News Article
May 29, 2012

Financing Energy Efficiency: An Emerging Best Practice

A sound process encourages underwriting of energy retrofits by increasing lenders’ confidence that energy savings will materialize



The key to unlocking the energy efficiency potential in commercial buildings is commercially attractive financing, according to a white paper, “Emerging Best Practice for Underwriting Commercially Attractive Energy Efficiency Loans,” by Anthony J. Buonicore, P.E., BCEE , QEP, managing director of Buonicore Partners.



Ideally, “commercially attractive” means financing that:

  • Covers all project costs with no owner out-of-pocket expense.

  • Does not add debt to the property.

  • Allows payments to be treated as an operating expense.

  • Allows payments (and energy savings) to be passed along to tenants.

  • Enables immediate positive cash flow through low interest rates and a long term.

Models that fit these needs include property-assessed clean energy (PACE) or tax lien financing, financing through an energy service company, and energy service agreements (ESAs). Buonicore says the key to financing is lenders’ ability to underwrite loans in a standardized, technically sound, consistent and transparent manner. He describes a best practice that relies on an ASHRAE Level II or Level III energy audit and the International Performance Measurement and Verification Protocol (IPMVP). In brief, the process includes:

  • Identifying energy conservation measures that meet return on investment criteria, determining total project costs and payback time, and accurately projecting energy savings.

  • Establishing the amount of financing needed and the preferred payback period, acquiring energy savings insurance, and then soliciting interest from lenders with a full documentation package that supports the saving projections.

  • Formally measuring and verifying performance annually using accepted protocols and documenting results to the lender.

This process gives lenders confidence in the energy savings projections before retrofit work is done, and confidence that the savings can reliably be measured and verified afterward. To download the entire white paper visit: http://www.srmnetwork.com/wp-content/uploads/Press_Release_SRS_Sponsors_Whitepaper_Underwriting_EE_Loans_04-19-12.pdf.

 

May 2012

 

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