Retrofits are vital to keep buildings running in tip-top shape. After establishing a proper measurement and verification process, it’s time to tackle one of the largest challenges of a retrofit project: financing.
There are many ways to finance any energy efficiency or retrofit project, making it difficult to find the right one for you. But emerging financing mechanisms have made it increasingly easy to take the next step toward a more efficient building. Here’s how to take advantage of them.
Sustainable Energy Utility Financing: Sustainable Energy Utilities (SEU) are a new type of collective organized by state or municipal governments to help businesses and residents in their jurisdictions find appropriate financing mechanisms for approved energy efficiency projects. SEUs can either connect businesses to the best financiers, or they can finance the projects themselves.
Utility Incentives Programs: Various utilities offer different financing and benefits for customers who undertake energy efficiency projects. For example, PG&E offers clients undergoing retrocommissioning financial incentives for undertaking this large-scale energy efficiency project. Unfortunately, these programs vary by utility provider – perhaps now is a good time to start looking for a better utility company.
Tax Credits From State & Municipal Governments: New financial incentives from both state and local governments help clients get over the financial barriers of retrofitting a building. Tax credits, grants, and rebates are the most common financial incentives. While this is often used in conjunction with other financing options, government-funded programs can help end users get over the capital hurdle of retrofit approval.
PACE financing: Property-Assessed Clean Energy (PACE) programs have cropped up across the country, enabling clean energy, energy efficiency, and water conservation projects to gain the financial backing required. Selected financiers can provide loans for approved projects, and the loans are repaid through an annual property tax assessment. Legislation for PACE has been approved in 29 states and the District of Columbia, and more than $1B has been invested in energy projects by December 2015.
On-bill financing: Utility companies are beginning to offer on-bill financing, in which the utility companies offer loans to their customers for energy efficiency projects. The loans are then repaid through monthly utility bill payments as an additional line on your bill. In theory, the payments you make on your utility bills will not increase with the retrofit line item because you will be reducing the amount of energy you consume every month. This type of financing has two major differentiators: the loans are tied to a utility service (therefore, the provider can cut off utility service if the customer fails to make payments) and the loan is automatically paid by the energy savings. This greatly broadens eligibility for energy efficiency financing because the cost of a retrofit is tied to the utility bills – you would pay these fees regardless of the retrofit. Plus, on-bill financing provides a reliable way to payback loans.
ESPC / ESCO Financing: An energy services company (ESCO) can set up an energy savings performance contract (ESPC) for a client in which the ESCO assesses energy savings opportunities. The ESCO takes a risk on the client by financing the project until the energy savings from the project “pays back” the ESCO, meaning the performance of the actual project defines the profit. This is a great program for hands-off clients because the ESCO handles the installation and delivery as well. However, because the risk is on the ESCO, the projects that are undertaken may result in lower savings than larger, more innovative projects.
Traditional methods of financing, including leasing and purchasing retrofitted equipment, still allow others to participate in the energy efficiency game. Still not sure which method is best? Check out Metrus Energy’s roadmap to energy financing to determine the right option for you.
With this new financing options, fitting retrofits into budgets is easier and other energy efficiency projects are becoming more available to a wider audience. If you do not invest in retrofits now, you are missing out on significant savings – both for operational budgets and new projects. They are leaving money on the table by not taking advantage of the opportunities for energy efficiency in their buildings.
You now have the tools you need to start your retrofit project. What’s holding you back? Get started today.