Blog
Making Building Energy Projects Financially Feasible
By: Brendan Cleary, Founder
Throughout the United States, cities have adopted policies to enforce building performance standards. The motivation is primarily driven by four factors: rising energy constraints, geopolitical oil shocks, decreasing costs with renewables, and global warming. Many property owners and portfolio managers recognize the value of investing in energy-efficient and renewable technologies for their buildings. But the main deterrence is often cost. While a renewable energy project can prove ROI for a building, traditional finance sources may not help, and owners may have to pay out of pocket for their projects.
However, most owners are unaware that government programs, energy subsidies, rebates, and green financing options exist for these reasons. Millions of dollars in funding for these projects go unclaimed each year, when they could help your next project.
Some of these funding options include:
C-PACE financing
Commercial Property Assessed Clean Energy (C-PACE) is one of the most common financing options for retrofit projects. C-PACE offers several benefits:
- Zero or minimal down payment
- 20–30 year terms
- Repayment occurs through property-tax assessment
- Transferable upon sale
Federal tax incentives
The Section 179D Energy Efficient Commercial Buildings Deduction allows commercial buildings to receive $5.00–$5.94 per square foot for energy savings upgrades. Furthermore, the amount owners are allowed to deduct increases as energy savings increase.
Additionally, investment tax credits (ITCs) can also be used to help with costs. These apply to:
- Large portfolios
- Industrial facilities
- District energy
- Large decarbonization projects
Government-backed financing
The U.S. Department of Energy (DOE) provides financing for long-term energy-related projects. These options are generally most applicable for:
- Large portfolios
- Industrial projects
- District energy
Utility rebates & incentive programs
State and local utility companies offer rebates (cash incentives) for certain projects. These rebates can sometimes offset project costs by 10–40%.
Energy Service Agreements (ESAs)
Energy Service Agreements allow owners to fund 100% of their project costs without any up-front payment. Energy service providers allocate and source funds to finance energy-related projects. Those funds are then paid to the owner to fund the project. The owner periodically pays back the energy service provider over a time period based on actual energy saved (a service fee).
These projects are best for large properties or portfolios:
- Owners who don’t wish to take on debt or go out of pocket to fund their project
- Large HVAC and decarbonization projects (usually over $500k total project costs)
- Portfolio owners
| Financing Option | Upfront Cost | Ideal Project Size | Owns Equipment? | Time to Access |
|---|---|---|---|---|
| C-PACE | None | $200k+ | Yes | 8-16 weeks |
| 179D Tax Deduction | Full (recovered at tax time | Any | Yes | Filed with taxes |
| Investment Tax Credits (ITC) | Full (recovered at tax time | Large/portfolio | Yes | Filed with taxes |
| DOE Financing | None to partial | Large/industrial | Yes | Months |
| Utility Rebates | Reduces net cost 10-40% | Any | Yes | Varies by program |
| Energy Service Agreement (ESA) | None | $500K+ | No (initially) | 4-8 weeks |
Navigating, sourcing, and understanding these financing options can be complex and time-consuming. Eligibility varies by project, state, building type, scope, and more. Forsa helps owners get their energy projects off and rolling by sourcing and identifying funding and incentive options so your project can move forward without getting stuck on funding.
To learn more about funding options or about Forsa, schedule a consultation.