A range of loan financing options are available. These include traditional loans but also arrangements for companies to avoid upfront costs, with repayments made using the savings generated from an energy efficiency project.
Different financing arrangements
Financing arrangements can be tailored for you. Types include:
- Leasing – Leasing equipment enables companies to avoid upfront costs and manage energy efficiency projects within operational budgets.
- On-bill financing – Allows businesses to install and upgrade energy efficiency equipment which is financed by the energy utility. Repayments are made by the business through their monthly power bill and ownership is transferred on final payment of the finance. Up-front capital is not required and repayments can be equal to or less than the energy cost savings achieved.
- Energy performance contracts – Are commonly used as a financing method in the commercial building sector. Energy service companies (ESCOs) guarantee reduced energy bills for commercial tenants, by identifying potential savings in a building’s operations, commissioning and funding a retrofit of the building and using the energy saved to fund the upfront costs. This financing model overcomes the inherent barrier of split incentives where building tenants benefit from retrofits through reduced energy bills, but building owners are responsible for the upfront infrastructure costs.
- Environmental upgrade agreements – Similar to EPCs, environmental upgrade agreements involve external financers covering the upfront cost of a retrofit, which is then recovered from the building owner through a council levy. Building owners can also pass on part of the environmental upgrade charge to tenants. The council forwards these levy payments to the finance provider. These structured payments remain with the property if ownership changes.
Talk to your bank or ESCO to explore the options.
For further information
NSW Office of Environment and Heritage
Choosing the right finance for projects can sometimes be challenging. This guide will help companies understand the different financial options available as well as providing step-by-step guidance in selecting the best finance for their business.
Energy Efficiency Council
An overview of energy performance contracting and guidance on whether EPCs are the most appropriate financing tool for your business, how to source an energy service company and put relevant contracts in place.
Office of Environment and Heritage NSW
These guidelines present the legal framework and rules for developing environmental upgrade agreements in NSW.