A widespread interest of commercial energy efficiency lending from financial institutions is limited by undefined risks associated with energy efficiency projects. The lack of data and information on predictable performance remains as one of the biggest challenges with loan underwriting. Hence, improvements in presenting data that captures the level of uncertainty in energy performance is a critical step towards stimulating greater deal flows in the commercial energy efficiency financing field.
In fact, Class B office buildings projects present good investment opportunities for lenders due to project size, attractive project ROI, and that Class B office building owners tend to have constrains in capital and liquidity. Aiming to help building owners and investors understand performance risks of energy efficiency retrofit projects, the California Sustainability Alliance conducted a case study on a Class B office building in SoCalGas® region. The whitepaper entitled “Energy Efficiency Financing Risk Assessment Case Study” demonstrates a streamlined standardized protocol for data collection, analysis, and reporting. In addition, the whitepaper discusses financing options available to Class B office building owners.
Key study conclusions include:
- Industry standards are available to help guide the data collection and analysis process to ensure the validity of the energy savings projections.
- Once project data is collected and analyzed, the range of expected savings should be estimated through building simulation modeling to capture performance uncertainty.
- Cash flow analysis should be performed on the high, expected, and low energy savings scenarios to capture financial risk associated with the retrofit project.
As part of the study, the Alliance developed a cash flow analysis calculator customized for Class B building owners to structure their loan proposals after they have completed a building audit. Download the full report for more details.