Customers do not want to borrow, nor do banks care to lend for these relatively small projects (<$1.0 million). Though banks are the most common source of funding in the commercial sector, they provide relatively modest levels of financing to property owners for EE measures. According to a July 2011 report on EE financing by the California Public Utilities Commission (CPUC), “Lenders tell us that many of the entities in this sector will not or cannot add debt to the balance sheet….” Opportunity costs and long payback periods, combined with perceived credit risk are also significant barriers to implementation for a large segment of businesses.
In 2008, the combined US commercial and industrial (C&I) building sectors accounted for over half of all US primary energy use, and approximately 10% of total global energy use. While there are approximately four million existing C&I buildings in the US, half of those are owner-occupied. Assuming a modest 25% gain in efficiency, that part of the owner-occupied segment with annual energy costs between $100,000 and $1,000,000 has an annual energy savings potential of approximately $11.9 billion, or 57 billion kWh.
CalCEF is working to overcome these barriers by selling EE as a service, akin to how power purchase agreements (PPAs) are used to finance solar panels. We intend to provide a means for business owners to implement EE projects without any upfront payments, thereby eliminating the first-cost barrier. Instead, efficiency assets can be owned by a nonprofit EE investment fund and customers will pay for savings over time using an Efficiency Services Agreement (ESA). This simple solution pays for capital improvements by repurposing a company’s utility operating expense in much the same way as do solar PPAs.
CalCEF intends to manage education and outreach with channel partners, who will play a vital role in unearthing and unlocking the value inherent in these disparate and invisible project opportunities. Partners can help lead their industries through education & communication, identification of savings opportunities, and project facilitation.
The Fund is now accepting customer applications from facility owners who have efficiency retrofit projects that cost less than $1 million.
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Bob Hinkle, President and CEO of Metrus Energy introduces the Efficiency Resource Fund in the below video:
Paul Frankel, Managing Director of CalCEF discusses the market impact of the Efficiency Resource Fund in the below video:
The post Leveraging Impact Investment for Small- and Mid-Size Energy Efficiency Projects appeared first on CalCEF.
