Facilities managers can earn a tax break on their next capital energy-efficient equipment purchase, says May Laghzaoui.
04 March 2019 | May Laghzaoui
Enhanced Capital Allowance (ECA) tax relief can be secured by purchasing energy-efficient equipment listed on the UK government's Energy Technology List (ETL). The ETL currently lists about 15,000 of the most energy-efficient products across 57 technology categories.
The ETL is composed of two separate sub-lists: the Energy Technology Product List (ETPL), which names qualified energy-saving products, and the Energy Technology Criteria List (ETCL), which specifies the energy-saving performance requirements that products must meet or exceed to be supported by the ECA scheme.
Most purchasing businesses will only have to concern themselves with the ETPL. Technologies supported by the ECA scheme are:
- Air-to-air energy recovery;
- Automatic Monitoring;
- and Targeting (AMT);
- Boilers equipment;
- Combined heat and power (CHP);
- Compact heat exchangers;
- Compressed air equipment;
- Heat pumps for space heating;
- Heating, ventilation and air-conditioning zone controls;
- Motors and drives;
- Pipe work insulation;
- Radiant and warm air heater;
- Refrigeration equipment;
- Solar thermal systems; and
- Uninterruptible power supplies.
The ETL is a free-to-use list that provides businesses with confidence that they are buying plant and machinery with a high standard of energy efficiency - typically the top 25 per cent of products in the market. This is backed by regular independent evaluations of the market by the ETL team across the relevant technology categories, providing a benchmark for what represents top performance.
Businesses can claim 100 per cent accelerated tax relief on these products until April 2020. But while the clock is ticking on the availability of ECA tax relief, the government has no plans to stop supporting the ETL in April 2020.
Based on rigorous energy-efficiency standards and testing processes, the ETL allows manufacturers to claim that their products demonstrate top quartile energy-saving performance, and offer customers operational savings when compared with less efficient alternatives.
When it comes to buying new equipment, FMs are looking beyond upfront capital costs to consider total cost of ownership. This is why the ETL has become an integral part of the procurement processes for many large businesses and public sector organisations.
This brings several benefits. When designing energy-efficient features for new or existing buildings, selecting equipment from the ETL can contribute to achieving SKA rating or BREEAM assessment. Both schemes include ETL-listed energy-efficient equipment in their criteria.
The types of savings that can be achieved through buying products on the ETL are shown in the following example of a refrigeration system controls upgrade. The annual savings achieved at a commercial site running eight evaporators and one cold room are calculated as:
- 26,200 kilowatt hours; and
- 9.2 tonnes CO2.
With a typical additional capital cost of £3,600 and additional lifetime energy and ECA benefits of around £31,000 at today's prices, the financial benefit of choosing an ETL listed product is over eight times the additional cost. And with a potential ECA of about £6,400 in year one, plus additional energy savings, the extra capital cost is recovered within a year of purchase. This is based on the assumption that refrigeration system controls lead to 10 per cent energy saving for a system using 262MWh/year.
Improving levels of energy efficiency helps organisations reduce operating costs and energy bills, resulting in a shortened payback period for new equipment and strengthening the business case for action.
Another benefit of using higher energy-efficiency equipment is lower CO2 emissions, helping companies meet required internal or external sustainability targets.
FMs should make the most of this time-limited window and benefit by upgrading to high-performing energy-efficient equipment.
May Laghzaoui is ETL project coordinator at The Carbon Trust