In a rising interest-rate market, finding affordable capital to modernize infrastructure for energy savings can be a huge challenge for building owners. But not when you know how to tap the many incentives and financing options available. Whether you are upgrading lighting, replacing HVAC systems, looking for energy storage or resiliency, or just looking for major cost reductions, the key is working with an energy-efficiency company that is also an expert in financing.
For businesses, getting maximum incentives means less revenue to earn, less capital to find elsewhere. For nonprofits tapping incentives means less fundraising and more money to put towards operational budgets.
Incentives for energy efficiency projects are available through multiple sources including federal and state governments, utility companies and in some cases, municipalities. It is a complex maze of ever-changing programs, with multiple factors that impact eligibility.
“Our job is twofold: finding incentives and determining opportunities for better financing. It’s the combination that reduces the overall cost of projects, so they become viable” explains Mike Sherman, President and CEO. “There are some extremely strong and, quite frankly, unheard of incentives right now that previously were not available.
“For example, we have programs where 50 to 80 percent of the project can be paid for with incentives from the utility company. But that’s not all. Few people realize that currently, utility companies are subsidizing a five-year, zero percent or low interest loans. That’s a significant driver to start a project now. No one knows how long the utilities are going to offer zero percent financing.”
1. Work with a pre-qualified partner
Almost all utility and some government incentive programs are exclusive to pre-approved companies. Working with a pre-qualified partner like Vanguard is the only way to access these funds. These programs investigate and validate the capabilities and competence of the approved partners, giving clients peace of mind that their project is in good hands.
Vanguard has been pre-qualified for numerous programs in different states. As part of this process our previous clients have been contacted as references and detailed case studies have been provided to program administrators.
2. Tap new incentive programs
The Inflation Reduction Act has brought additional federal incentives to the table, especially for solar and energy storage projects. Typically, programs like these offers dollar-for-dollar tax credits to commercial enterprises. Now those incentives are available for nonprofits as well—and they have a major benefit.
“Nonprofits can receive direct payments from the government instead of a tax credit. They will be given a check, and the percentages can go as high as 60% of the project. This is very new, and it is definitely something that nonprofits should consider,” notes Sherman.
3. Understand the nuances
Vanguard is in constant communication with not only the government entity or utility company behind the incentives but the third-party program administrators responsible for the day-to-day operation of the program. “Our engineers work within these incentive programs every day, so we’re informed on any last-minute changes regarding the rules and regulations and have long standing relationships with the administrators,” explains Brian Theordor, Director of Engineering. “That allows us to advocate for our clients and get them the maximum dollars available.”
Another factor is that some programs have a fixed amount of funding. “By staying up to date we can avoid applying for funds from exhausted programs. Additionally, there are instances when new entries aren’t accepted but because of our relationships we can get on waitlists in case last minute funds from cancellations or other changes are made”.
From a financial perspective, it is known that lower interest rates are key to cost reduction but not everyone considers the impact of loan terms. “We try wherever possible to reduce the overall terms on the financing which encompasses interest rates and incentives that go into putting together a good project at the lowest possible cost,” says Sherman.
Navigating the multiple incentive programs is complicated. In some cases, multiple grants and incentive programs can be tapped at the same time, sometimes the opposite is true. Incentive programs are constantly changing. “Without a detailed understanding of all these programs, you don’t realize how or if they are interconnected. For example, combining multiple energy savings measures like lighting and HVAC into one project can raise the incentive level for the entire project,” explains Theordor.