Commercial energy efficiency projects create a dilemma for small- and medium-sized businesses. Sure, they save energy and reduce utility expenses. But implementing them often requires a significant up-front cash investment, frequently leading organizations to forego opportunities, even in cases where a commercial energy audit has indicated a relatively speedy payback. Energy efficiency at lower costs would be nice – but how do you get there from here?
Energy Efficiency Financing Options
When it comes to funding for commercial energy efficiency projects, many still think in terms of banks (commercial and otherwise). With these institutions, the high interest rates charged for loans can make implementing energy efficiency financially impractical. Loan fees, and equity and collateral requirements, may be steep as well.
Funds from other organizations are available, however – and often at terms that take the “infeasibility” out of energy efficiency projects.
• For organizations that qualify, the USDA’s Rural Energy for America Program (REAP) offers grants and low-interest guaranteed loans that can pay up to 75% of total eligible energy efficiency project costs. The program’s loan fees, equity requirements, and interest rates are very attractive.
• Most states offer commercial energy efficiency grant and loan programs to help minimize the cost of implementing energy use reduction. For example, Ohio’s Energy Efficiency Program for Manufacturers provides grant money for energy management plan development (the commercial energy audit) and will loan up to 80% of the funds needed for projects costing up to $1 million.
• Regional entities have developed their own energy efficiency funding solutions for commercial and industrial operations. The Toledo-Lucas County Port Authority’s BetterBuildings Northwest Ohio program uses a combination of revolving loan funds, bond funds, and public/private partnerships to offer low-cost, fixed-rate loans for Ohio energy efficiency projects.
But the energy efficiency financing options don’t stop here for Ohio businesses.
Ohio Efficiency Resource Fund
In Ohio, one program offering a completely different solution for funding commercial energy efficiency projects is the Ohio Efficiency Resource Fund, a joint initiative by the Cleveland-based Council of Smaller Enterprises (COSE); the energy efficiency financing firm Metrus Energy; and CalCEF, a non-profit funding organization focused on accelerating the adaptation of clean-energy technologies.
So what makes the Ohio Efficiency Resource Fund unique? Simply this: participating small- and medium-sized organizations can implement their facility energy efficiency projects and measures with no up-front costs and no financial risks.
No loan fees? No equity requirements? How’s this possible? According to Bob Hinkle, Metrus Energy President and CEO, it’s all in the operating philosophy: the Fund isn’t making a loan; it’s selling a service – in this case, energy efficiency. Here’s a summary of how the program works:
1. The Fund and the facility owner sign an Efficiency Services Agreement (ESA).
2. The Fund hires energy efficiency experts to design, install, and maintain the energy efficiency measures. The Fund also purchases the equipment required.
3. The facility owner sees a reduction in energy costs and uses the money saved to reimburse the Fund (the Fund issues regular invoices, just like any other service provider would).
4. Over the life of the ESA, the Fund recoups its investment while the facility owner reaps the energy efficiency benefits.
It’s an innovative approach, to be sure – one suddenly placing energy efficiency initiatives well within the reach of organizations that, to this point, didn’t feel they could afford to implement these projects. A more complete description of the Ohio Efficiency Resource Fund and the COSE-Metrus-CalCEF partnership is available in the article “New Ohio Efficiency Resource Fund to Help Upgrade Buildings, Save Energy Costs, Create Local Jobs.”
Cost Effective Energy Efficiency
Today, businesses don’t have to strain their cash flow while they wait for energy efficiency projects to pay off. A variety of cost effective alternatives exist for keeping project financing expenses low. And in the case of the Ohio Efficiency Resource Fund, up-front costs can be eliminated altogether. If your organization has been waiting to move into the 21st Century energy-wise, the time for doing so without busting your budget has never been better.
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