Paying for an energy efficient lighting project can often be a hurdle that many facility owners fail to clear. Although the energy savings are well documented, and the financial math indicates such savings will easily pay for the upgrade over time, the expense still has to be accounted for in some manner.
There are many options available to overcome these challenges. Simple financing arrangements or lease agreements can be deployed in some cases where the required funds are essentially borrowed and the principal/interest payments occur over time, largely funded by the energy savings. Such financing arrangements are varied and each has accounting or tax implications for the client. We are here to help you successfully navigate through all the options so you can get your projects approved.
Straight capital investment approaches are very common. All of the accounting treatments and tax implications of a capital project are in play but the project investment still needs to be funded upfront. Given the cost of capital, and the many competing capital intensive needs of any organization, the lighting project may not be able to rise to the top of the list. Hurdle rates and ROI calculations vary organization by organization but typically the payback calculations carry a strong correlation to which projects get funded and which remain on the needs list.
The concept of Performance Service Contracts has been around the energy efficiency space for many years. In such contracts, typically offered by large ESCOs in the federal, state, municipal and education markets, the energy savings are guaranteed over time by the ESCO. The funding is provided by the ESCO and the savings are used to pay for the project over a specified period. While the total cost of the project increases due to the cost of money factors associated with the ESCO financing, the client pays no money upfront.
In recent years the Lighting-as-a-Service concept has emerged as an attractive financing option. Similar to the Performance Contract, the LaaS approach requires no upfront capital investment on the part of the client. Eco Engineering and its financing partners assume all responsibility for the required funding. Savings are metered and verified based on pre-upgrade measurements and electricity costs. The savings over time are typically split between the client and Eco Engineering; hence the client still realizes some benefit in reduced operating costs while the balance is used to pay for the upgrade over time. Additionally, LaaS means that Eco Engineering owns the lighting, is responsible for all lighting and controls maintenance and carries future responsibility for newer energy saving designs and technologies as they become available in the marketplace.
For more information about LaaS download the recent presentation we delivered to the National Facilities Management and Technology Conference (March, 2017).
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We believe in the powerful potential associated with the reduction of carbon emissions from our environment and the absolute necessity of changing business and personal practices to help prevent global warming. This component is aligned with energy efficiency but represents more than just the environmental outcome derived from the work we do.
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As part of our brand promise we believe that every organization shares a responsibility to be the best corporate citizen they can be and to take an active role in supporting the communities which support them. This component represents more than just providing money or support for community causes.
Energy Efficiency is More Than a Business Outcome
We believe in maximizing the significant potential for saving money associated with all energy efficient systems, designs and technologies. More than just the “industry” where Eco Engineering operates, energy efficiency is a dynamic and ever changing landscape which is imbedded in our business and our culture.
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