Bill Beattie , KEMA

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The Financial Sell: Coordinating Smart Ideas Incentives and Other Funding Sources for Your Customer. Bill Beattie , KEMA. What We Will Cover with Today. Overview of the Smart Ideas program Where are the incentive opportunities? How can I better help my clients? Takeaway Opportunities - PowerPoint PPT Presentation

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  • The Financial Sell: Coordinating Smart Ideas Incentives and Other Funding Sources for Your Customer Bill Beattie, KEMA

  • What We Will Cover with TodayOverview of the Smart Ideas programWhere are the incentive opportunities?How can I better help my clients?

    Takeaway OpportunitiesIs financing something my customer really needs?To whom and where can I turn for assistance?Would financing options make a difference for missed opportunities, past proposals or large system applications?

  • Where Smart Ideas Started . . . Provides incentives for energy efficiency upgrades and equipmentPart of Illinois energy legislation passed in 2007Program implemented by ComEd, Ameren Illinois and the Illinois Department of Commerce and Economic OpportunityNow in third year of programRatepayer funded program

  • How Ratepayer Funding WorksEnergy Efficiency Programs charge on your monthly billBased on kWh usageHow much is your customer contributing?

  • Where the Smart Ideas Program Energy Savings Come From

  • Who Receives Incentives from Smart Ideas for Your Business?By kWh, 2008 to Present

  • Smart Ideas Helps You Become More Energy EfficientPrescriptive and custom incentive programNew construction programRetro-commissioning programCommercial buildingCompressed air

  • Prescriptive and Custom IncentivesPrescriptive MeasuresOff-the-shelf equipment retrofits, replacements and upgrades:Lighting HVAC RefrigerationMotorsCommercial kitchen/food service equipmentControls and sensorsCustom MeasuresTailored-for-you energy efficiency upgrades, such as:Energy management systemsIndustrial process improvementsAnd other efficiency improvements not captured by the prescriptive programIncentives

  • New ConstructionSmall buildings trackLess than 20,000 square feetFocus on daylightingSystems trackOver 20,000 square feetFocus on later stages of designComprehensive trackMore than 50,000 square feetFocus on early design stagesWhole building modeling provided

  • Commercial Building Retro-CommissioningIncentive is the cost of engineering study and M&VStudy performed by ComEd-approved service provider500 kW and larger150,000 sq ft and largerMeasure implementation deadlineCustomer implementation requirement of $10,000 or $20,000, depending on project size

  • Compressed Air Retro-CommissioningTwo tracks100499 HPIncentive pays for portion of studyCustomer leak-fix requirement (50% by volume)500 HP and largerIncentive is the cost of engineering study and M&VCustomer is paid $0.01/ M&V kWh

  • How to Cash In

    The Customers Perspective

  • Financing Energy EfficiencyWhy financing?Types of financingBarriersSolutionsLeveraging financing options with utility programs like Smart Ideas for Your BusinessWhere do we go next?

  • Why Financing?Capital required for major investment in energy efficiency improvementsRecent severe economic conditionsAvoid cost of delay and missed savings potentialTo complement other energy efficiency programs offered by Smart Ideas incentivesCombine with EECBG, EPACT and other optionsPositive cash flow net savings to customer should be a win-win

  • Traditional Types of FinancingAccording to the SBA, there are four primary funding options:Internal fundsDebt financingLease or lease financing (buck out lease)Venture capitalAngel financing (friends and family)

  • Traditional Types of Financing for Energy EfficiencyAccording to the DOE and Small Business Review, there are two more options for energy efficiencyInternal fundsDebt financingLease or lease financing (buck out lease)Venture capitalAngel financing (friends and family)Energy performance contractsUtility incentives

  • Barriers to Commercial Financing (and not always just tied to financing)Confusion complexity tied to take-up rate (more than interest rate)Transaction cost paperwork, paperwork, and more paperwork Lack of customer knowledge audit driven results in more savings, with more complexityLack of confidence will the savings materialize?Split incentivesDebt classificationUtility objections to tie financing to utility billBank objection to tie financing to property taxThe reality of regulatory constraints for utility programs and state lending laws

  • What Holds Customers BackAvailability of capitalCost of capitalFirst costCredit and collateral issues Payback/ROI requirementsPayback period of less than three years typical

  • Now the Quagmire

  • The Challenge:Energy efficient solutions often cost more than their inefficient equivalents. Although the people who purchase them will benefit over the life cycle from the energy savings, the incremental, up-front costs of energy efficiency can make the efficient purchase unattractive to many business customers.Solutions:Funding sources that cover these up front costs and allow people to pay back principal and interest from energy savings, rebates that cover incremental costs, and tax incentives that do the same can overcome this first-cost hurdle. Since energy bills are lower for energy efficient buildings, net operating costs for efficient buildings (mortgage plus utility bills) are usually lower, making energy efficiency a smart economic decision if financing is available. Source: Eight Approaches to Enable Greater Energy Efficiency: The National Council on Electricity Policy

  • Where Do We Go from Here? First Steps to Help Your CustomerHelp them set goals for targeted, short-term wins (i.e. highlighting projects with quicker payback periods) and for enduring approaches.Encourage leveraging Smart Ideas incentives to fund additional capital projects. Help them with creative ways to leverage these funds as below line budget line items, for example.Develop multiple project opportunities from the short-term wins to lock you in for long run solutions with your customer.

  • Trade Allies that Are Successful with this Program:Help the customer reserve their projectComplete the project on time and to program specificationDo everything possible to ensure that the check is in the mail for the customer!123

  • How to Cash In

    The ContractorsPerspective

  • What Other Funding Sources Should You Present to Your Client?

    Have a basic working knowledge of the EPACT program and the difference between tax deductions and tax credit opportunities.Consider proposal templates that include estimated EPACT credits and deductions. Always encourage deferral to a tax professional.Check for any applicable grant programs available to your client.Look for EECBG (federal block grants) in communities you serve.Network with economic development contacts in your community.Consider association-based funding sources.Check with your suppliers, manufacturers and distributors for project funding sources.

  • Develop Yourself as a Resource Expert for Your ClientsConsider developing accounting firm business development contacts.Network with other contractors that you know and trust.Develop your personal document library to leverage current and readily-available industry data and share this knowledge.Help your customer overcome any unrealistic return-on-investment requirements that may be an internal hurdle.Develop bundled solutions versus one and done opportunities.Qualify your prospects well. Be choosy about where you spend your time.

  • How Do I Develop a Financing Resource Base?Start with people and companies in this meeting today.Work with your ownership and their knowledge. If you are an owner, share your knowledge and contacts!Pursue training events provided by ECW/ComEd and others.Leverage the knowledge at your clients company: CFO, business analysts, facilities directors . . . they all know people that you need to know.Talk to other business professionals in your community.Ask those you trust about who they trust: your attorney, your accountant, your investment advisor.Ask us! Your Smart Ideas outreach staff knows hundreds of companies and contacts who can help you get the answers you need!

  • Next Steps . . . Some Simple Questions!What can I do to help you leverage Smart Ideas for Your Business to get some of your projects done?

    If relevant financing options were available, would this help justify this energy-efficiency system purchase for your company?

  • Need Help Getting Started with a Large Account? Ask for a Smart Ideas Opportunity AssessmentWhat is an Opportunity Assessment?Identifies energy efficiency projects at the clients facility that may qualify for Smart Ideas incentivesHow long does it take?A ComEd energy engineer will spend about two hours with them on-site to assess opportunitiesWhat will I receive?Within two weeks of the assessment, the client will receive a letter with energy efficiency opportunities with the estimated savings and potential incentives.How do I get started? Suggest an Opportunity Assessment the clients ComEd Account Manager will do the rest

  • Additional Helpful Resources for Financing Assistancewww.dsireusa.org Click on Illinois for available resourceswww.energy.gov/energyefficiency/financing.htmwww.sba.gov/content/financing-energy-efficiency-projectswww.smartenergy.arch.uiuc.edu/pdf/DOEFinancingHandbook.pdfwww.ase.org/event/financing-webinar-september-2010www.aceee.org/topics/energy-efficiency-financing

    These websites will provide you with financing descriptions and options.

  • Sell your role as a Smart Ideas Trade Ally to your customers!I am an independent contractor with Smart Ideas experience and training.Mr/Ms. Customer, I can help you:Identify opportunitiesSelect, purchase and install equipmentManage your projectComplete and submit your paperworkwww.comed.com/TradeAllyDirectory

  • For general program infor