New Financing Solutions for Energy Retrofits

11/01/2013 | By Chris Olson

Jump over the obstacle of initial cost and fund your money-saving project

For years BUILDINGS readers have rated energy as their number No. 1 operating cost concern. And for as many years, they have also said that the No. 1 obstacle to an energy improvement project is initial cost.

In a survey of building owners and facility managers conducted in June 2013 for this report, 44% of respondents said that initial cost is the greatest obstacle to an energy retrofit. That percentage of respondents is more than four times larger than for any other hurdle to a retrofit (see table).

However, new financing vehicles are helping owners to overcome this obstacle. The goal is to use future energy savings to pay for the upfront cost of energy retrofits. When structured properly, such vehicles can generate positive cash flow from the outset. With longer terms, they can also fund deeper retrofits that supply more savings.

While it takes time and resources for building owners and lenders to navigate the financing labyrinth, the results can be well worth the effort. If your organization is wasting money on inefficient equipment, it may be able to quantify the waste and use it to finance energy improvements without paying large initial costs.

This special report looks at several emerging solutions: PACE (Property-Assessed Clean Energy), on-bill financing, ESCOs (Energy Service Companies), and managed energy services agreements (MESAs). The article also looks at the special situation of small commercial buildings under 50,000 square feet.

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