03/07/2014

Change Your Perception of Financing and Reap the Energy Savings

An overview of funding options for your next project

By Eric Woodroof, Ph.D., CEM, CRM

 

Psychologically, when most people hear the word “financing,” they have a quick and negative reaction about cost. I understand the perception. If you look at the total financing cost on your home, you pay an amount over 30 years that can be twice the purchase price!

But most energy projects are different from your home mortgage. The savings is greater than the finance cost (especially with today’s low interest rates). Yet lack of capital and financing cost are the most common reasons why good energy projects are delayed or cancelled.

An energy project can have a rate of return over 30% – higher than most investment opportunities and many companies’ profit margins. Even with a 10% financing cost, you are still 20% ahead compared to doing nothing.

Lack of capital is solvable for many projects. I will outline solutions, some old and some new. I hope this article inspires you to challenge anyone who tries to block a good project based on the premise that money is not available and the financing cost too high. The truth is, you are probably throwing bags of money out the window – and that money cannot be recovered, even if you do a conservation project at a later date.

Innovative Options

Among recent financing innovations are Utility Energy Service Contracts (UESC), Power Purchase Agreements, on-bill financing, and Property Assessed Clean Energy (PACE) financing.

Utility Energy Service Contracts are basically performance contracts that are developed and implemented by utilities. The contracts offer some streamlining because utilities can provide the project funds and make deals with neutral cash flow.

Power Purchase Agreements (PPAs) are commonly used for solar PV and wind generation. In a PPA, solar is put on the roof at no upfront cost to the building owner, who agrees to purchase the kWh produced over a long-term contract. The PPA is typically structured so that the building owner is paying about the same price for the solar kWhs as they would for power from the grid. This works well when the grid price is high, the utility is cooperative, and local incentives are available.

On-bill financing is offered by some progressive utilities, typically as part of a Demand Side Management Strategy that benefits the utility. As the name implies, building owners repay the installation costs with an extra charge on their future utility bills. The deal is structured so that the monthly savings is larger than the extra charge. The improvement can be linked to the meter, so that if the owner sells the building, the savings and the repayment are taken over by the new owner.

PACE is very similar to the on-bill financing concept except that the savings and repayment are linked to the property tax, so that if an owner sells a property, the new owner would assume the property tax amendment (i.e. extra payment). However, any new owner also reaps the savings cash flow. In recent years, PACE has become very popular. This financing vehicle has now been enabled by legislation in 31 states. 


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Visit our website today to learn about the design flexibility of a Morton building and the endless possibilities of partnering with our designBUILD team.


Wood construction is both cost and energy efficient. Check out Morton Buildings and our designBUILD team online today to discover all the benefits of post-frame construction.


When choosing a metal-clad building for your next construction project, consider Morton Buildings, Inc., and their designBUILD team, we’ll make your dream a reality.

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Our mission is to help our customers manage their buildings' energy costs, improve reliability, and enhance performance while having a positive impact on the environment.
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Tennant Company is a recognized leader in designing, manufacturing and marketing solutions that help create a cleaner, safer, healthier world. With thousands of satisfied customers already using award winning ec-H2O technology, why not see what you're missing? Test ec-H2O on your soils in your facility. Get a free demo.

 

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Visit our website today to learn about the design flexibility of a Morton building and the endless possibilities of partnering with our designBUILD team.


Wood construction is both cost and energy efficient. Check out Morton Buildings and our designBUILD team online today to discover all the benefits of post-frame construction.


When choosing a metal-clad building for your next construction project, consider Morton Buildings, Inc., and their designBUILD team, we’ll make your dream a reality.

We Can Help You Reduce Energy by 30%

Our mission is to help our customers manage their buildings' energy costs, improve reliability, and enhance performance while having a positive impact on the environment.
CLICK HERE to find out how.

 


Tennant Company is a recognized leader in designing, manufacturing and marketing solutions that help create a cleaner, safer, healthier world. With thousands of satisfied customers already using award winning ec-H2O technology, why not see what you're missing? Test ec-H2O on your soils in your facility. Get a free demo.


Tennant Company is a recognized leader in designing, manufacturing and marketing solutions that help create a cleaner, safer, healthier world. With thousands of satisfied customers already using award winning ec-H2O technology, why not see what you're missing? Test ec-H2O on your soils in your facility. Get a free demo.

 

Replace core drilling with Connectrac In-Carpet and On-Floor Wireways, the proven connectivity solution in open interior spaces of all kinds. These elegant low-profile wireways are great for AV / telecom connectivity wherever it’s needed.

 

Add highly responsive multi-zone comfort to any building project, in any climate. Our CITY MULTI H2i R2- and Y-Series VRF systems give you flexibility to fit the needs of any building. Enjoy 100% heating capacity at 0°F outdoor ambient, and 85% heating capacity at -13°F outdoor ambient.  For more information, log on to www.mitsubishipro.com


 
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