Page 18 - NBIZ Magazine April 2021

resilient power technologies, coming
up with the financing to install the
equipment can be a challenge. Per-
sistent issues including access to up-
front capital, competition for funding,
split incentives, and a lack of financing
knowledge must be overcome. A broad
range of mechanisms is available to
reduce the cost of financing, overcome
split incentives, and help protect
facilities and people from the adverse
impacts of power outages.
Figure 5: Financing Landscape
Self-Funding
Using internal capital pools such useful life of the equipment typically (PPAs) allow third-party ownership of a
as revolving funds, internally funded limits the financing term for these solar system at a host site, the owner of
energy savings performance contracts, leases and often the creditworthiness which purchases the electricity generat-
and capital expenditure funds instead of the property owner determines the ed for a predetermined price.
of outside financing are common ways availability of financing and rates. An Incentives, rebates, and grants
to pay for resilient energy projects. energy loan is similar to taking out a are powerful project tools that can
Self-funding is a simple way of paying loan to purchase a car, the loan is paid help overcome investment barriers by
for projects that allow the owner to off over time and, in the end, the asset decreasing the upfront cost burden,
keep all the economic benefits/savings is owned outright. A variety of loans are improving access to capital, and lower-
as they own the upgrade, provide all available for various product types and ing financing costs. Utility companies
the capital, and assume all the risks. are typically financed through the prod- typically have a range of programs
The most direct is using operating uct manufacturer, vendor, or a bank/ conducive to resilience and efficient
or capital budget expenditures. This financial institution. Bond financing is energy investments. Local governments
is using monies that are in existing also traditionally considered for large may also offer incentives or tax abate-
capital or operating budgets for energy infrastructure projects, such as power ments through economic development
measures. Another example is an plants and airports. Green bonds and programs that encourage property
internal revolving loan fund program. Environmental Impact Bonds are recent improvements, permanent job creation,
This is where loans are made, the market additions focused on sustainabil- and capital investments. Federal tax
repayments are returned and then lent ity that can support power resilience. deductions or credits can also make
out again. A sustainable funding cycle energy efficiency upgrades and renew-
is thus created that can be indefinitely Specialized Financing able energy systems more affordable
maintained. Equipment purchases are Financing barriers can be overcome for businesses. For example, the Solar
also included in this financing bucket by using specialized mechanisms Investment Tax Credit (ITC) for com-
as they can be made using traditional that leverage future savings to pay mercial properties, can be claimed by
credit mechanisms. for energy projects. Frequently in the the business that installs, develops, and/
form of leases or loans, these innova- or finances the solar energy project.
Traditional Financing tive programs are often designed so
Among the most common of the the repayments are lower than the Power Resilient Resources
traditional energy, finance formats are energy savings, resulting in cash flow Evaluating energy opportunities
leases and loans. Energy leases are positive projects. and financing availability is key to
similar to leasing a car and allows for Among the most popular ways to successfully implementing power resil-
the use of equipment without outright finance the upfront cost and pay back ient and efficiency upgrades as these
purchase. Solar leases are considered over time, On-bill financing is a way improvements are a long-term com-
tax-exempt leases as the property owner for utility customers to afford energy mitment and different scenarios may
rents the system at a fixed monthly rate technologies financed by the utility by lead to different financing options. The
and tax incentives/rebates typically paying for clean energy and efficiency preceding tactics for financing these
stay with the solar project developer. investments as part of the utility bill. projects are examples of the various
This can be a good alternative to power Property Assessed Clean Energy (PACE) mechanisms available to help improve
purchase agreements (discussed later is a market-based finance tool that project implementation. Numerous
in this article) for a third-party-owned enables property owners to invest in resources are available to help navigate
system. Equipment manufacturers, energy efficiency, water conservation, funding opportunities for investments
vendors, and third-party companies renewable energy, and resilience proj- that keep long-term energy use down,
all offer to finance these projects and ects using low-cost, long-term private improve resilience, and maintain
many will offer turnkey services. The capital. Power Purchase Agreements facility cost savings.

18 NBIZ ■ April 2021