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Alternative Financing Methods for Energy Projects
Financing Options
There are three primary alternative financing options for funding energy projects:
- Power Purchase Agreements (PPA) - Contract between two parties, one who generates electricity for the purpose (the seller) and one who is looking to purchase electricity (the buyer).
- Utility Energy Service Contract (UESC) - Contracting vehicle that allows utilities to provide to their customers comprehensive energy and water efficiency improvements and demand-reduction services.
- Energy Saving Performance Contract (ESPC) - Allows customers to complete energy savings projects without up-front capital costs.
Power Purchase Agreement (PPA)
- Contract between two parties, one who generates electricity for the purpose (the seller) and one who is looking to purchase electricity (the buyer).
- Wholesale Power Purchase Agreement
- Long term agreement between the owner of an electric generating facility and the wholesale energy purchaser.
- Customer-Sited Power Purchase Agreement.
- Private entity installs, owns, operates and maintains customer-sited renewable equipment.
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Site purchases electricity through power purchase agreement (PPA).
Utility Energy Service Contract (UESC)
- Contracting vehicle that allows utilities to provide to their customers comprehensive energy and water efficiency improvements and demand-reduction services.
- UESCs Reallocate the customer's Utility Budget
- Decrease energy costs
- Achieve energy savings for the customer
- Pay for project costs
Energy Saving Performance Contract (ESPC)
- ESPC allows customers to complete energy savings projects without up-front capital costs.
- ESPC is a partnership between a customer and an energy service company (ESCO).
- ESPC is a no-upfront-cost contracting method. The contractor incurs the cost of implementing energy conservation measures (ECMs) and is paid from the energy, water, and operations savings resulting from these ECMs.
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Where Money Comes From & Where It Goes
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Team Building
Everyone who could help or hinder (or be affected by) project should be invited before contacting an Energy Savings Company (ESCO):
- Purchasing Agent
- Facility manager and facility maintenance staff
- Energy, design, and construction engineers
- Financing Specialist
- Legal staff
- Budget/comptroller representative
- Union reps, labor relations
- Building tenants
- Environment, health, safety
- Security representative
How to Implement Successful Project with ESCO
- The Right RFP
- Has ESCO successfully completed projects of a comparable size?
- Has ESCO completed projects recently?
- Has core ESCO team worked together successfully on projects recently?
- Resumes for top 2 ESCO team members.
- Ask about smaller projects comparable to individual projects.
- The Right Process
- Find a partnership with an ESCO where they understand your goals and you understand their approach.
- Need an ESCO who will solve your specific problem and operates as an extension of your office.
- Define objectives clearly.
- Create baseline for M&V.
- Develop team with required members and people that will be impacted by projects.
- Coordinate projects with other facilities projects.
Resources
- Department of Energy (DOE)
- Federal Energy Management Program (FEMP)
- Office of Energy Efficiency & Renewable Energy (EERE)
- Database of State Incentives for Renewables & Efficiency (DSIRE)
Key Points Large energy projects require funding. The PPA, UESC and ESPC provide funding options. Build an internal team. Selecting the right funding option can make the difference between a stalled project and a successful project with energy cost savings.
Call eDiscoveri at +1 804 291 7667 to learn more about alternative financing methods for energy projects.
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