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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Three Key Constituencies to tap into for Energy Management

“Each summer, EDF Climate Corps fellows evaluate organizations for energy savings opportunities with many of them uncovering stakeholder engagement as a key savings opportunity. After 400 EDF Climate Corps engagements, the program has found that there are three key constituencies to tap into for energy management:”

  • Executive Leadership– “Ambitious goal setting is one way executive leaders can advance green initiatives.
  • Employees– Engaging and Empowering
  • Local communities and utilities– incentives, programs, standards, certifications

– Ellen Bell, EDF Read More.

It seems that the industry needs to start to integrate psychology and behavioral change in order to successfully reduce energy use of a building or process.  An article written by Emily Lawson and Colin Price’s “The psychology of change management,” has identified:

“four basic conditions are necessary before employees will change their behavior: a) a compelling story, because employees must see the point of the change and agree with it; b) role modeling, because they must also see the CEO and colleagues they admire behaving in the new way; c) reinforcing mechanisms, because systems, processes, and incentives must be in line with the new behavior; and d) capability building, because employees must have the skills required to make the desired changes.”

McKinsey also “identified nine insights into how human nature gets in the way of successfully applying the four conditions required for behavioral change. ” Four of the Nine are listed below.

1. What motivates you doesn’t motivate most of your employees. 

4. Leaders believe mistakenly that they already “are the change.”

6. Money is the most expensive way to motivate people. 

9. Good intentions aren’t enough. 

McKinsey Quarterly.

Energy Management: 5 KPIs that Increase ROI and NOI

“KPIs should be able to be measured, benchmarked, compared, sliced and diced. And the first most important step to make use of KPIs is to have a solution to get a high-level view and therefore manage your energy data. Many multifamily utility billing and invoicing products offer some level of this service. Some even have experts who tailor a system to a company’s needs. Even our old friend Excel can produce some measurable results. A high-powered energy management system, however, is a proven ally.

With a measurement and verification (M&V) system in place, properties can define factors that are important to managing energy spends that favorably affect the bottom line.”—by