy equipment that you want to own outright – such as ground-mounted solar farms, large wind turbines or hydropower turbines – hire purchase is a great fit.
After making your agreed payments, you become the new owner of the leased asset.
This makes it a popular choice for businesses that need high-value assets while maintaining a healthy cash flow.
While the provider retains ownership of the asset during the agreement term, you’re responsible for maintenance.
But even so, hire purchase is a strong option for gradually acquiring renewable energy equipment that’s out of your price range.
Refinancing
Other types of renewable energy asset finance help you acquire new assets directly.
But refinancing allows you to release capital tied up in assets you already own.
You use your high-value assets as collateral for a loan.
This provides quick funding and immediate liquidity with no risk of bankruptcy.
And you can even use this money to buy new assets to boost your income even further.
Refinancing works best when you put up operational, revenue-generating assets as collateral, such as mature renewable energy farms.
That’s because these allow you to secure a larger loan while also driving revenue that helps you pay it off.
5 key benefits of renewable energy asset finance
Here are just a few reasons why asset finance is ideal for renewable energy businesses.
1) Preserves cash flow
Buying an asset outright requires a big upfront payment.
But renewable energy financing allows you to spread payments over time, typically in monthly instalments.
That means you make smaller, predictable payments while preserving the working capital you need to operate.
This also helps you manage costs during project development or scaling phases.
Renewable energy asset finance is particularly beneficial for developers or small and medium-sized enterprises (SMEs) with multiple concurrent projects.
2) Flexible financing options
With your choice of types of asset finance, you’re sure to find an option that suits your needs for any project.
And with flexible end-of-term options like returning, upgrading or owning the asset, it’s easy to plan for replacements and disposal.
Renewable energy asset finance also gives you a lot of freedom in negotiating repayment schedules, funding amounts and asset types.
That’s especially true if you finance through an established independent finance broker with excellent connections to renewable energy lenders.
3) Tax efficiency
Certain renewable energy financing agreements can provide tax advantages – especially leases and hire purchases.
Lease payments are often fully deductible as business expenses, reducing your taxable profits.
And you can take advantage of capital allowances on the assets you acquire.
Through tax efficiency, renewable energy asset finance helps you maximise your return on investment (ROI) and reduce total costs over time.
4) Access to leading technology
Financing assets rather than buying them outright lets you acquire cutting-edge equipment you might otherwise never be able to afford.
These leading technologies generally have better energy efficiency and a longer lifespan.
That means you can reduce costs and generate higher ROI, which often more than covers your interest payments.
Leases can also include upgrade options. So you can get top-of-the-line equipment without full replacement costs or taking ownership of assets that could depreciate or become outdated quickly.
Improved project cash flow
Renewable energy project cash flow is rarely consistent.
Early stages of project development tend to be extraordinarily expensive. And for certain projects like solar farms, your income can rise or fall as seasons change.
But asset finance for renewable energy equipment supports more accurate forecasting and financial planning, especially in multi-asset portfolios.
By agreeing asset repayment schedules that align with your profit cycles from renewable energy generation, you can smooth out your cash flow across the project lifespan.
This helps you better manage your budget in long-term projects and prevents delays that could be caused by financial constraints.
What to consider when choosing asset finance for renewable energy projects
Selecting the right type of asset finance
Different types of equipment finance for renewable energy serve different needs.
Choosing the wrong one can actually harm your cash flow or interfere with your project goals.
As a general rule, you should opt for:
- Finance leasing for long-term use without ownership
- Operating leasing for short-term use or rapidly evolving tech
- Hire purchase if you want to own the asset
Interest rates and repayment terms
Your asset finance interest rates directly affect project returns.
Look for:
- Fixed-rate deals for predictability, especially in a volatile market
- Variable-rate deals with lower initial rates for short-term projects or within an economic climate where interest rates are expected to drop
Remember to consider the total cost of finance over your term, not just monthly repayments.
Provider expertise in renewable energy
Working with a finance provider that understands the renewable energy sector allows for more accurate risk assessment and realistic asset valuation.
Their superior knowledge of performance metrics and technology trends can also give them confidence in your projected incomes.
This can lead to better, more affordable rates and terms.
Maintenance and upkeep
It’s important to know who’s responsible for servicing and maintaining the asset.
In a short-term operating lease, the provider generally covers upkeep.
But with finance leases and hire purchase, it’s typically your responsibility.
Poor maintenance can lead to increased downtime, warranty voiding or increased long-term costs that jeopardise your growth.
Always check whether a service and maintenance agreement is bundled with a finance deal.
Connect with trusted renewable energy asset finance providers
Asset finance for renewable energy projects empowers businesses to get critical assets without raising the capital for a large upfront payment.
That means you can get the cutting-edge technology you need to compete with larger or better established firms in a growing market.
To get deals with the best rates and terms, you need to choose a provider who understands the renewable energy sector.
But with so many options, it can be hard to know which is right for your business.
That’s why renewable energy businesses throughout the UK and Ireland rely on Kane Financial Services.
As an independent asset finance broker with over 35 years’ experience, we can connect you with energy-savvy providers who offer competitive rates and terms that generic high-street lenders can’t match.
With our knowledge and support, you can get accurate and affordable asset finance products that meet the demands of your renewable energy project.
Contact us today to discuss your needs or apply for asset finance online now.