Energy Efficiency Finance
WHAT ARE “ENERGY EFFICIENCY (EE) PROJECTS*”?
Energy Efficiency Projects or Retrofits are the replacement or upgrade of old building systems with new energy saving technology and processes.
- New Kits: repair, replace, or upgrade to key internal equipment; insulation; high performance windows; coating materials etc.
- New Controls: Enable the system to operate more dynamically, with individual optimization by floor, and appropriate schedules.
- Integrated Design: Evaluate the impact of multiple systems to be changed or upgraded (Cross Components)
- AEM: Active Energy Management systems that monitor performance and make corrections when necessary; smart thermostats, etc.
- Energy Storage: Peak Shaving to reduce demand in key hours
* Based on the study by “US Building EE Retrofits” by the Rockefeller Foundation and DB
The goal of many of many of our clients is to go to market with a ‘Turn Key’, white-labeled, financial solution that features the following attributes:
- A clear and easy to understand preliminary set of credit and other criteria so that marketers can give a quick ‘yes or no’ where appropriate (a more efficient use of time and satisfying customers)
- A simple project application accompanied by a definitive due diligence check list
- A quick turn around on project applications
- Uniform documentation
- The ability to pool customers so that an advantage is gained via diversification
- Reasonable pricing
Advanced Energy Capital assists its clients in realizing their business objectives, grow their revenues and their profitability.
ENERGY EFFICIENCY FINANCE:
Case Study: The Empire State Building
- Retrofits can offer strong returns through energy-savings driven cost reductions. A good example is the Empire State Building (ESB).
- From 2011 through 2013 the ESB underwent a complex and high-profile retrofit that produced a 38% reduction in annual energy costs.
- Malkin Properties considered third-party financing to renovate the ESB but ultimately decided to self-finance.
- The ESB retrofit provides an example of the potential returns inherent in energy efficiency retrofits.
- The energy retrofit cost the ESB $13M and created $4.4M of annual energy savings.
Source: DBCCA Analysis, 2012, Jones Lang LaSalle, 2011.
Note: Costs savings are projected from current data.
Split Incentives and Solution
Installing a battery in the basement of a building, that can charge at night (off peak) and discharge during peak hours during the day can save 40%+ of energy and demand charges each month.
- Building owners, by in large, are responsible for capital expenditures
- Tenants are responsible for the energy costs.
- Therefore, a retrofit that has to be paid for by the landlord to benefit the tenants will not happen.
- Battery developer leases space in the basement from the landlord – providing the building with income.
- Developer keeps the energy savings as income and charges the building a discounted price for the electricity which is passed through to the tenants
WIN – WIN – WIN: Tenants save money, Landlord earns income on unused space, and AEC earns the financing charges on the installation.
SAMPLE ENERGY EFFICIENCY FINANCE TRANSACTIONS
- Credit Facilities for Small Businesses Accessing Utility-Sponsored Retrofits
- Senior Debt for Implementation of Facility-Wide Energy Efficiency Retrofit Programs
- Energy Services Agreement for the Implementation of Retrofits in Commercial Buildings
- Off-Balance Sheet Financing for Installation of Commercial Energy Storage (Battery)
- Off-Balance Sheet Financing for Boiler Conversion
- Investments (Preferred Equity/Equity/Debt) in Energy Efficiency Services (and Consulting) Firms
- Investments (Equity/Debt) in Energy Storage Firms