Energy Project Finance: 4 Steps to Success
Building owners are on the hunt for environmentally impactful and financially profitable energy efficiency projects. They've never had more ways to satiate their appetite.
From ESAs to PACE, the plethora of green financing options has unlocked a bonanza in energy project finance. But to make the most out of these new finance tools, building owners must also get accustomed to a new set of rules. Follow the rules and Other People's Money becomes available to finance your project development and ongoing maintenance costs.
Here's how it works: savings realized from an energy project are used to pay back project costs. Banks like Deutsche Bank are ponying up huge pots of money to finance quality projects. This means building owners are no longer on the hook to front project costs. The catch is the viability of these financing structures is predicated upon proving savings are real. This is done through a regime of measurement and verification, "M&V" in industry lingo.
Whether calculating "avoided resource consumption" under an energy services agreement (ESA) or ensuring an energy savings performance contract (ESPC) meets its guarantee, green financing requires a complete and accurate M&V process. Because the savings of an efficiency project are wildly difficult to measure (no pun in intended...), many companies adhere to an internationally recognized protocol such as International Performance Measurement & Verification Protocol, which defines best practices for quantifying the results of an energy efficiency project.
While there are many ways to fund an efficiency project, and even more approaches on how parties should agree to split the benefits of that project, here are four steps for ensuring project success.
|Where to start||How it helps funding||What to do||Learn more|
|Quality historical data and third-party review of the baseline against which savings will be compared give investors comfort a project is worth funding.||
||ENERGY STAR: Investment-Grade Audit|
|Typically developed during financing negotiations, a measurement plan confirms both parties understand how performance savings will be quantified.||
||Example Measurement and Verification Plan|
|Designating an individual or agency responsible for carrying out savings verification, gives both parties confidence in quantified savings.||
||International Performance Measurement & Verification Protocol|
|Reviewing project performance on predetermined intervals helps both parties maintain contact for the life of the performance contract.||
||Post-Acceptance of Energy Savings Performance Contracts|
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