The Future of Energy Efficiency is an Even Sweeter Deal for Business

It is widely known that energy efficiency is a great decision for businesses of all stripes. Reduced expenses, greater cash flow, improved productivity - all at a typical payback period of just 2-4 years. Unfortunately, energy efficiency has historically lacked the glamor and following of "sexier" energy resources like solar. Perhaps because of this, financing options and other incentives for efficiency have lagged comparatively. This may be about to change.

A recent CleanTechnies article - "How to Make Energy Efficiency Affordable" - explores recent developments in project financing that make it easier for businesses to install energy-efficient equipment:

Consider the transaction that Metrus Energy, an EE developer and financer, announced in December with defense manufacturer BAE Systems, Siemens Industry and Bank of America. Under the deal, BAE Systems' facility in Greenlawn, New York will install $2 million in energy efficiency with no upfront payment or capital investment.

This may sound like a traditional energy service performance contract, which also spares the customer from an upfront capital investment. But Bob Hinkle, Metrus Energy CEO, explained that the deal is quite different. Called an energy services agreement, or ESA, it is more akin to a solar power purchase agreement (SPPA), except there is no power to be purchased. What's monetized is energy saved.

"Customers do not have to use their own capital. It is like a power purchase agreement where the customer is charged only for the output," Hinkle said. "But in energy efficiency, the output is not a kilowatt-hour generated; it is a kilowatt-hour saved, or a therm saved."

Better yet, there is a demonstrated interest on the part of investors to make such financing agreements a reality. Clean technology investors country-wide are considering ways to enable energy-saving projects - and share in the profits they produce:

The fund could serve as the third-party owner of the energy efficiency installations, collecting payment from the shared savings achieved by the businesses. [It] could then recycle the profits to pay for other clean technology projects.

Here at Octus, we partnered with Five Star Bank to develop the Building Energy Savings financing program, which we pair with utility cash incentives to produce extremely favorable financial outcomes for our clients. We're also working with clients to get them approved for a lucrative 0% financing program that has recently become available to qualified California businesses. As financial alternatives continue to expand, you can be sure we'll be at the forefront to ensure the companies we work with get the sweetest return possible.