The Green Premium Problem: Financing Electric Construction Equipment and Closing the Cost Gap

Across the UK construction sector, interest in low-emission sites is growing. Contractors face increasing pressure from clients, local authorities, developers and sustainability frameworks, and electric machinery is one option to reduce the local environmental impact of building works.

It helps contractors comply with clean-air policies, positions them competitively for tenders with strict sustainability criteria, and signals environmental responsibility.

But despite these incentives, adoption remains slow. The main reason is simple: electric construction equipment still carries a significant “green premium” construction companies face. Even as manufacturers expand their zero-emission ranges, the cost gap between electric and diesel alternatives remains stubbornly wide.

Understanding why that gap exists and how construction plant finance options can help close it, is essential for anyone considering the transition to electric plant. This article explores the roots of the green premium, the often-overlooked factors influencing total cost of ownership (TCO) electric plant, how specialist finance structures can help manage the shift, the implications for business models, and how these might need to change in future.

Why the Green Premium Exists: Electric Plant Cost Drivers

Although electric plant is gaining visibility, its economics differ sharply from traditional diesel equipment. Several factors contribute to high prices across the value chain:

• 1. Higher Production Costs Electric machines depend on advanced technologies that are still expensive to produce. Lithium-ion batteries require energy-intensive extraction processes and complex manufacturing stages. Heavy-duty construction equipment needs large battery packs to deliver acceptable run times, which pushes costs even higher.

  
  

  In addition to batteries, electric machines require bespoke inverters, motors, cooling systems, chargers and battery-management. These systems add weight, engineering complexity and production expense. As a result, electric plant typically costs twice as much as diesel in terms of purchase price alone.

  
  

• 2. Lower Production Volumes Unlike diesel plant, electric equipment is not yet produced at global scale. Manufacturers do not benefit from the economies of extensive mass production, and must spread R&D, testing, certification and tooling costs over far fewer units. This raises the cost of each individual machine.

  
  

• 3. Global Supply Chain Pressures Electric plant competes with the automotive, transport and energy-storage sectors for batteries and specialised components. With global demand rising rapidly, competition for raw materials and manufacturing capacity pushes prices higher and introduces volatility into supply chains.

  
  

The True Total Cost of Ownership (TCO): What to Include for Electric Plant

While electric machines are often cheaper to run and maintain (with electricity generally costing less than diesel and having fewer moving parts) the full financial picture is more complex. Several factors that significantly affect ownership profitability are often missing from current models for calculating the total cost of ownership (TCO) electric plant.

• 1. Infrastructure: Costly, Complex and Frequently Overlooked Electric machinery requires supporting infrastructure that diesel fleets do not. This is often where the green premium becomes most visible.

  
  

  Grid connections are expensive and can involve long lead times. As decarbonisation accelerates across industries, competition for grid capacity is intensifying. In some areas, capacity simply isn’t available. Even where it is, there are several additional challenges on sites which have temporary, unpredictable demands.

  
  

  Depot facilities are sometimes rented, with current occupants risking increases in property value, rent, or losing access at a later date.

  
  

  Charging solutions also add cost and logistical complexity. While some machines can use slower overnight charging, many sites and depots will require multiple high-power DC fast chargers. These also carry cost to buy, modify for construction environments, transport and maintain. Financing electric excavator charging infrastructure can often be packaged separately or together with the asset itself. High-power cabling on live construction sites also raises safety considerations.

  
  

  In large infrastructure projects, the challenge becomes even more pronounced. Machines may operate far from available power. A mobile battery storage system capable of charging a mid-sized machine might be an option, but can weigh over ten tonnes, require an additional driver, and create transport complications especially in poor ground conditions.

  
  

  Finally, space is a premium resource on sites and in depots, and electric infrastructure can take up a significant footprint. On temporary sites, the cost of constructing and decommissioning temporary substations becomes a recurring expense for developers.

  
  

• 2. Transportation Challenges Electric machines are typically heavier and bulkier due to their batteries, which can affect transport efficiency. It may no longer be possible to combine the same number or mix of machines on a single truck. Additional trips add time, cost and complexity, especially for large or ‘abnormal’ loads.

  
  

• 3. Downtime, Productivity and Operational Reliability Electric machines offer several operational benefits: fewer mechanical failures, improved operator comfort and the ability to work during sensitive hours and locations. But challenges remain.

  
  

  A full battery rarely matches the working hours achieved with a full tank of diesel, and fast charging can still take significant time. Work schedules need careful planning around charging windows, power availability and site logistics.

  
  

  Electric machines also have less resilience in unforeseen circumstances. Yes, issues are rarer, but when they do occur they are harder and often slower to fix. A power outage, charger failure or unexpected workloads can create operational bottlenecks.

  
  

• 4. Utilisation and Demand Low utilisation is emerging as a major barrier. Given their high purchase price and the complexities of infrastructure and transport, electric machines typically spend more time at depot than on site.

  
  

  Under-utilisation makes ownership unprofitable. Batteries also degrade when left unused, especially in cold conditions, so it’s not good to have them sitting in the yard unused for too long.

  
  

  This creates a difficult cycle: low utilisation increases hire costs, but increasing hire rate can reduce demand further. Many electric machines are currently operating at a loss, because customers cannot afford to pay the true price of these machines. This loss can only be absorbed by large businesses in small volumes, it is not scalable.

  
  

• 5. Staffing and Training Costs Electric fleets require technicians familiar with high-voltage systems, battery management and digital diagnostics. Staff need training in safety procedures, and teams must learn to assess power availability on sites. These additional responsibilities, including staff training costs electric construction fleet, add cost and operational complexity.

  
  

• 6. Residual Value Uncertainty Diesel plant enjoys a mature global resale market; electric plant does not. With limited demand on the international second-hand market residual value uncertainty electric equipment remains a major concern for fleet owners and finance providers.

  
  

  Even if demand emerges, old machines from the UK will be competing against low-cost new machines from China. OEM buy-back schemes, component recycling, remanufacturing and emerging global second-hand channels may help in future.

Rethinking the Business Model for Electric Construction Machinery

The existing model for plant ownership was built around diesel machines: buy on finance, keep for about seven years, and resell at 5–10% of the original purchase price. Electric machinery disrupts that model in several ways.

If the purchase price is two or three times higher, owners may need to keep machines far longer to see a return — which means warranties, service agreements and financing structures must also evolve.

The traditional preference for new machines on high-profile sites may also need reconsideration. Older electric machines — potentially remanufactured and upgraded with new components and software — may need to become a more common part of future fleets. This would also reduce embodied carbon, but reduce sales for manufacturers.

Some businesses might choose to borrow against their company rather than the machine itself, but this is not scalable. Ultimately, each machine must be financially viable in its own right.

The challenge now is to determine whether a new business model for electric construction machinery can make it economically sustainable — and what changes are needed to get there.

How Construction Plant Finance Options Can Help Bridge the Gap

Finance cannot eliminate the green premium, but it can make it more manageable by spreading costs, reducing risk and aligning payments with utilisation.

• Hire Purchase (HP) A straightforward approach that enables contractors to: pay a smaller upfront deposit, spread the remaining cost over one to five (or potentially longer) years, and take ownership at the end. This protects working capital while providing immediate access to new electric machinery. Comparing Hire Purchase vs Finance Lease construction equipment is crucial to find the best fit.

  
  

• Finance Lease Ideal when ownership isn't necessary. Benefits include: lower monthly payments than HP, flexible end-of-term options, potential tax efficiencies, and the ability to upgrade more frequently. Because residual value risk is absorbed into the lease structure, monthly costs may be higher than diesel but lower than shouldering depreciation risks alone.

  
  

• Operating Lease & Contract Rental These options offer maximum flexibility and minimal risk, with: the lowest monthly payments, no exposure to residual value, predictable budgeting, and optional maintenance and servicing packages. For electric machinery — which carries greater technological and depreciation risk — the operating lease electric construction plant UK offers the safest and simplest route into low-emission equipment.

  
  

• Green Finance Construction Plant Finance offers tailored green finance packages that can include: electric machinery, charging infrastructure, on-site power solutions, and related technology. Packaging machines and infrastructure together can reduce upfront costs and simplify the transition.

  
  

• Managing Residual Value and Technological Change Shorter finance terms, flexible end-of-term options and upgrade-friendly structures help contractors stay aligned with rapid improvements in electric plant technology, without locking them into ownership of early-generation machines.

  
  

Building a Clear Business Case: How to Calculate a True Cost of Ownership

Before investing, businesses should take a structured approach:

• Calculate a true cost of ownership,

• include infrastructure and transport considerations,

• assess realistic utilisation expectations,

• evaluate depreciation and resale uncertainty, and

• explore finance options early.

  
  

Being honest about these factors is essential. Downplaying the financial challenges only increases the risk pressures on hirers and OEMs. A realistic view allows stakeholders to collectively focus on improving the economic viability of low-emission machinery.

The Path Forward

Electric construction equipment costs more today — not just because of its purchase price, but because of the infrastructure, utilisation, operational and residual-value challenges that surround it. Finance can play a critical role in easing these pressures, but it cannot solve the problem alone.

Future fleets will likely be powered by a mix of technologies: fully electric, hybrid, hydrogen, alternative fuels and others. Each has strengths and limitations depending on application and site constraints. But electric machinery will almost certainly be part of that mix.

The task now is to develop financial and operational models that make it commercially viable at scale. The industry faces a central question: if today’s business model doesn’t work for electric machinery, what model will — and how do we get there?

It’s a question that should be applied to all emerging technology types, and the answers will shape not only the future of construction plant, but the sector’s ability to meet its environmental and commercial goals for decades to come.

Want to Begin the Transition? Construction Plant Finance can structure funding tailored to your fleet, your workload and your sustainability plans.

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Author

Steve Moody, Consultant, Construction Plant Finance

I have been a Director of SKM Asset Finance Ltd since 1997 and this is my 41st year of financing construction equipment! We are asset finance brokers based in Ringwood, Hampshire and we specialise in providing funding to the Construction Industry, including Plant Hire, Groundworks, Building, Civil Engineering, Waste Recycling and Demolition. Prior to forming the company I worked for Construction Equipment Finance Ltd, a subsidiary of De Lage Landen Ltd, for 4 years and prior to that I worked for JCB Credit Ltd, now JCB Finance Ltd, for 10 years.

We have a team of 12, all who have many years of asset finance experience, mostly within the Construction sector.

Luis Bassett, Decarbonisation & Sustainability Manager, The Construction Plant-hire Association

Qualified Environmental Health Officer with a good, self-driven work ethic and a wide range of experience and transferrable skills. Started career in cleaning services for ducting systems, premises hazardous to health, crime & trauma scenes, and pest control.