What are the financing options that should be considered to make building energy efficiency retrofits possible?
- Oct 13, 2021 3:47 am GMT
Energy efficiency financing along with rebates, incentives and grants are just some of the finance options.
A building assessment is the first step in the process, gathering building information that results in the creation and development of potential financing options the project could be eligible for.
A proprietary assessment will validate how much financing a project would qualify for based on the property’s valuation and the amount of owner equity, as well as the financial performance of the company.
The second step is to define how energy is being used by the building. Defining the sources of wasted energy, the types of heating /cooling and lighting systems, and how the building is operated. Water usage is another utility to consider during this audit process. Reviewing 2 to 3 years of utility data to look for patterns or changes in building utility usage provides great insights.
The third step is to determine the available technologies to eliminate waste, and finally provide specific recommendations that would make the energy intensive operation less energy dependent and less responsive to rising utility costs.
Creating a cash flow/budget neutral project strategy is key where the utility dollar savings are diverted from the existing utility budget (assume 25% reduction) to pay down a loan for a predetermined period of time considered the payback term. Return on investment may vary from 2 to 5 years depending on the size of project, technologies applied and the utility savings opportunity.
When developing these types of projects, the top of mind question for a CFO to ask is “how can these energy and water efficiency upgrades be funded to meet our company's available capital and financial performance objectives?”
Taking a cash flow/budget neutral approach as described above is redirecting available capital in an efficient yet effective way to reduce utility waste along with upgrading your building systems with new technologies to continue to rein in rising utility costs.
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