INCREASING ACCESS TO CAPITAL

Commercial property-assessed clean energy (CPACE) is a financing structure in which building owners borrow money for energy efficiency, renewable energy, or other projects and make repayments via an assessment on their property tax bill. The financing arrangement then remains with the property even if it is sold, facilitating long-term investments in building performance.

Efficiency-as-a-service is a pay-for-performance, off-balance sheet financing solution that allows customers to implement energy and water efficiency projects with no upfront capital expenditure. The provider pays for project development, construction, and maintenance costs. Once a project is operational, the customer makes service payments that are based on actual energy savings or other equipment performance metrics, resulting in immediate reduced operating expenses.

Under an Energy Savings Performance Contract (ESPC), an energy service company (ESCO) coordinates installation and maintenance of efficiency equipment in a customer’s facilities and is paid from the associated energy savings. The ESCO typically provides a savings guarantee. The improvements are usually owned by the customer and may be installed with little or no upfront cost if the ESPC is financed.

A green bond is a fixed income debt instrument in which an issuer (typically a corporation, government, or financial institution) borrows a large sum of money from investors for use in sustainability-focused projects. Green bonds work similarly to a traditional bond issuance, except the funds are slated for use in energy efficiency, renewable energy, or other projects that meet certain sustainability requirements, often formalized in a green bond “framework” developed by the issuer.

Internal funding refers to the use of an organization’s existing financial resources to pay for energy efficiency, renewable energy, or other generation projects, rather than seeking external financing. This is often the most simple and direct method for funding projects, and it allows the organization to capture the full financial benefits of energy projects rather than paying a portion to a financing provider.

A lease is a simple financing structure that allows a customer to use energy efficiency, renewable energy, or other generation equipment without purchasing it outright. The two most common types are on-balance sheet capital leases and off-balance sheet operating leases. Solar leases are a unique structure available for solar energy projects, and public sector organizations can also take advantage of tax-exempt leases.

Customers can borrow money directly from banks or other lenders to pay for energy efficiency, renewable energy, and other generation projects. The customer must then arrange the purchase, installation, and management of equipment by a third-party contractor or in-house staff. Loan financing is offered by many equipment manufacturers, vendors, and contractors as well as third-party banks and lenders.

On-bill financing (OBF) and repayment (OBR) are financing options in which a utility or private lender supplies capital to a customer to fund energy efficiency, renewable energy, or other generation projects and is repaid through regular payments on an existing utility bill. The benefits of OBF/OBR include low-to-zero interest rates, simple contract structure, and streamlined repayment. However, OBF and OBR are only available in regions where utilities support on-bill programs.

A Power Purchase Agreement (PPA) is an arrangement in which a third-party developer installs, owns, and operates an energy system on a customer’s property. The customer then purchases the system's electric output for a predetermined period. A PPA allows the customer to receive stable and often low-cost electricity with no upfront cost, while also enabling the owner of the system to take advantage of tax credits and receive income from the sale of electricity.