Economic Development through Energy Efficiency-as-a-Service

Communities are increasingly embracing the concepts behind Asset-Based Economic Development. After all, it’s much easier to build on the assets you already have (people, infrastructure, etc.) than to try and develop something completely new, right? And though every community has its own unique set of assets, there are two things that are shared across every community; building energy users and the need for capital to reduce energy consumption through energy efficiency upgrades.

In fact, many communities have instituted energy benchmarking ordinances requiring people to compare their building and efficiencies compare to other similar buildings and uses. In fact, many of the ordinances require certain targets to be achieved by the business or organization. Benchmarking also helps to identify energy saving opportunities at your building. But most benchmarking ordinances fail in getting energy saving projects implemented due to the lack of capital for the improvements. Even many municipalities fall short in energy savings due to budget shortfalls and credit restrictions. But how do you turn the energy users into economic growth for your community with that constraint? The answer lies in Energy Efficiency-as-a-Service (EEaaS).

Scaling the utility model down to energy efficiency

At its core, EEaaS follows the electric utility model. When you connected to the electric utility, you didn’t have to have capital to buy the power plant or run the distribution lines. In fact, you also don’t maintain the infrastructure. You simply get Energy as a Service from the utility. The utility made the investment in the infrastructure, operates and maintains everything. The EEaaS model does the same thing at your building. The EEaaS Service Provider makes the investment to install energy efficiency improvements at your building and charges a monthly service fee that covers their return on investment, debt coverage and the cost of maintaining the technologies installed by your EEaaS Service Provider. You get a share of the savings from day 1. There is no ROI since you didn’t make an investment. Your building gets capital improvements without any capital or debt so that your capital can be focused on your core activities.

Let’s take a look at how this translates to sustainability and economic growth.

The top five energy-consuming building categories used about half of the energy consumed by all commercial buildings in 2012, and they include the following types of buildings:

  • Mercantile and service(15% of total energy consumed by commercial buildings)
    • Malls and stores
    • Car dealerships
    • Dry cleaners
    • Gas stations
  • Office(14% of consumption)
    • Professional and government offices
    • Banks
  • Education(10% of consumption)
    • Elementary, middle, and high school
    • Colleges
  • Health care(8% of consumption)
    • Hospitals
    • Medical offices
  • Lodging(6% of consumption)
    • Hotels
    • Dormitories
    • Nursing homes

Last updated: September 28, 2018

The top 5 uses of energy in commercial buildings are:

  1. Lighting 17%
  2. Refrigeration 16% (motors)
  3. Ventilation 16% (motors)
  4. Cooling 15% (motors)
  5. Computers 10%

Older lighting technologies can save 75% by upgrading to LED technologies. Fixed speed motors can save 30% to 90% through variable frequency drives. And motors impact refrigeration, ventilation and cooling. But too often energy efficiency projects get proposed only to not be implemented because it just isn’t in the capital budget this year. But ESaaS allows you to save money with No Capital and No Debt. During the initial term of an ESaaS agreement, the client’s share can range from 10% to 50%.

Let’s look at the steps in implementing an Energy Efficiency-as-a-Service project:

  1. Meet with an EEaaS Service Provider.
  2. Benchmark your building and identify energy saving opportunities.
  3. Execute a Memorandum of Understanding committing to either implementing energy efficiency through an EEaaS platform or option to purchase the project.
  4. The EEaaS Service Provider performs an energy audit at your facility and engineers an energy solution.
  5. Review the energy saving (water conservation too) plan for approval.
  6. The developer is financially responsible for building and maintaining the energy efficiency system.
  7. The host facility for the onsite efficiency project pays a monthly service fee using the savings generated by the system.
  8. The host facility gains positive cash flow and income from day 1.

With the EEaaS Service Provider bearing sole financial responsibility for the energy efficiency project, both in building and maintaining it, the facility’s pockets are untouched; no capital outlays are required and there is no debt for the project. This allows the facility to use its limited financial resources to stay focused on their core business. In addition, the EEaaS service fee is fixed over the contract term which means your net cash flow savings grow as energy rates increase.

With an EEaaS agreement in place, the Service Provider can begin developing the energy efficiency project, bringing tangible economic development to the community. To start, an energy efficiency project requires product installation. These are local jobs for an electrician, a mechanical, refrigeration or controls contractor to perform the installation. And once constructed, the efficiency project will continue to support jobs for the upkeep and maintenance of the project. Jobs are the essence of economic development, and that is exactly what an EEaaS project provides for a community, with no investment or debt required.

Watching it Grow

Along with the construction of the energy efficiency project, local businesses and organizations spend less and less on their electricity, more funds are available to spend supporting the local economy. Without energy efficiency upgrades being done, the utility bill goes to the local utility, which in all likelihood is anything but locally owned. However, with an EEaaS project, more money stays in the local economy. The building’s share of the EEaaS energy savings will be available to spend within the local community, locally owned shops, businesses and restaurants. When you consider that money spent within the local community is three to four times more likely to be re-spent within the same local community (per the local multiplier effect), these savings can potentially be turned into exponentially increased economic activity for your community.

Economic development usually isn’t easy, but when you can work with assets like existing buildings and businesses and implement an Energy Efficiency-as-a-Service program, let the economy grow.

Fritz Kreiss is the CEO of Onsite Utility Services Capital, LLC, a nationwide EEaas funder and developer (www.ouscapital.com ) of energy efficiency projects and onsite generation. Onsite works with municipalities, economic development, chambers, associations, energy contractors and business and organizations looking to reduce their carbon footprint, save money but lack the capital. Fritz can be reached at Fritz@ouscapital.com .

Written by OUS

January 5, 2024

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