Financing Energy Efficiency Projects for Nonprofits | Article

Installing cost-effective energy retrofits will generate enough savings over their lifetimes for the customer to break even. But that still requires being able to pay for the upfront cost of the retrofit. Utility-funded rebates, state incentives, and external and internal financing options can help bridge the gap. Nonprofits that are able to raise funds for energy efficiency measures are able to enjoy all the benefits that come from these projects, like lower operating costs, more comfortable and productive facilities, and affordable and predictable energy bills. An energy efficiency retrofit is where good budget management meets environmental sustainability, which should make chief financial officers (CFOs) happy while also addressing climate change and taking care of the planet.

To ensure a happy nonprofit CFO, energy savings and the costs of an energy efficiency retrofit need to be calculated before financial decisions are made. The U.S. Department of Energy’s (DOE’s) Building Energy Asset Scoring Tool (Asset Score) can help you understand the energy-saving opportunities for your building. This web-based calculator uses powerful DOE software to simulate the whole-building envelope and mechanical and electrical system performance using data you input. Visualizing your energy projects' potential energy savings (and the associated upgrade costs) is essential when accessing utility rebates and searching for financing options to leverage existing utility rebate funds or grants.

Leveraging Utility Rebates and State Resources

Nonprofits with utility accounts can access utility rebates to fund energy efficiency projects. Many utilities offer rebates for whole-building retrofits as well as for limited energy efficiency measures, such as new lighting systems, boilers, or thermostats. The U.S. Environmental Protection Agency (EPA) lists utilities nationwide offering rebates to help nonprofits fund projects by leveraging ENERGY STAR® products. Many of these rebate programs require the use of EPA’s ENERGY STAR® Portfolio Manager® to benchmark building energy usage. EPA offers a hub for nonprofits to apply for the rebates and incentives that manufacturers provide for new and certified energy efficiency products and for recycling old appliances.

Another useful resource is the Database of State Incentives for Renewables and Efficiency® (DSIRE®), a comprehensive source of information on state, local, utility, and federal incentives for energy efficiency projects. The searchable database identifies the rebates and grants available from utility providers (both electric and gas) as well as from state and local government agencies.

Making the most of Internal Resources

Even modest cash reserves can be used by nonprofits to help manage the upfront costs of energy efficiency improvements. Blending internal financing from capital or operating budgets with utility rebates can be a great way to fund efficiency projects, like lighting system upgrades that deliver energy savings from day one. Energy savings generated from internally-funded efficiency projects can be used to replenish a dedicated revolving fund and then leveraged into additional projects. Because energy efficiency projects deliver energy and monetary savings, they send a positive and compelling message to donors who want to invest in your nonprofit’s ongoing financial and environmental sustainability by funding such projects.

Using External Resources

One of the most significant barriers for nonprofits is the upfront costs of energy efficiency measures. Rebates can help and be part of a stacking solution, but incentives rarely cover all the costs. Larger energy efficiency projects that involve heating, cooling, and ventilation systems replacement, as well as building envelope improvements, likely mean that some third-party financing will be necessary. Several innovative financing mechanisms like on-bill financing, Property Access Clean Energy (PACE), and specialized loans available from green banks can help nonprofits align and manage costs and savings over time. EPA summarized several innovative financing options available to nonprofits in an accessible report. The Better Buildings Financing Navigator can help you determine which financing method is the best match for a given project.

Summary of external resources to help nonprofits finance energy efficiency projects

On -bill financing programs offer low-cost options to pay for energy efficiency and electrification measures over time, as monthly utility bill line-items with no upfront costs
Green banks offer low-cost financing for clean energy investments by providing targeted investments for nonprofits, rural areas, and low-and medium-income communities
Many states and local governments offer PACE programs to help building owners finance clean energy improvements through assessments on their property tax bills.
Community Development Finance Institutions (CDFIs) and low-income federally accredited credit unions offer low-interest loans for efficiency projects in targeted communities or places where utility rebates are unavailable.