Market conditions are driving more low-carbon buildings, faster—but there’s simply not enough to meet demand. According to JLL, a projected 75% shortage in low carbon workspace by 2030 will soon lead to a 57M sq. ft. deficit across major U.S. markets.
We hear from so many owners that they’re blocked from making investments in their buildings. Why?
- Capital is scarce. In this economic climate, owners can’t afford to invest in their buildings on their own dime. They’re only going to put capital into building where absolutely required.
- The immediate bottom-line returns simply aren’t there. Even if you’re able to unlock financing, why invest in retrofits? If you pay for it, the tenant receives the immediate benefit in the form of lower energy expenses; that doesn’t help you with the bottom-line.
On-Bill Repayment Programs 101
Fortunately, for assets in California’s PG&E, SCE, and SDG&E service territories, there are strategic funding mechanisms, called On-Bill Repayment (OBR) programs, available to finance costly energy projects.
Picture this: your building undergoes upgrades that not only slash energy costs but also make those monthly utility bills more manageable.
Here’s how it works: a utility or lender provides a customer with the upfront cash necessary to cover the costs of an eligible energy efficiency, renewable energy, or generation project. The capital is then returned to the utility via utility bill payments.
Once the upgrades are complete, you repay the borrowed funds through your monthly electricity bill over a period ranging from 2-15 years. The energy cost reductions from your retrofit balance out the on-bill payback fee, leaving you with an unchanged total utility bill.
Rolling project costs onto your utility bill helps make energy efficiency possible.
The Benefits
If you’re daunted by the hefty capital costs associated with energy projects, consider your financing options. Here are just some of the compelling benefits of OBR programs:
- Zero capex required: Make energy upgrades more affordable (and palatable to your higher-ups!) from day one, by treating them as an operating expense.
- Increase tenant satisfaction: Tenants benefit from upgraded office space, while energy bills remain neutral.
- Improve energy efficiency, faster: OBR programs allow you to bundle multiple projects together, helping you achieve sustainability goals faster and avoid associated compliance penalties.
Once efficiency upgrades are completed, you’ll of course also benefit from the associated increase in NAV, NOI (post-loan), and lease-ups. OBR programs make efficiency projects a win-win for all parties involved.
How Do I Access This Funding?
Note that not all projects will be eligible for this type of financing, as it’s typically tailored to specific types of energy upgrades. But if your project is eligible, OBR can be a game-changer. Whether you need a lighting upgrade to comply with AB 2208, or you’ve postponed that chiller replacement one year too long, the Gridium team can unlock the financing mechanism for you, helping you make necessary efficiency upgrades happen now with zero capital expenditure. Gridium Alpha, our turnkey project development and financing solution—from identifying efficiency opportunities with attractive paybacks all the way through to financing, construction, and M&V—ensures you get the most return on your efficiency investments.
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As you consider which building investments are going to be the “deal drivers,” we recognize that efficiency upgrades often don’t make the cut. Taking advantage of the available financing mechanisms, like OBR, offers a direct pathway for building owners and managers seeking increased NOI, happier tenants, and faster decarbonization.
Interested in learning more about how to fund your efficiency upgrades with zero capital outlay? Tune into our webinar 3/12, “Financing Retrofits in Capital-Constrained Times.”
Have a project in mind, but daunted by the costs? Chat with a Gridium expert to assess your financing options.
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