Financing

Building owners and managers pursuing energy efficiency often face a variety of barriers when seeking funding for projects. Fortunately, specialized financial tools can help to overcome upfront costs and other financing-related barriers. Members of the Better Buildings financing team work to identify and develop resources to help building owners and operators overcome barriers by taking specialized financial tools to scale.

Financing Tools High first cost Lender restrictions Short payback requirements Complicated/ unavailable incentives Landlord/ tenant split incentive
Internal Financing
Debt Financing
ESCO
Energy Services Agreements
Lease Financing
On-Bill Financing
PACE Financing
Green Leasing
State Incentives
Federal Financing

This page provides an overview of energy efficiency financing tools, case studies, information on collaborative groups, and guidance documents to help owners and managers understand financial solutions to existing barriers. Contact us to join the Financing team or for additional information.

Tools & Resources

Internal Financing - Owners allocate capital from internal capital or operating budgets to be used for energy efficiency upgrades

Debt Financing - Owners borrow money from banks to pay for energy efficiency projects

ESCO - An energy services company (ESCO) will assess the energy efficiency opportunity, purchase the equipment necessary to improve performance and install the equipment

Energy Services Agreements -Agreements are developed where third parties are paid for achieved savings at a property

Lease Financing - Owner leases equipment rather than purchasing to avoid upfront costs

On-Bill Financing/Repayment - The utility or some other third-party source loans money to the owner, and the owner in turn repays that money through a charge on the utility bill

PACE Financing - Property Assessed Clean Energy (PACE) Programs allow for local governments to provide energy efficiency financing in return for adding an assessment on the tax bill

Green Leasing - Green leases (also known as aligned leases, high performance leases, or energy efficient leases) align the financial and energy incentives of building owners and tenants so they can work together to save money, conserve resources, and ensure the efficient operation of buildings.

State Incentives (DSIRE) - Use this comprehensive database to find city, state, federal, and utility incentives and policies related to energy efficiency and renewables.

Federal Financing - This guide provides a snapshot of the federal finance facilities available for energy efficiency upgrades and clean energy deployment. Business owners, homeowners, investors, and policymakers can all use this guide as a “Yellow Pages” for federal financing. The guide is organized by market segment, and also includes a table that presents each finance facility by type of instrument along with the federal agency that administers the program.

Clean Energy Lending Primer - Introduces the five major component of a clean energy lending product: lenders, repayment, capital sources, credit enhancements, and security.

Metrus Energy Better Buildings Challenge Implementation Model: Efficiency Services Agreement (ESA) in BAE Facilities Nationwide - In Q1 2013, construction was completed on two projects that are part of an ongoing multi-phased, multi-facility integrated energy efficiency retrofit program. The program has been financed under Metrus Energy’s Efficiency Services Agreement (ESA), with Siemens Industry designing and installing the efficiency project equipment. To date, Metrus and Siemens have financed and constructed four integrated retrofit projects at BAE facilities in New York and New Hampshire, with several additional facilities currently under development. Total investment is approaching $8 million, with zero out of pocket costs to BAE. The program currently generates more than $1.1 million of annual energy savings and represents 3 million kilowatt hours reduced annually.

Clean Fund BBC Implementation Model: Commercial PACE Financing at Pier 1 - On October 15, 2012, Prologis, Inc. closed $1.4 million in PACE (Property Assessed Clean Energy) financing for energy efficiency and renewable energy upgrades to its headquarters at the historic Pier 1 building in San Francisco. The project represents the largest PACE-funded commercial retrofit in the country to-date and the first completed project in the GreenFinanceSF program.

Kohl’s Better Buildings Challenge Implementation Model: Energy Finance Strategy - Kohl’s Energy team wanted to implement energy efficiency measures with targeted, predefined payback periods across the chain. Over two years, the Energy team executed several “low-hanging fruit” energy efficiency projects that resulted in monetary savings for the organization, and attracted the interests of Kohl’s Finance Department.

Southern California Edison Better Buildings Challenge Implementation Model: on-Bill Financing - Over the last few years, the CPUC has led various efforts to authorize California investor owned utilities such as Southern California Edison (SCE) and PG&E to offer On-Bill Financing (OBF) to customers. Through OBF, customers can fund qualified energy efficiency projects for zero interest and no fees, reduce their monthly electricity usage, and receive financial incentives for installing qualifying energy-efficient equipment. The unsecured OBF loan is used to cover the cost of energy efficiency equipment and installation costs (net of rebates and other incentives). Customers repay the loan in monthly installments, which are added as a line item on their bill.

3M Better Buildings Challenge Implementation Model: Capital Set Aside Fund - 3M’s goal was to ensure funding for worthwhile energy efficiency projects that were being overlooked through the normal budgeting process. 3M created a special pool of capital to fund cost-saving energy efficiency projects that provided positive returns, but otherwise failed to meet the company’s investment criteria. For each of the past two years, 3M has committed $1 million to the set aside fund for investments in relatively small projects (less than $50,000 in capital costs).

Best Buy Better Buildings Challenge Implementation Model: Using Maintenance Funds for Energy Upgrades - Best Buy had limited capital funds for energy efficiency. They implemented a rolling portfolio-wide lighting retrofit program using maintenance funds instead of capital budget. This resulted in reduced energy and labor expenses for the company.

USAA Real Estate Company Better Buildings Challenge Implementation Model: Calculating the Financial Benefit of Energy Upgrades - USAA had difficulty garnering approval for investments in building energy efficiency due to incomplete understanding of financial and other benefits. They developed a tool to convert the results of energy efficiency upgrades into metrics that are meaningful for financial decision makers. More projects were funded leading to increased portfolio-wide energy savings; improved energy efficiency more closely connected to increased asset value, net operating income, and tenant satisfaction.

See Action Financing Solution and Existing Buildings Working Groups - The mission of the Financing Solutions Working Group for the State and Local Energy Efficiency Action Network (SEE Action) is to provide responsive financing instruments and mechanisms (loans, leases, and power and service agreements) that support widespread adoption of energy efficiency technologies in the United States. The working group recognizes that effective financing is a vital tool that can encourage implementation of energy efficiencies by strengthening the value proposition of investments consumers consider making in energy conservation.

Join the Billion Dollar Green Challenge - The Billion Dollar Green Challenge encourages organizations to invest a combined total of one billion dollars in self-managed green revolving funds that finance energy efficiency improvements. Though initially focused on higher education, the program now targets municipalities, healthcare providers, and companies.

Green Building Financial Consortium - Offers a free, downloadable book that details how to value and underwrite sustainable properties

Green Revolving Funds: A guide to Implementation and Management - A white paper that helps organizations build the business case for energy efficiency by establishing a green revolving fund. The paper focuses on higher education, but most of its insights are applicable across sectors.

Energy and Financial Modeling tools - The Rocky Mountain Institute (RMI) has developed a set of tools and templates that will save time and increase the quality of energy modeling. These include the Energy Model Input Translator (EMIT), Model Manager, LCCAid, and Elements.

The RMI Retrofit Depot Guides to Managing and Identifying Opportunities for Deep Retrofits - RMI provides three guides to help enact a deep retrofit: (1) Managing Deep Retrofits, (2) Identifying Design Opportunities, and (3) Building the Business Case.

How to Calculate and Present Deep Retrofit Value for Owner Occupants - RMI offers a practice guide for calculating and presenting the true value of a highly efficient and sustainable building. The Deep Retrofit Value Guide documents the compelling logic of how deep energy efficiency and sustainability retrofits create value and introduces RMI’s Deep Retrofit Value models, providing the foundational methodology necessary to calculate and present value to retrofit decision makers.