Funding procedures at University College London and University of Leicester

The UK FHE sector spends over £200 million a year on energy. There is much evidence that this can be reduced by energy efficiency initiatives. However, these can often be difficult to implement in practice because there is competition for capital and funding mechanisms that result in capital and energy costs being allocated to different budgets, so that there is no incentive to prioritise energy savings in new investment.

One solution to these problems is to allocate specific funding for energy efficiency investment. This case describes two ways in which this can be achieved. The University of Leicester has a specific budget of around £100,000 per annum. At UCL the energy manager is allowed to utilise any underspend on budgeted energy costs.

Funding mechanisms of this type have two main applications. Firstly, they allow substantial investments to be made which despite reasonable paybacks, might have been ‘crowded out’ by other investments, which are more attractive to decision-makers. Secondly, they allow top-up funding to be provided for departments or projects where a small increase in capital cost will generate substantial energy savings.

The different funding mechanisms have different advantages and disadvantages, and are also more appropriate to some settings than others. A dedicated budget is the most secure mechanism but often the most difficult to achieve – a flexible underspend or shared saving (when a percentage of cost savings from energy efficiency are allocated to finance further investment) approach may be more appropriate for many FHE institutions.

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