Energy | August 21, 2007 |
Creative Financing to Drive Energy Efficiency
The total cost of the project was $13.6 million and according to a press release "is funded entirely by the energy savings generated by the efficiency improvements." Savings of $20 million over 20 years are expected, and the project will also cut about 8,000 metric tons in utility carbon dioxide emissions.
These kinds of projects are a great opportunity for lenders and energy efficiency companies to work with public and private institutions who are hesitant or unable to invest the up-front capital. I am guessing that some creative financing was used to pay for the work done by Chevron Energy Solutions, which oversaw the project. I've heard of cases where the energy company doesn't charge anything to the customer, but the contractor works with a lender to share in the savings.
Developing special lending programs dedicated to energy efficiency projects is a great way for banks to prove they are green.
For companies, this is a win-win situation. If there is no cost, reduced emissions, lower maintenance cost, and a chance to share or own the long term savings, energy efficiency might move to the top of COO's ledgers in ways to improve the bottom line.
Landlords whose tenants pay for their own are in a unique position since they have almost no incentive to reduce heating costs. Incentives to do or these types of "no risk" improvements may be necessary.