Several financing models can help businesses obtain upfront capital for energy savings that can be paid back over time, linked to the cost savings from energy efficiency.
Energy Performance Contracting
Energy Performance Contracting or EPC is a model whereby decisions about which products and equipment to replace are outsourced to a third party who delivers a range of solutions and guarantees the resulting savings (assuming that usage remains equal). This model avoids the need for upfront capital and in-house technical expertise. Energy Performance Contracting is well suited to businesses with low internal capacity to identify, prioritise and/or implement upgrade projects. A contractor is typically and Energy Services Company (ESCO) who can evaluate energy use, identify energy saving opportunities, provide engineering design and technical solutions for upgrades, manage the project from design to installation to monitoring, facilitate financing if required, train staff and provide ongoing maintenance services.
Typically for an EPC many small efficiency actions will add up to the total saving. It does not require involvement of building owner or any upfront investment and can be combined with operational leasing products or carbon abatement certificate creation under the NSW or Victorian certificate schemes. To investigate further or look for an ESCO, see the Energy Efficiency Council best practice guide.
Environmental Upgrade Agreements
Environmental Upgrade Agreements are a three-way arrangement where property owners enter into an agreement with councils and finance providers to fund environmental upgrade works for existing buildings. Environmental Upgrade Agreements allow for upfront access to capital with repayments made via a council rates charge on the property. These are then chargeable back to office tenants via outgoings where the charge is smaller than or equal to savings the tenant will make in energy savings.
This finance mechanism is available within the following cities:
The EUA financiers are Sustainable Melbourne Fund and Low Carbon Australia.
Environmental Upgrade Agreements are also under consideration by Wollongong City Council and Penrith City Council.
Operational finance or equipment leasing
Office and base building equipment can become quickly outdated as technologies advance and is generally superseded by more cost-effective and efficient options. Utilising a finance mechanism for equipment leasing reduces the risk of directly investing in an asset and removes the need for upfront investment capital, fast-tracking the potential to improve your business operations. The mechanism uses operational capital and provides flexible leasing arrangements and ensures both property owners and tenants can benefit from substantial energy cost savings sooner. At the end of the lease term, the equipment, plant or lighting can be purchased for a residual, replaced or removed.
Leasing provides the flexibility to upgrade equipment over time as technology improves. It is suitable for large and small projects plus a wide range of equipment upgrades including HVAC, and removes the residual value risk of the asset for lessee. The vendors currently offering these mechanisms are Low Carbon Australia (via EnergySmart Finance), Allleasing, Macquarie Group, NAB and Origin Energy.
The following vendors provide one or more leasing and finance solutions: