A confluence of trends has helped focus the private sector’s attention on efficiency retrofits. First, oil and natural gas price spikes in 2008 renewed concerns about volatility and long-term increases in energy prices. Second, amid concern about global climate change, many businesses now rank sustainability as a critical corporate objective. In that context, businesses are inclined to measure the value of energy retrofits both for their financial benefits and for their contributions toward sustainability goals.
A white paper released earlier this year by Johnson Controls provides an overview of financing options for facilities in the private sector. Authored by Peter White, director, private sector energy solutions at the company, “An Awakening in Energy Efficiency: Financing Private Sector Building Retrofits,” states that one of the greatest barriers to improving energy efficiency or adding renewable energy technology in buildings is the high capital cost of projects. Whether upgrading a chiller, installing a solar photovoltaic system, or implementing a bundle of improvements under a whole building retrofit, these types of projects require large up-front investments, followed by a long period of payback through savings in energy bills.A 2009 survey by Johnson Controls and the International Facility Management Association (IFMA) illustrates the importance of capital as a barrier to energy efficiency projects. When more than 1,400 executives with budget responsibility for facilities were asked about the biggest barrier to energy efficiency, 42% cited capital availability (see chart below). These findings suggest that new financing models can make a huge impact in igniting more clean energy investments.
A Look At Financing Options
“An Awakening in Energy Efficiency” provides an overview of Performance Contracting — when the capital investment to make the improvements is paid for through the savings created over a set period, and the energy service company (ESCO) installing the improvements contractually guarantees a savings on energy consumption and improved system performance, or both.
At the end of the contract, when the improvements are paid for in full, the owner reaps substantially lower costs than if the retrofits had not been completed. Still, for all its success in public and not-for-profit entities, performance contracting has had limited appeal in the private sector, where organizations have financial priorities, expectations for return on investment, and risk profiles differ. For example, while public and non-profit entities may accept retrofits that pay back the capital investment in five to seven years or longer, private businesses tend to expect payback in two years or less.
Johnson Controls’ paper goes on to to discuss several emerging financing options for private sectors — Anchor Tenant Financing; Shared Savings Agreements (SSA); Capital Leases; Power Purchase Agreements (PPA); Property-Assessed Clean Energy (PACE) Bonds; Green Leases; On-Bill Financing; and Performance-Based Infrastructure.
To request a PDF of the paper, send an e-mail to email@example.com. Include “Private Sector Energy Efficiency” in the subject line. Or, download it here from the Johnson Controls Website.
You might like:
- Technology, Aging Facilities Impacting Education Facility Budgets
- 4 Ways To Avoid LED Lighting Failure
- Question of the Week: How Can I Protect Employees From Zika Virus?
- Facility Management Critical To Infection Control
- VARIDESK Debuts Pro Desk 60 On HBO’s “Silicon Valley”
- Infographic: The Healthcare Speech Privacy Crisis
- Look, Listen, And Learn To Find Leaks
- Lunetta Exterior Lighting By Amerlux
- SkyBEAM UAV From Tremco FAA Approved For Nighttime Operation
- Spray Kleen Multi-Surface & All-Purpose by Sunburst Chemicals
- Energy Upgrades And Renovations: What To Know About Windows
- Fire Rated Flood Door from PS DOORS
- DCIM For Facility Management
- President Obama Proclaims May National Building Safety Month
- York Chiller Mobile App