The owner of a 1920’s era building was interested in a long overdue boiler replacement and had asked The Energy Alliance Group of Michigan (EAG) to coordinate the project while also developing financial solutions for minimizing the cost of upgrading. Under consideration were multiple money saving options including rebates, utility incentives, tax strategies and energy- specific financing.
The domino effect began as the EAG team evaluated the facility. It was decided that upgrading the boiler, without simultaneously replacing the original windows, would be counter productive. The new boiler would lose any inherent efficiency due to the dramatic loss of heat and infiltration of cold by way of the ancient windows.
A recommendation that the boiler be upgraded at the same time the windows were replaced included a similar suggestion for a roofing upgrade! The ancient roof, which was installed without insulation, was leaking in a variety of locations and needed to be upgraded with a thermal barrier along with new roofing material. The domino effect was now operating in full force.
It is at a point similar to this that most upgrade projects stall. Upgrades often require a comprehensive approach that can be likened to dominos falling. One element of the upgrade directly affects adjacent or interrelated systems that should be addressed at the same time. Projects soon become daunting because a cheaper piecemeal approach is counterproductive. This is when it becomes easy for a CFO to delay all action, and just accept the loss of energy and efficiency as another cost of doing business.
A New Approach – Comprehensive Financing Fosters Comprehensive Projects
While comprehensive upgrades undoubtedly save money in the long term, how to pay for them today is the real issue that hinders progress. A lack of project financing is often the key stumbling block that keeps many upgrade and efficiency projects from moving forward. A different approach is required if maximum benefit is to be achieved!
Adequate financing is the key component of a successful upgrade. Because of the wide variety of financing options (including the option to self finance) it is important for any project developer to identify the stack of financing resources that best meet project parameters. Those parameters may include return on investment, maintaining optimum cash flow, availability or lack of capital, impact on a potential future sale, etc.
In addition to traditional commercial loans, and some of the more common financing options such as capital and operating leases, there are a number of financing resources that are often unknown by product suppliers or project developers. All applicable options should be utilized if they can assure a project moves forward towards completion.
These options include federal, state and local financing plans that focus on energy efficiency, as well as programs offered by independent providers. A short list includes: Property Assessed Clean Energy (PACE), Rural Energy for America Program (REAP), Energy Service Agreements (ESA), Managed Service Agreements (MSA), and Power Purchase Agreements (PPA).
Why Minimizing the Domino Effect is Important!
Due to the fact that close to half of all the commercial buildings in the U.S. were built prior to 1980, it is important to address any factor that hinders needed upgrades. Building owners and managers stand to benefit financially when they upgrade the commercial and industrial infrastructure that typically wastes over 30% of energy consumed. Reducing waste is now possible through the use of new technologies that consume less energy, are socially responsible and create a better indoor and outdoor environment.
“About half of all commercial buildings were constructed before 1980” U.S EIA
Thanks to recent developments and initiatives, it is now possible to combine energy efficient technology (machines, lighting, HVAC, water conservation measures, insulation, etc.) with energy derived from sources that are renewable or generated locally or on-site and dramatically reduce the cumulative waste of energy now present in our collective building infrastructure.
Through the use of a variety of energy specific financial tools, the domino effect no longer needs to hinder the successful launch of upgrade projects. Commercial and industrial building and equipment upgrades are now more affordable than ever thanks to a diverse array of financing options!
Graphic source: U.S EIA