Financing the upfront investment

Eric Woodruff raises a concern that “several surveys show that lack of capital remains the primary barrier to approving energy management projects.  Even if a project has a 50% Return on Investment (or approximately a 2 year simple payback period), there is no “return” if a company cannot make the initial investment.”

The problem as he sees it is that:

  1. many professionals are not aware, or do not have the skills, to effectively navigate their financing option
  2. industry lacks competent professionals who can package deals in a way that is attractive to investors
  3. professionals must understand their options to fund an energy project

Woodruff discusses the two common methods for funding,Traditional Financing & Performance Contracting and then summarizes 4 new options that may help address the problems he has identified above.  Despite these newer options Woodruff states that facilities managers need to know where to look and how to leverage the information.  Additionally, he emphasis education and training in performance contracting and finance.


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Financing Smaller Energy Efficiency Projects

Two Financing Schemes in the news lately are:

  • Noesis Shared Savings Agreement (SSA)

“The SSA allows the customer to pay a variable payment based upon the actual amount of avoided energy measured. The concept is similar to solar net-metering where customers are paid for the actual amount of energy they contribute back to the grid.”  Read More.

  • Joule Assets

“works with vendors of energy efficiency services, providing them with funds. They, in turn, loan the money to the end-user businesses.” Read More.
Could either of these programs help NYC buildings implement energy savings measures identified during LL87?


The number one barrier to participation in the EE market is…

ACEEE released a “more detailed report that profiles successful, integrated efficiency lending programs, highlights perspectives on increasing lender participation, and explores substantive barriers to growing the market to its full potential”.

The number one barrier, according to ACEEE, for small to mid-size lenders entering the  energy efficiency financing market is the lack of customers actively seeking financing for retrofits. “Armed with the technical assistance and policy and research support outlined in the report, small to mid-size lenders could serve an important role in facilitating investment in energy efficiency at the local, state, and regional levels. Given their strong relationships with customers, these lenders, both mission-driven and non-mission driven, could potentially leverage local knowledge to connect their customers with energy efficiency contractors. These lenders can also connect customers with members of the community who have undertaken similar projects in the past.” – Casey Bell

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Invest now, save later: Energy Efficient Mortgage

Chris Birk discusses the benefits of an energy-efficient mortgage, the financial tools available to help customers and existing programs that offer the mortgage.

Main benefits:

  • savvy resale strategy
  • finance improvements that will optimize equipment and reduce usage
  • typically only approved when measure will result in net cost savings

It is important to note that an “energy-efficient mortgage isn’t the right fit for every person and every property. Run the numbers in detail, and compare them with other financing options such as a home equity line of credit or even a low-or no-interest credit card.” (Chris Birk)

Read more at: MyMoney

Morgan Stanley Institute for Sustainable Investing

“Morgan Stanley Chairman and CEO James Gorman  announced the establishment of the Morgan Stanley Institute for Sustainable Investing.  The Institute for Sustainable Investing will pursue three focus areas: financial products and solutions that enable clients to invest in sustainability-focused strategies seeking risk-adjusted financial returns; groundbreaking thought leadership that will help mobilize capital toward sustainable investing opportunities; and strategic partnerships with the public, private and nonprofit sectors designed to build capacity and best practices within the field of scalable sustainable investing.”– Morgan Stanley