Guaranteed lower electricity bills enabled by innovations in the financing and insuring of energy efficiency and renewable energy projects will soon be transforming the commercial real estate industry. These innovations enable zero-down financing. Project payments are tied to measured "negawatt" results. No “negawatts," no payment made by the property owner. And most critically, performance insurance supplied by a creditworthy financial institution satisfies the risk of non-performance for the building owner and the bank that supplies project financing.
These breakthroughs hold the potential of dramatically reducing the 33 percent of operating budgets the commercial real estate industry pays to utilities. It could meaningfully reduce the commercial real estate industry’s greenhouse gas emissions that currently represent 20 percent of total U.S. emissions. The greatest potential from these innovations is their ability to fund net-zero energy buildings.
At the same time, banks are hesitant to make loans on energy efficiency projects without guarantees of payment. They view projects that do not have a direct financial assurance as having “technology risk,” or the uncertainty that the technology investments will generate a reduced payment to the utility, a failure that could then threaten loan repayment. Banks do not take technology risks. They take credit risk, or the ability of the borrower to fulfill their loan obligations on time. Banks traditionally make loans on energy efficiency projects if the borrower has qualifying credit status and will guarantee payment.
The solution now being pioneered is to wrap the financing of building energy efficiency projects with insurance from a creditworthy financial institution that will assure the building owner of lower electricity bills and the bank of payment on the enabling loan. The steps that enable this assurance include:
In this exclusive (three minute) video interview with President & CEO Bob Hinkle of Metrus Energy conducted at the Verdexchange, he profiles the innovations in finance and insurance that have enabled this pioneering Kuakini Medical Center Project:
Bill Roth is an economist and the Founder of Earth 2017. He coaches business owners and leaders on proven best practices in pricing, marketing and operations that make money and create a positive difference. His book, The Secret Green Sauce, profiles business case studies of pioneering best practices that are proven to win customers and grow product revenues. Follow him on Twitter: @earth2017
Founder of Earth 2017. Author of The Boomer Generation Diet: Lose Weight. Have Fun. Live More that Jen Boynton, Editor in Chief of Triple Pundit , says is "Written in Bill Roth's lovable, relatable tone. A must read for any Boomer who is looking to jumpstart their health and have fun at the same time. I hope my parents read it. "