Finance Model Superchargers
In addition to the financing models discussed above, there are additional models for energy efficiency projects that do not warrant a specific financing structure. Because these projects are compatible with many of the methods above, they can utilize finance model superchargers to further boost the value in a financial agreement.
The performance contracting model enables building owners to make capital improvements, save energy, reduce emissions and address tight budgets, while using the expected utility and operational savings to finance some or all of the cost. Offered by select energy services companies (ESCO), performance contracting is a way of receiving guaranteed energy cost savings that help offset the costs of facility and infrastructure projects over a period of time. Some ESCOs will even pay the difference between the savings guaranteed and any savings not realized.
Green Lease Structures
Green lease structures ensure that tenants comply with the building’s green practices. There are three key elements to a green lease:
- Triple-net lease: The lessee is responsible for paying all taxes, insurance, maintenance, and utility expenses, causing them to prioritize energy-efficiency because they directly recover any investments in efficiency over their lease term.
- Sub-metering: Sub-metering energy and water services enable building owners to bill tenants for actual usage and peak demand. This practice motivates tenants to minimize their energy and water consumption, and allows the building owner to employ a feebate (fee/rebate) incentive system to ‘right-size’ electrical and mechanical systems.
- Allow capital cost pass through: Under a green lease, building owners are given the option to pass the capital improvement costs through to tenants. As a result, the tenants, who pay the utility bills, reap the energy savings benefits as a return on investment.
A collaborative green leasing process can result in the largest gains by reducing vacancy risk for building owners and lowering operating costs for tenants. Green leases create incentives for both parties to save money through efficient design, construction and operations.
Putting energy efficiency within reach
As an ever-increasing number of businesses emphasize sustainability, these financing models uncover opportunities for more building owners to capitalize on energy efficiency and renewable energy updates that deliver strong returns with lower risk. Businesses are now able to more easily complete retrofits in ways that align with their financial models and business strategies.
Bill Guiney is the director of the Solar Thermal business at Johnson Controls. He is currently developing the Solar Water Heating program and building the internal capabilities of Johnson Controls, and has more than 30 years of experience in the solar industry as a retailer, contractor, distributor, manufacturer and educator. Guiney has provided many renewable energy and energy efficiency training programs, and has been an instructor for solar thermal energy systems.