June 25, 2013  

Dear Clients, Friends and Colleagues,

Still wondering how to make billions like all those other companies out there? Here's how we think you can do it and it just so happens that carbon footprint reduction is the by-product. 

U.S. consumers spend in excess of $500 billion each year to power the buildings where we live, work and play. According to the Environmental Protection Agency, at least 30% of that power, costing about $150 billion, is wasted. Walmart recently announced its commitment to a 20% reduction in annual energy consumption by 2020, which it estimates will result in annual savings of $1 billion. One company. $1 billion a year in savings. That leaves billions in annual savings for the rest of us.  

In addition to the billions in savings that are available, Deutsche Bank AG estimates that U.S. property owners will spend $280 billion over the next 10 years on energy saving devices for their buildings. That means billions of dollars per year in revenues for companies that can provide energy savings advice, financing, technologies and installation/maintenance capabilities to U.S. property owners.

For the many companies that have not gotten past GO when it comes to implementing energy efficiency improvements because of up-front costs, here are some things to consider. 

Incentives. Start by taking advantage of incentives that defray those up-front costs. In just about every state, prescriptive and/or performance-based incentives are available to property owners who improve the energy efficiency of their buildings. All types of property are potentially eligible. Dsireusa.org provides a good overview of state, local and utility based incentives for energy efficiency and renewable energy improvements throughout the U.S.

PACE Financing. Find out about whether the Property Assessed Clean Energy (PACE) mechanism is available in your city and state. The PACE mechanism will enable you to put energy saving improvements into your buildings with little or no up-front investment and pay back the installation costs out of the savings generated. Thirty states have passed enabling legislation and local program development is moving forward in many of these states. Simon Property Group and Prologis, two of the world's largest property owners, recently took advantage of PACE programs to fund building-related energy improvement projects.

Investment Capital. Access capital from newly emerging private financing vehicles to cover the up-front costs. Hannon Armstrong, a specialty finance company, recently forged the way for energy efficiency/renewable energy investment vehicles to receive the favorable tax treatment of a real estate investment trust (REIT). Its Sustainable Infrastructure Fund, with an existing $1.6 billion portfolio of energy efficiency and renewable energy investments, received an IRS ruling that enabled it to become a publicly traded REIT in April of this year. That should mean better returns for investors and more favorable terms for borrowers.  

Catalysts. Finally, see if there are any governmental, quasi-governmental or not-for-profit entities, such as the New York City Energy Efficiency Corporation, in your jurisdiction. These entities are catalyzing energy efficiency improvements in a myriad of ways, including partnering with private lenders to increase the availability of private and public sector funds for energy saving projects. 

Between state and local incentives, the re-emergence of PACE, favorable tax treatment for private sector energy efficiency investments, and the emergence of entities whose sole mission is to facilitate energy efficiency projects, we look forward to billions of dollars of capital for billions of dollars of energy efficiency projects that will result in billions of dollars of savings and billions of dollars of revenue for companies with energy efficiency know-how. A very nice "cradle to cradle" billion dollar opportunity.  

Let us help your company take advantage of this billion dollar opportunity ----- you can't afford not to.