Financing Energy Efficiency
- Make energy efficiency part of your hospital’s high-level, long-range organizational planning and budgeting, and including facility directors in the discussions.
- Have a transparent and clear approval process and financial criteria for energy efficiency proposals.
- Consider the “total cost of ownership” of investments, not just first cost.
- Use life-cycle cost (TCO – total costs of ownership) analysis for larger, more complex projects – not just simple payback analysis.
- Determine a financial “hurdle rate” for virtually automatic approval (e.g. an internal rate of return of 10 percent or better) that’s in line with other hospital investments.
- Investigate participation in a revenue generating demand response program that pays your facility for energy load reduction efforts that can coincide with mandated back-up generator testing requirements.
There are several methods of financing large conservation projects which can be mixed and altered to meet organizational needs:
- Many utility companies provide financial incentives and advisory support. Many of the utility programs are designed to integrate with other financing mechanisms so talk with your utility company about options.
- Energy services companies (ESCOs) provide various services to evaluate a facility, design and propose facility improvement measures , estimate and guarantee savings and provide implementation services such as create bid documents, manage projects, commission the projects and train facility staff. Some ESCOs can even provide a turn-key project including financing options, some include structuring projects that require no negative cash flow or even generate a modest positive cash flow.
“Consider the ‘total cost of ownership’ of investments, not just first cost.”