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Investing in Energy Upgrades For Your Building? Use the Energy Savings Cash Flow To Secure Financing

Posted by Vital Group of Companies on Feb 19, 2019 9:19:00 AM

Improving your energy savings is the best way to invest in a building and enjoy an immediate and verifiable cash flow payback. Yes, there are other building upgrades you could explore that reap different benefits that all may be worth pursuing on their own merits.

But the ability to quantify how an energy-saving upgrade will affect your energy bills allows you to make a clear argument for the project with a thorough, demonstrated understanding of the return on investment.

A new coat of paint? It might look nice. It might help attract tenants or improve the overall aesthetic impression of your facility. But an LED lighting retrofit? That’s money saved every month. Here’s a few energy-saving upgrades that could benefit many building owners:

Financing your Energy-Saving Upgrades

Still, just because there is a payback doesn’t mean it’s not expensive up-front. In fact, that’s the main barrier to creating more energy-saving buildings. Sure, everyone knows an LED lighting installation, or solar panels, or a major HVAC overhaul has the potential to save them money. Few, on the other hand, have the capital to make it happen. But the truth is it’s easy to access financing for energy-saving initiatives and spread that cost out over a number of years — and use the energy savings cash flow to pay back the financing.

When compared to other building improvements, your energy-saving projects are financial instruments with verifiable and immediate cost savings. It makes sense to leverage this free cash flow to finance energy savings projects and save your internal capital for other building improvements that aren’t able to generate a verifiable payback. So if you have a project, get yourself a loan or utilize other financing instruments such as PACE financing, or an energy savings performance (ESP) contract to cover the initial cost, and once the initial financing is paid off, that new found cash flow stays with you. Ideally, throughout the repayment period, your energy savings will actually exceed the payment obligations entirely. Even if the payment obligations do not offer and immediate cash flow positive project, remember that there are other benefits to moving forward with an energy savings project, such as capitalizing on promoting your building as green.

You can get funding for LED lighting

How To Get Energy-Saving Financing 

How would one approach financing for their energy-saving project? 

Often, you’ll find that banks like RBC, TD and ATB now have programs for some projects. You’ll also find that some home owners and building owners are banding together to obtain financing for smaller projects as one aggregated deal rather than each approach a bank for a $2,000 furnace.

In Alberta, we’ll also see the Property Assessed Clean Energy (PACE) program launch in 2019, which will allow building owners to obtain financing for energy projects via payments in their property taxes, coupling the payment of the project to the building itself rather than the current owners. This will vastly simplify the process for Alberta building owners.

Additionally, there are many green investment funds and banks that focus exclusively on projects that reduce carbon emissions.  These sources of financing are often easier to work with as they inherently understand the technical aspects of the project that will generate the free cash flow for which will pay back the investment over time. Furthermore, many energy service companies will partner with these organizations to offer performance contracts, which guarantee the energy savings of the project, and therefore reduce the over risk to the building/facility owner. In some cases it is even possible to turn this option into an off balance sheet operating expense.

Here’s Where We Come In

Vital Group of Companies is a holistic energy integration company with years of experience in energy-saving project planning, financing, and installation.   

When you work with us, we can help with the entire process, end-to-end. That includes helping to facilitate financing. We will ensure that the financing mechanism is the right one to suit your organizational needs, as it is not a one-size-fits-all proposition. We have the expertise and partnerships to structure a financing plan for maximum savings and will ensure your building is operating optimally.

Get started with an energy assessment if you want to explore what’s possible for your building, or find out if you’re eligible for government incentives to help ease that cost even further.

Filed Under:

Energy Efficiency

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