Of The Energy Alliance Group’s (EAG’s) four cores, financing is the most critical to the success of any energy solution project. EAG identifies the financing option that best meets our client’s requirements, and results in the best ROI. In addition to commercial loans and some of the more common financing options such as capital and operating leases, there are a number of them that our clients are frequently not familiar with. One of the key benefits of working with EAG is our complete knowledge of all available federal, state and local financing options, and assisting our clients throughout the qualification and application process.
Property Assessed Clean Energy (PACE)
Available in regions with an active PACE program, this is a relatively new vehicle for financing energy upgrades for commercial, industrial and multi-family properties. All project funding is provided by private sources, and allows up to 100% of loan-to-value (LTV) financing. It helps property owners save money and make buildings more energy efficient. Although varying state-to-state, projects that typically qualify for PACE financing include:
• All traditional energy efficient improvements
• Renewable energy improvements
• Water efficiency improvements
• New manufacturing equipment that saves energy or water
Like a property tax, PACE financing is a special assessment that is senior to any mortgage, making it exceptionally secure. The loan is secured through a tax lien on the building, which “runs with the land”, so it moves to the new owner if the property is sold. The financing term is 5 to 20 years, extending through the useful life of the improvements, and at a lower interest rate than most commercial loans resulting from the stronger lien position.
Download the PACE-EAG Overview 1-2016.
State Finance Programs
A number of states offer low cost financing programs to encourage energy improvements. For example, in the state of Michigan, the “Michigan Saves” program is a non-profit financing organization dedicated to making energy improvements affordable. It will finance a project up to $150,000 for five years at an interest rate of either 1.99% for those companies involved in the food industry, or 3.99% for all other businesses.
Energy Service Agreements (ESA) and Managed Service Agreements (MSA)
This is how Energy Service Companies (ESCO’s) operate. It is a financing solution where energy efficiency is “outsourced” to a third party which owns and maintains the energy efficiency equipment. The building owner agrees to pay the third party based on the realized energy savings.
Power Purchase Agreement (PPA)
Similar to an energy service agreement, a PPA provider owns and maintains energy-generation equipment – such as solar panels – and the building owner agrees to purchase the energy from the PPA at an agreed upon rate, typically below that charged by the utility.
Incentives
The Energy Alliance Group (EAG) maintains an up-do-date library of all incentives available for renewable and energy efficiency technology solutions. Staying informed of the latest policy changes, we ensure our clients take full advantage of all available programs and receive the maximum financial benefit. This is one of the key value-added EAG services. The incentives currently available include:
• Utility Rebates and Incentives
• Federal Tax Incentives
• Federal, State and Local Grant Programs
Utility Rebates and Incentives
Most utility companies offer a number of rebates and incentives to offset the cost of installing energy efficient technologies. These typically include lighting, variable frequency drives (VFD’s), compressed air systems, gas appliances, HVAC equipment, boilers, controls, pumps and several others.
Prescriptive incentives are available for the more common energy efficient upgrades and improvements. Custom incentives are frequently available to our clients for less common, or more complex, energy saving measures installed in qualified retrofit and equipment replacement projects not covered by a prescriptive program. In addition, most utility companies offer new construction, major renovation, multi-measure and “state-made” incentive programs. EAG ensures our clients take full advantage of all available programs, receiving the maximum financial benefit.
Federal Tax Incentives
Federal tax incentives are available for a wide variety of renewable and energy efficiency technologies. EAG assists our clients in determining which are available to them, along with the applicable technologies. Although these are always changing, current incentives include Section 179 and the Energy Policy Act (EPACT).
Section 179
This program allows a tax payer to deduct the cost of certain types of property on his income taxes as an expense, rather than requiring it to be capitalized and depreciated. This property is generally limited to tangible, depreciable, personal property purchased for use in the active conduct of a trade or business.
Energy Policy Act (EPACT)
This program was adopted in 2005 and was recently renewed. Calculated on a per square foot basis of the property for which the energy efficient expenditures are made, it provides a tax deduction up to 50% for exceeding ASHRAE/IESNA 90.1-2001 standards. Available for both new construction and renovation projects, EPACT applies to lighting, HVAC and building envelope energy reduction improvements.
State and Local Grant Programs
These cover an especially wide spectrum of energy conservation and energy efficiency programs. The Energy Alliance Group will identify all of those that are applicable for our clients and their particular situation.