Reducing energy costs for Hotels is a critical success factor
If, like many hotels, your gas and electric per kWh prices have nearly trebled, your business will be hurting. You could find yourself paying £100,000 or more in extra energy costs per year! Like “renting”, its a one-way spend. But you have the opportunity to direct some of the spend to “owning” and investing. You can take action today to reduce your energy costs for the long term.
Take control
When you are facing a permanent, extra tens of thousands of pounds in gas and electric energy costs – your hotel’s bottom line and your hotel’s valuation will be pressured! After all, an extra £50K in energy costs translates into a reduction of £500K or more in the hotel’s overall valuation!
At this stage hotel owners and operators have one of two options. Sit it out and hope prices come down. Or, be proactive in energy generation and saving.
While insulation and other energy efficiency measures will help, it’s time to embrace technology and generate your own power. By harnessing solar energy and taking advantage of special night rates, you can save significant amounts on energy costs. These are long lasting savings that generate cash which could be put to improvements in other parts of your hotel. Solar and Charge can do much more than “solar” for your hotel – take a look at the case study below.
%
increase in electricity prices over last ten years
Average annual electrical use in hotel rooms per sq. meter
Average annual electrical spend per hotel room in UK
Average annual saving per hotel room by installing Solar & Charge system(s)
“For us, straight after the covid crisis, energy costs tripled. This was an existential crisis. Solar & Charge changed the equations for us. Now, one year on, our overall £ costs are up by 1% only“
Hotel Dir (70 beds)
Our Mission
To give businesses like hotels access to technology and methods that save on energy costs. We will do this by excelling at the value provided and offering earliest payback on investment possible. In turn this will give the businesses opportunity to use savings to posively impact long term health and improve their CO2 profile for the common good.
How did we get here?
‘Necessity is the mother of invention’ … so the saying goes. When we faced tripling energy costs ourselves, we looked for help and went to market for solar and similar things. Annoyingly, all we found was semi-helpful ‘hardware’ installation proposals and nothing like the coherent energy strategy that we needed to combat the ‘cost of energy’ crisis we were experiencing.
At Solar and Charge, we had the chance to re-engineer everything that the industry was offering – and improve on it. So we did.
A fresh approach
We took the best of what was on offer in the market, added solutions as opposed to hardware alone, added innovation and sensible cost-effective fitting methods and a lower profit margin requirement. Our low low overhead structure and our meticulous design approach, means we can offer unbeatable service, great value and the best returns for our customers.
We start by understanding what you need and looking to achieve and overaly on that our promise of early payback. The investment has to make sense all round!
Things You need to decide
Investment
Like all other investments, you need be comfortable with the level of your initial money input. Our objective is for you get that money back in around five years. Of course the systems continue to generate cash for years well beyond that
Audit
A good place to start is an overall look at your energy ‘sources, uses and spend’. After all, savings in the spend is what ‘buys’ you a budget to invest in change. For hotels, apart from solar and battery tech., new (lower cost) equipment for in room heating, gas boilers and heat pumps are worth checking out
Proposal
Solar and Charge will produce a comprehensive, but ‘sensible’ proposal that will aim to get the best returns for your money whilst also getting a solid level of cost reduction. Ultimately, you decide what’s in and what’s out at your hotel
Implementation
Our team prioritises efficiency and minimal disruption throughout. From securing authorities’ consents, planning, etc., all the way to commissioning, we take care of all the necessary steps. Post-handover, our support continues, so you can maximise the benefits of your system.
The Accountants view
So what would your accountant say? Or how would it impact the business financial standing? Also, what if the proposal appeals but we don’t have the cash flow?
Does it make financial sense?
The good thing about finances is that numbers can bring clarity. You and your accountant will want to know what is going to change with your ongoing costs for energy after you install solar. This allows an estimate of how long it will take to get your money you put in back. We target ‘payback’ of around five years.
Then you want to estimate how much profit over and above what you put in is. This takes into account a longer time span, cost of money and other things. This, internal rate of return calculation (IRR) is a more comprehensive indicator. We target 15-25% and that is an exceptional return!
Are there tax breaks
Yes, certainly. The current UK tax* regime encourages investment. All your spend on the solar system should qualify for “capital allowances” and therefore you are able to offset that spend against profits.
More than that, the current regs allows that you are able to write the whole amount of spend off in the first year! So if your taxation rate on profit was 20% and you invested say, £50,000 on a comprehensive solar system, this tax break means, it would actually cost you only £40,000 in net terms*. Sound!
* We are not tax qualified and not presenting specific tax advice. You should seek appropriate advice for your situation from your professional advisors
What is the green angle?
Piecemeal, all business and human activity is adding up to a global CO2 problem. More and more, individuals, corporates, and local government departments are looking into the opposite effect – how piecemeal we can all reduce our CO2 footprint, or improve our ‘green’ credentials? Generating CO2 free energy via solar is a significant step.
For an example of how one hotel achieved the almost unheard of status of net zero CO2, see here.
Solar and Charge’s input into that effort is presented here.
Buying Alternatives
If your cash flow is tight you may consider alternatives to outright purchase of the hardware. One alternative is a “power purchase agreement” (PPA).
With a PPA, we invest in the hardware and installation and you agree to purchase generated electricity from us. The kWh cost is agreed in advance and set at a rate* that is (substantially) less than the market cost of commercial electricity. This option would appeal to large energy users.
* Effectively we pay for and install the facility with your agreement. You pay an ongoing rate per kWh for the generated electricity that should mean a reduced cost of energy for your business. This option would appeal to businesses that a looking for “cash nuetral” proposition. Subject to credit rating and agreement.
Case Study: Hotel in Midlands
Over the last 10 years this hotel had managed to reduce energy consumption from 8.8 MW to 6.5 MW. However, bills fell by only a third in the face of steadily increasing energy costs and new levies.
Profits were already battered by covid trading conditions. Now in autumn 2022, the business faced another threat. A tripling of gas and electricity per unit prices – that could be £80K or more wiped off the bottom line.
Credit to the hotel management for their strategic planning, which concluded that :
- Lowering energy cost was critical. Restoring control of the overheads budget would be a real boon
- There was significant upside to having green credentials for the hotel
- EV charges was essential to retain a segment of customers. It could boost attracting new customers and would also be extra revenue source
The team at Solar and Charge were briefed on the following objectives – reduction of cost; a five year payback on spend; and reduction in CO2 footprint.
Reduction in electricity after Solar and Charge plan
Reduction in gas usage after Solar and Charge plan
0.1kg CO2 emitted per room night on average throughout 2023
Year 1, measurable saving from the Solar and Charge designed and installed system
What we did / how we worked
Information was collected pre-visit, on site and post-visit while researching appropriate solutions. What we found was:
- Fixed (reasonable) rates for energy supply were coming came to an end in Jan 2023. Expectation was that it would increase 3 to 5 fold!
- The hotel predicted use in 2023 was c 350 MW electricity and 300MW gas per year
- There were 75 bedroom and extensive conferencing facility and significant daytime occupancy
- Room heaters were electric
- Two of three gas boilers were troublesome (maintenance cost was increasingly high)
All the ‘easy things’ like LED lights and auto switches had been done by the hotel. Even the swimming pool was converted to a conference room!
The proposal
Solar and Charge outlined an extensive solution within the hotel’s investment budget – with some serious value engineering and innovations included not least because of their buying power with manufacturers. The proposal included:
- 79 kW of solar panels
- 116 kW battery storag
- 100 kW inverters
- New (specific) gas boilers
- New (type of) heaters in rooms
- EV charge points, including 2 fast 40 Amp DC chargers
- Air source heat pump for water
The Hotel directors accepted the vast majority of the proposal bar the heat pumps. This would be saved for later.
Implementation: After the regulatory hurdles were cleared, installation was completed in Nov/Dec 2002.
The Results
Early results looked really promising. For example, Jan 2023, gas usage was nearly 11Mw less, and in Feb 2023, there was £2,860 saving on electricity, all compared to equivalent prior periods. One year on, we were able to see actual results in £ and kWh terms.
For the whole of 2023, compared to the last trading year pre-covid, there was reduction in electricity cost on same rate basis of £39.6K. The gas cost had come down by £12.7K. At this rate, the entire investment including the fast, but costly, electric vehicle chargers and gas boilers would be recovered in under 3.5 years. Wow!
Impressively, the CO2 emission from the hotel had fallen to 0.1 Kg per room per night. This is a near zero CO2 footprint position – something that the hotel should be congratulated for.
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