A significant obstacle confronts most business leaders interested in controlling rising energy costs by converting to renewable energy – the financing!
While a recent Crain’s news article highlighted the rising business demand for renewable energy, the obstacle of financing creates a weak link which must be overcome first.
“Switch is one of a growing number of companies in Michigan and nationally — Apple, Google, Facebook, Amazon and Whole Foods — that have pledged to power their companies with 100 percent renewable energy.” Crain’s Detroit Business
The Energy Alliance Group of Michigan’s CEO, Scott Ringlein, recently described the influence Certified Public Accountants (CPAs) have in the financial decision making process for all energy upgrades. He discussed when proposed efficiency or renewable energy projects have a long payback period or hinder cash flow, the CPA will often recommend passing on, or at the very least, delaying the project.
In his article Ringlein made note of the financial solution known as Property Assessed Clean Energy or PACE, that was created expressly to make the conversion to energy efficient technology affordable. He noted:
The weak link in energy efficiency goals is the financing component, and that link is being addressed with a program that is not even on the radar of most CPA’s. The program is known as Property Assessed Clean Energy (PACE) and it is financing earmarked solely for projects that save energy, conserve water and increase the use of renewable energy.
Because PACE is relatively new, most CPAs have not even heard of it! They have not had the chance to learn how it is used to increase business profits through a reduction in the money spent on wasted energy.
Recognizing the key role CPAs have in the financial decision making process, Ringlein developed a variety of educational opportunities to increase awareness of PACE within that profession.
In cooperation with the Michigan Association of Certified Public Accountants (MICPA), Ringlein created an online training program for organization members to access at their convenience. Additionally live presentations have been scheduled at various association gatherings.
An upcoming MICPA event in Okemos, Michigan, will be the next opportunity for CPAs to learn more about PACE in a presentation titled:
Ringlein’s goal is to give CPA’s the necessary information to offer their clients a financial tool that makes energy upgrades possible.
The PACE tool makes sense to CPAs because of its resultant key benefits:
- Positive Cash Flow positive – For projects $250,000 and greater, the resultant savings must be greater than the entire cost of the project. This includes all audits, engineering, equipment, material, labor, financing and legal – essentially every cost associated with the projects.
- 100% financing for up to 20 years at a fixed rate – Commercial loans typically cover 60% to 80% of project costs and seldom go beyond five years.
- Non-recourse – The property secures the loan and does not affect the credit of the business owner.
- “Runs with the land” – If the property is sold the purchaser seamlessly takes over the assessment.
- Can be considered “off-balance-sheet” – Since the assessment can be considered an expense it does not have to be reflected on the owner or company balance sheet as debt.
In the countless meetings I engage in with executive teams, it is readily apparent that the financial advice of company CPA’s (Certified Public Accountants) is often the determining factor for energy efficiency projects moving forward or getting tabled! Scott Ringlein
While the demand for energy efficiency and renewable energy continues to expand, the ability to finance upgrades hinders implementation. Ringlein’s final comment from his article illustrates how the adoption of renewable energy is now more affordable.
“Reducing wasted energy and increasing efficiency is possible once the up-front financial barriers are overcome. PACE has a proven track record of launching projects that would not have been considered when the tool was unavailable.”