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:
many professionals are not aware, or do not have the skills, to effectively navigate their financing option
industry lacks competent professionals who can package deals in a way that is attractive to investors
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.
“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?
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
Chris Birk discusses the benefits of an energy-efficient mortgage, the financial tools available to help customers and existing programs that offer the mortgage.
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)
“Whether it is deploying LEDs and other state-of-the-art lighting technologies, retrofitting public and private buildings or installing new solar energy systems, these priority activities are examples of how mayoral leadership is changing energy use in our cities. And, the findings in this survey also demonstrate how mayors and cities are adapting to changing conditions and partnerships, while still leading the nation on its energy and climate challenges.”– Tom Cochran
Summary of survey results:
29% of cities choose LED/energy-efficient lighting as the energy technology receiving top priority in their cities within the next two years. Solar systems and building retrofits are second at 19%.
In 45% of surveyed cities- the City operating budget &
City capital improvement program are “
How Cities Expect to Finance Their Top Priority Technology”
71% of the cities say that the utilities are the “most important partners in deploying new energy technologies”
84% of cities say budget/funding constraints pose the “Most Significant Challenges in Advancing Energy Efficiency and Conservation”
36% of cities have developed a “Comprehensive Energy Plan”
40-50% of cities creating programs for residents and business for “Engaging the Local Community on Climate Activities”
“Finally, owners and vendors often struggle to model the financial benefits of particular efficiency investments. Making matters worse, every building owner does internal financial modeling differently. For example, some owners for leasing reasons can rely only on simple payback as a financial metric, while others can use other assessment criteria, such as Net Present Value and Internal Rate of Return. Some can incorporate criteria such as increased value at sale, or avoided maintenance, increased employee productivity and improved corporate reputation, while others cannot.
Owners typically prefer to self-finance for a variety of reasons, and are wary of investments that only work based on complicated third-party financing mechanisms. These can generate onerous legal fees and increase the liabilities that owners have to record on their books.”–By Sara Neff