1. DOE Webinar National Renewable Energy Laboratory Financing Energy Efficiency for the Commercial Market Sector Presented by Harcourt Brown & Carey June 29, 2011
2. U.S. Commercial Building Sector Metrics Commercial Sector: 80 billion square feet Typically consume $2.00 per square foot per year Represent 46% of US building energy use Consumes $120 billion per year A $120 billion EE investment: Reduce consumption by 25% Save $30 billion per year Representing a 4 year payback (McKinsey Report)
3. Why Does the Commercial Sector Waste Energy? Energy typically represents only 2% – 4% of operating costs Buying EE is complex and risky, buying energy is simple and risk free EE generally requires a capital investment Commercial enterprises have limited access to capital and use it to achieve their core mission Use of capital for non-core projects such as EE requires “C” level support 50% of commercial space is leased and tenant pays for energy Leased space has very restrictive mortgage covenants
4. The Opportunity Offer EE as a service, not a capital investment, so that it can compete with the risk-free simplicity of buying energy Modify the ESCo business model typically offered to government clients which: Maximizes capital investment Decouples savings performance from compensation (provides a fixed amount guarantee based mostly on stipulated savings) Generally requires user to balance sheet the investment The new ESCo model would: Minimize the capital investment Pay the ESCo based on actual savings ($/kWh, therm) Provide EE as a service w/ no impact the balance sheet
5. The Roadmap The following models describe steps to incrementally transform the Commercial EE market Model #1 proposes conventional bank financing with a separation of credit risk and energy saving performance risk Model #3 pays the ESCo on actual savings but shifts the credit risk to a public entity Model #4 uses bond financing as the source of capital Model #5 a Utility procures DSM from an ESCo franchise
21. Invoice based on units of energy saved at predetermined priceProperty Owner 3.E Key: $ = Cash Flow E = Energy Efficient Installation 4.$
22. Model #3: Leveraged Bond Financing for ESCos Utility Bond Purchaser Trustee & Conduit Issuer Special Purpose Entity Program Administrator C 1.$ 2.$ 3.$ C ESCo 5.$ 4.$ Property Owner Key: $ = Cash Flow C = Contract
