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New Financing Options for Energy-Efficiency Projects

August 19, 2014 | 0 comments

Energy conservation retrofits in small commercial buildings can present challenges – upfront capital may not be available, and energy savings might not accrue as quickly to offer a fast return on investment. As a result, investors may hesitate to invest in energy-efficiency projects for smaller retrofit projects.

However, small and medium commercial buildings (50,000 square feet or less) make up nearly 90% of all U.S. buildings (and 50% of total energy consumption), according to Rocky Mountain Institute. While the individual energy conservation projects within these buildings may be small, the aggregate opportunity for energy efficiency is quite large. A Preservation Green Lab study found that increasing energy efficiency in small buildings could potentially reduce overall commercial energy use by 17%.

Here are a few financing options that may be available for small commercial buildings wanting to invest in an energy-efficiency project:

  • On-Bill Recovery Financing. Some utilities may offer low-interest on-bill recovery financing that makes it possible for small businesses and not-for-profits to use savings on their energy bills to pay for energy-efficiency upgrades.
  • Participation Loans. A public benefit corporation, such as NYSERDA, partners with lenders to help small businesses gain access to low-interest financing for energy-efficiency improvements. For example, NYSERDA provides 50% of a loan (up to $50,000) at 0% interest, and the lender then provides the rest of the loan at market rate.
  • Public Financing. Government loans or bonds, such as the Property Assessed Clean Energy (PACE) loan, can offer financing for energy-efficiency projects and tie the loan to the building, not the owner.
  • Green Revolving Loans Funds. Green revolving loan funds are internal funds that provide financing for sustainability projects intended to provide cost savings through energy-efficiency improvements. These savings are put back into the green fund for the next project. As the green revolving fund matures, it becomes a source of capital for energy-efficiency projects.

Last year, the U.S. Department of Energy awarded $10 million for six projects that will help small commercial buildings save money by saving energy. The investment will be matched by at least $14 million in private-sector funding. The projects include a crowd-sourcing website to help market, finance, and install energy-efficiency retrofits; affordable energy-efficiency evaluation and upgrade tools; and pre-packaged technology retrofit options available by building type and size, business type, and climate zone. With these six projects under way, new energy-efficiency financing options may be available soon for small commercial buildings.

Have you made use of any of these financing options to complete an energy-efficiency project? What other financing methods have you used?

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