Financing and incentive programs

Renewable energy incentives

The United States currently relies heavily on coal, oil, and natural gas for its energy. These fossil fuels are nonrenewable, because the resources are finite. They will become too expensive or too environmentally damaging to retrieve. In contrast, renewable energy resources are constantly replenished. Most renewable energy comes either directly or indirectly from the sun, including wind, solar, and biomass.

Wind energy has been harnessed for hundreds of years to pump water or grind grain. The windmill's modern equivalent—a wind turbine—can use wind energy to generate electricity. Wind turbines can be used independently, connected to a utility power grid, or even combined with solar energy technology.

Solar energy or sunlight has always been used directly for warmth and light. A more recent discovery is the process of converting light (photons) to electricity (voltage) called the photovoltaic (PV) effect. A variety of technologies have been developed to take advantage of solar energy for buildings, including solar cell (PV) systems, concentrating solar systems, passive solar and daylighting, solar hot water, and solar process heat and space heating/cooling.

Biomass energy is the energy from organic matter. It has been used for thousands of years, ever since people started burning wood to cook food or to keep warm. Today, the sources of biomass include wood, plants, residues from agriculture or forestry, and the organic component of municipal and industrial wastes.

The Minnesota Sustainable Building Guidelines (Minn. Stat. 16B.325), also known as the B3 Buildings, Benchmarks and Beyond Project, consider the long-term operating costs of a building, including the use of renewable energy sources and distributed electric energy generation that uses a renewable source or natural gas or a fuel that is as clean or cleaner than natural gas. These guidelines were effective beginning in 2004.

Guideline E.2 requires all new buildings being constructed with state bond proceeds to evaluate renewable and distributed energy generation options. This analysis includes the environmental, economic and community impacts of supplying a percentage of the building's total energy usage with solar, wind, or biomass energy systems as well as micro-turbines and fuel cells, as applicable.

Financial incentives are available in Minnesota to support the use of renewable energy for commercial, institutional and residential buildings.

Financing Energy Projects | www.cleanenergyresourceteams.org/financing.html
The Clean Energy Resource Teams (CERTS) Web site contains up-to-date, Minnesota-specific information on financing for clean energy projects. This website also includes detailed information on each clean energy technology, case studies, presentations, utility links, community events and more. CERTS is funded through a partnership of the Legislative Commission on Minnesota Resources (LCMR), Minnesota Department of Commerce, U.S. DOE, Blandin Foundation, the University of Minnesota, and others.

Database of State Incentives for Renewable Energy (DSIRE) |
www.dsireusa.org/library/includes/map2.cfm?CurrentPageID=1&State=MN This database is an excellent source of information about federal and Minnesota-specific financial incentives, rules and regulations, and related programs for renewable energy. Contains statutory citations, program summaries, and links. Information available for all 50 states. Everything your heart "DSIRES."

Energy savings opportunity gap

The inefficiency of your existing energy systems may cause you to spend far more on utility bills and maintenance than necessary. If your existing or planned building does not optimally conserve energy, then you may be able to take advantage of the "energy savings opportunity gap" to finance improvements. The key is your existing monthly budget to operate the building's energy systems. You are wasting money if the monthly payment you would make to a lender to finance upgraded equipment is less than the amount you would reduce your monthly utility and maintenance bills with more efficient equipment.

System upgrades can accomplish even more than energy conservation. The energy savings opportunity gap can help "green" your facility, as well. Buildings that are "energy hogs" often experience indoor environmental quality issues as well. Problems with stuffiness, temperature variability, bad lighting, toner fumes, and mold or condensation are just a few of the health and productivity issues that can be addressed in tandem with energy usage by upgrading thermostatic controls, lighting, office equipment, and ventilation systems.

Resist the temptation to opt only for "low hanging fruit" such as lighting upgrades because they yield a high rate of return or quick payback. Bundling a number of improvements will allow those with quick payback to offset more expensive upgrades that can dramatically improve the performance and comfort of your building.

Delay is expensive. Financing with interest often is cheaper than continuing your present energy consumption. Financing costs are paid from your energy and maintenance budgets. In this situation, the concern is not how to obtain enough money, but what source of financing makes the most sense. There are several options that avoid the problems associated with capital bonding, and provide tax exempt interest rates for public sector institutions:

• Line of credit from a bank
• Lease purchase agreement
• Performance contract (also called shared savings agreement or guaranteed savings contract)

Typically these financing options are not considered debt because most lenders view retrofits as personal property.

The process starts with a building audit. Obtain technical advice about the upgrades needed for your facility from a power utility, energy consultant or energy services company (ESCO). Links provided on this page connect you with the Minnesota State Energy Office at the Department of Commerce, utility conservation improvement programs (CIP) in Minnesota, excellent Handbooks for Energy Efficiency from the California Energy Commission, and the nationwide Energy Services Coalition.

To diagnose more complex indoor environmental quality issues, consider having a sustainable design professional, indoor air quality specialist, mold abatement contractor, or other appropriate specialist participate in the building audit.

Be sure to compare sources of financing. You are not obligated to accept money offered by an ESCO. Often it is in an organization's best interest to obtain technical advice from an ESCO but to look elsewhere for funding.

Financing energy-efficiency projects

Energy Star for Government | www.energystar.gov
According to U.S. EPA's Energy Star program, nearly one-third of the energy used to run typical government buildings goes to waste. This site is a good starting point for information on financing projects. This site explains how to be strategic about energy management. It includes information on financing energy efficiency projects, a list of energy services providers by state, and more.

Minnesota School Board Association Lease Purchase Program

The Tax-exempt Lease Purchase Program is a flexible and convenient means for Minnesota public school districts to finance capital needs. A lease purchase is fixed-rate installment loan financing, a proven alternative to traditional loans, bonds and internal funding. As nonreferendum debt, the lease purchase is required by state statute to be an "annual appropriation." The district is committed to lease payments for only one year at a time, and the payments are not counted as long-term debt.

A lease purchase may be arranged for a wide variety of essential equipment and property including: energy improvements, field lighting, food service equipment, science and lab equipment, computers, telephone and radio communication equipment, office furnishings and equipment, and more.

For more information contact MSBA's Tiffany Rodning at 800-324-4459 or go online to fill out a financing request form: www.mnmsba.org/Public/displaycontent.cfm?ScreenID=657.

Minnesota utility programs

The Minnesota Conservation Improvement Program (CIP), administered by the Energy Division of the Minnesota Department of Commerce, requires utilities to invest 1.5 percent of their annual income in conservation programs. Municipal and cooperative utilities will no longer be allowed to concentrate their investments in load-management activities, so new conservation programs should become available for utility customers.

Xcel Energy | www.xcelenergy.com (Commercial & Industrial » Programs & Resources » Rebates & Incentives)
Xcel Energy offers a number of rebates and incentives for its commercial and industrial customers. Look in the left sidebar of the page for links to these examples and more:

• Custom Efficiency service targets new equipment purchases, offering cash incentives (based on energy savings), funding for engineering studies, and competitive financing.
• Recommissioning can help lower energy costs by 15%. Xcel funds up to 50% of a recommissioning study (up to $15,000), then provides electric and natural gas rebates that cover up to half the cost of implementation. An extra 30% in rebates is available from May 1 to October 31, 2004.
• Energy Design Assistance helps these large customers design efficient new facilities to reduce energy bills by an average of 30%. Custom consulting, available for buildings at least 50,000 sq. ft. in the early design stage, provides customized energy-design consulting expertise, personalized computer energy modeling, and incentives for implementing recommendations. Plan review, available for buildings from 15,000 - 50,000 sq. ft. includes professional review of construction documents, evaluation of energy-efficiency upgrades, and incentives for implementation.

Alliant Energy Integrated Services - Cogenex
www.alliantenergyisco.com/main/osecontracting.asp
Alliant offers performance-contracting services.

Minnesota Power's Triple E New Construction program is based on the concept of a "house as a system" and promotes energy-efficient construction and design through specific thermal and performance standards. Homeowners and builders can qualify for special incentive rebates up to $2,000 by meeting specific energy standards for thermal integrity (insulation, windows and doors, exterior wind barriers), airtight construction, moisture control, appliances, lighting, ventilation and heating system performance. The program is open to all residential new construction (maximum of four units per dwelling) built in Minnesota Power's service area in northeastern Minnesota.

Otter Tail Power Company | www.otpco.com/business/Comm_Fin_CIP.htm
Otter Tail offers rebates, incentives, and low-interest financing to purchase energy-efficient commercial systems such as geothermal heat pumps.

Handbooks for energy efficiency

The California Energy Commission has developed six informative manuals useful to decisionmakers, posted online at www.energy.ca.gov/reports/efficiency_handbooks/index.html.

• How to Hire an Energy Auditor to Identify Energy Efficiency Projects is an excellent resource. It describes the advantages and disadvantages of types of audits and contractors. Appendix A contains a comprehensive Sample Request for Qualifications, including the Evaluation & Selection Process, and Sample Contract Terms. Appendix B contains Suggested Information for Performance Specifications for many common upgrades.
  
  
• How to Finance Public Sector Energy Efficiency Projects includes Cost-Effectiveness Criteria, Options for Financing, a Sample Master Lease Agreement, and a Sample RFP for Financial Services, as well as California-specific information on financial programs.

More on energy performance contracting

Energy performance contracting can be an effective way to achieve energy efficiency goals. A facility is a likely candidate if it has at least 40,000 sq. ft. and energy bills that total more than $40,000 annually. Remember that bundling upgrades which have a short payback with upgrades which have a longer payback will result in a higher-performance facility.

Examples of projects which work well include:

• Heating projects that replace aging boilers, steam traps, and pumps.
• Cooling projects that replace aging chillers, cooling towers, or pumps.
• Ventilation and distribution projects that install variable speed fans or replace fan or pump motors.
• Lighting projects that replace lamps and ballasts or entire fixtures.
• Projects that install a new energy management control system or improve operation strategies.

Energy Services Coalition | www.energyservicescoalition.org
This informative web site provides great resources on performance contracting, including a listing of energy services companies by state. ESC resources include downloadable model contracts, RFPs and sample loan programs.

Minnesota State Law | Minn. Stat. § 16B.32
A requirement for onsite energy generation from renewable sources was added to Chapter 16B, which also authorizes shared-savings energy performance contracting by state-owned and wholly state-leased buildings for energy efficiency improvements with a cost payback within 10 years.