Posted by 
Bryan Haag on Thursday, February 4, 2016
It isn’t any secret to facility managers that campus central utility projects can offer quick paybacks and sizeable annual savings for your campus, through energy reductions. Furthermore, those annual savings can be used as a funding mechanism for other energy or sustainability projects, creating your “Goose that Lays Golden Eggs.”
The question is how to fund these central utility energy projects when utilities are often “out of sight, and out of mind” and bypassed, in lieu of other energy projects that are more noticeable to students, stakeholders, and donors alike.
The first step as a facility manager is to arm yourself with the data about energy savings opportunities in your central utilities. Two ways to get the data are through a utility master plan (UMP) or energy use index benchmarking. A UMP provides the data by analyzing your system, usage, and bills, to identify projects, costs, and energy and emissions savings, forming the life cycle cost of the project(s), the baseline of your case for funding. A more lightweight approach is to use your campus energy use index to benchmark your campus and see your savings potential at a high level, which may be helpful in determining if enough savings could exist to proceed.
Putting this information into the hands of your administration may be enough to receive funding, but if you’re relying on your utility projects’ savings to serve as a funding mechanism for the next round of energy projects, and internal funding sources are scarce, you need to present options and savings data to help your institution fund the projects, and feed the goose, so it can begin laying those golden eggs.
There are many funding options available, which is the good and bad news all rolled into one. While having options is a good thing; having too many can lead to confusion between each option’s nuances. While the lines between the options are continually blurring, as vendors, lenders, manufacturers, and regulators all continually adjust their offerings to meet customers’ needs. We’ve developed a helpful chart to lend clarity and give you a quick overview of some of the typical options for financing your utility energy project(s), so you know which options might be viable for your situation, and can focus your search.
There is no “one size fits all” solution when it comes to funding your central utility energy projects. Two things are for sure, (1) in every energy project you should always see what grants and incentives are available first, and get as much “free money” as possible to reduce the project costs that need to be financed and (2) you want those golden eggs!
| | Self Funding | | Concept: | Use your available capital or credit to fund your own projects | | Performance (or lack thereof) risk: | Owner | | Project Size: | Small to Large | | Equipment Ownership: | Owner | | Maintenance & Repairs: | Owner | | Initial Capital Outlay: | Full to None | | Loan/Lease Period: | Varies | | Measurement & Verification (M&V): | Owner Optional | | | Energy Performance Contract (Guaranteed Savings) | | Concept: | An Energy Service Company (ESCO) audits your facility, identifies energy savings implements, and provides upgrades, guaranteeing the energy savings. You pay a fixed amount, less than or equal to the energy savings, for a fixed term to the ESCO. Funding can originate from ESCO or 3rd party lender directly. | | Performance (or lack thereof) risk: | Provider | | Project Size: | Large | | Equipment Ownership: | Owner (after contract term) | | Maintenance & Repairs: | Provider or Owner | | Initial Capital Outlay: | Negotiable | | Loan/Lease Period: | Up to 20 years | | Measurement & Verification (M&V): | Provider For Set Term | | | Utility On-Bill | | Concept: | Your energy utility provider pays for the energy project and you repay them through the energy savings difference until project is paid off. | | Performance (or lack thereof) risk: | Owner | | Project Size: | Small | | Equipment Ownership: | Owner | | Maintenance & Repairs: | Owner | | Initial Capital Outlay: | None | | Loan/Lease Period: | Varies | | Measurement & Verification (M&V): | Owner Optional | | | Operating Lease | | Concept: | Equipment is leased by the manufacturer to the owner for a period of time, and operated by the owner. | | Performance (or lack thereof) risk: | Owner | | Project Size: | Small to Medium | | Equipment Ownership: | Provider | | Maintenance & Repairs: | Provider | | Initial Capital Outlay: | None | | Loan/Lease Period: | Up to 10 years | | Measurement & Verification (M&V): | Owner Optional | | | PACE | | Concept: | Local governments fund the building's energy improvement project(s), a lien is placed on the property and paid down with the annual property taxes. | | Performance (or lack thereof) risk: | Owner | | Project Size: | Large | | Equipment Ownership: | Owner | | Maintenance & Repairs: | Owner | | Initial Capital Outlay: | None | | Loan/Lease Period: | Up to 20 years | | Measurement & Verification (M&V): | Owner Optional | | | Grants and Incentives | | Gist: | Governments and utility providers give you money towards energy projects and upgrades that reduce your energy demand for qualified projects. | | Performance (or lack thereof) risk: | Owner, if M&V is required, and the performance doesn't meet grant/incentive standards, they will not be issued. | | Project Size: | Small to Large | | Equipment Ownership: | Owner | | Maintenance & Repairs: | Owner | | Initial Capital Outlay: | Reduced | | Loan/Lease Period: | n/a | | Measurement & Verification (M&V): | None or Owner Required | |
If you want more information on any of the funding options, we’d be happy to help further explain; simply reach out to us or comment below. Also, be sure to join our energy planning and management eNews list to get other energy news and updates from us.
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Categories: Buildings & Campus
Tagged: Energy Planning & Management | Environmental | Mechanical | Engineering