Financing energy upgrades for k 12 schools - u.s. dept. of energy
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The document discusses resources from the U.S. Department of Energy (DOE) for financing energy upgrades in K-12 schools, including a guide on the topic. It outlines DOE programs that provide strategic energy planning assistance, best practices, case studies, and tools. It also summarizes different financing options for school energy projects, such as internal cash, grants, bonds, leases, and power purchase agreements. A case study of energy improvements financed through a lease agreement for a Tennessee school district is provided. The document encourages schools to access DOE resources and initiatives that support energy efficiency projects.
Financing energy upgrades for k 12 schools - u.s. dept. of energy
- 1. 1 | Energy Efficiency and Renewable Energy eere.energy.gov New U.S. Department of Energy – Lawrence Berkeley National Laboratory Guide: Financing Energy Upgrades for K-12 Schools June 26th, 2013 Memphis & Shelby County Sustainability Summit
- 2. 2 DOE’s State & Local Technical Assistance Program • Strategic Energy Planning • Program & Policy Design and Implementation • Financing Strategies • Data Management and EM&V • EE & RE Technologies Priority Areas •General Education (e.g., fact sheets, 101s) • Case Studies •Tools for Decision-Making • Protocols (e.g., how-to guides, model documents) Resources • Webinars •Conferences & in-person trainings • Better Buildings Project Teams Peer Exchange & Trainings •Level of effort will vary •In-depth efforts will be focused on: •High impact efforts •Opportunities for replicability •Filling gaps in the technical assistance marketplace One-on- One
- 3. 3 • Resources Guide to Financing Energy Upgrades for K-12 Schools available on the Solution Center Also featured: page dedicated to Energy Savings Performance Contracting (ESPC) & other finance resources Guide to Performance-Based Contracting for K-12 Schools and improved Solution Center portal for finance resources live later this year • Peer exchange & trainings April webinar on the finance guide available on the Solution Center Join the Better Buildings Alliance and participate in Project Teams for Financing Strategies or Energy Savings Performance Contracting, kicking off this summer • Apply for one-on-one assistance and peer matching Priority Area: Financing Strategies
- 4. 4 Significant Benefits for Schools 4 K-12 schools spend around $6 billion on energy annually – more money than is spent on textbooks and computers combined. There are significant benefits to making clean energy upgrades, including: • Lower energy bills • Modernized infrastructure and reduced facility maintenance costs • Improved comfort, health, and safety • Environmental benefits • Educational opportunities Financing guide & case studies: http://www.eere.energy.gov/wip/solutio ncenter/pdfs/financing_energy_upgrade s_k-12.pdf
- 5. 5 Key Principles 5 Principle 1. Start with Clear Project Objectives Principle 2. Pursue Comprehensive Projects Whenever Possible Principle 3. Focus on Life-Cycle Cost Analysis GETTING TO “YES” In addition to making the financial case, successful projects require a strong team of champions, and a clear understanding of key hurdles and how to make the case to a variety of audiences. For an in-depth treatment of these topics, see Getting to “YES”: A Guide to Developing a Persuasive Business Case for Energy Efficiency : http://energy.maryland.gov/Business /businesscaseguide/
- 6. 6 Financing Options for Schools 6 • Internal Cash • Grants & Incentives • Bonds • Leasing Arrangements • Other Clean Energy- Specific Financing
- 7. 7 Internal Cash 7 • Simplest, most flexible and most direct way to pay for energy-related improvements • Projects paid directly with cash from the operating or capital budgets • School retains all energy savings and often speeds project implementation time by avoiding transaction delays • However, the availability of internal funds is constrained by budget limitations and competing operating and capital investment needs Internal Cash Monies from existing school district budgets Pros Cons Extremely flexible capital Not debt, so no interest or obligation to repay Significant competing needs for these flexible funds Most school districts lack sufficient cash to fund all (or any) EE/RE needs
- 8. 8 Grants & Incentives 8 • Grants are external sources of capital that neither schools nor their taxpayers need to re-pay • Grants can help to lower the overall cost of project • However, accepting a grant obligates the school to perform actions specified in the grant agreement Find Incentives in Your State Check out the Database of State Incentives for Renewables and Efficiency (DSIRE) at www.dsireusa.org. Click on your state, and then scroll down the list of incentives. Schools are usually included under the “business” incentives. Grants Monies from third parties such as Federal and State governments, utility ratepayers, or foundations that cover all or part of the costs of energy improvements Pros Cons Best source of funds – reduces total project cost Not debt, so no interest or obligation for school district or taxpayers to repay Limited availability Restricted uses Often covers only part of project costs Philanthropic and government grants require planning and often a detailed proposal
- 9. 9 Bonds 9 • Bonds are long-term debt obligations, and are commonly issued to finance construction and/or improvements to public infrastructure • General obligation bonds are most common; they often require voter approval and are subject to debt limits • Clean energy projects can be: o Wrapped into a larger bond ballot measure o Offered as a stand-alone project for voter approval (for larger projects) General Obligation Bonds (GO) Debt secured by the obligation to levy and collect property taxes sufficient to pay annual debt service Pros Cons Flexible capital for funding a range of clean energy projects (often subject to voter approval) Lowest cost debt due to robust security and tax exempt interest Increased revenue for school district (in most cases because taxpayers repay debt Long terms (20-30 yrs) Voter approval required (in most cases) Counts against statutory debt limit restrictions High fixed issuance costs, including obtaining a legal opinion, setting up a trustee, and retaining accounting services Long development time (~9 months+) to prepare package of funding requests and gain voter support
- 10. 10 Federally-Subsidized Bonds 10 • Qualified Energy Conservation Bonds (QECBs) can be used for a range of “qualified energy conservation projects” including those that reduce energy consumption in publicly owned buildings. • Qualified Zone Academy Bonds (QZABs) can be used for a range of energy and non-energy facilities renovation projects in disadvantaged communities, but are more complicated to deploy because they require a partnership with a private entity that must make a contribution to the school to improve student education. More info on QECBs: http://www1.eere.energy.gov/wip/solutioncenter/financialproducts/QECB.html More info on QZABs: http://www2.ed.gov/programs/qualifiedzone/faq.html
- 11. 11 Lease Financing 11 • Leases often have slightly higher rates than bonds and require the school district (instead of the taxpayers) to repay the debt • However, leases are a faster and more flexible tool, and can be set up so that energy savings are greater than debt payments • Methods of procuring lease financing include: o Private-Placement Agreements (or single investor leases) o Certificates of Participation (COPs) In many states, leases are popular because they are often not subject to school district debt limits or voter approval Leasing Arrangements School district leases property from a lessor, the underlying security is the leased equipment or real estate. Pros Cons Often voter approval not required Often not subject to debt limitations Flexible capital for funding a range of EE projects Tax exemption lowers costs Flexible terms (5-15 years) Short development time (3months) School district (not taxpayers) must repay the debt Higher interest rates than GO debt Reserve fund and capitalized interest typically required
- 12. 12 Other Clean Energy Financing Options 12 • Power Purchase Agreements - A third party owns, operates and maintains a renewable energy system installed on school district property, e.g. rooftop solar photovolatics (PV). The school district pays the third party a pre-negotiated rate for the power generated. • On-utility bill financing (OBF) entails a utility (or third party) lending the up-front capital for energy-related improvements. The school repays this loan through a line item on the utility bill. • Revolving loan funds (RLFs) are pools of capital from which loans are made – as loans are repaid, the capital is then re-lent for another project.
- 13. 13 Williamson County School District (TN) 13 Organization Size: 42 schools (32,000 students in K-12) Primary Work Completed: Replace cooling towers, boilers, HVAC units, heat exchanger; lighting retrofits; energy management control systems Project Cost: $5.7 million Type of Financing: Lease-purchase agreement, bank note, general obligation bond Simple Payback Period: 6.5 years (net project cost / savings per year) Key Benefits: Lower energy bills, replace aging equipment, improved energy controls, funding for an energy resource manager
- 14. 14 DOE Better Buildings Initiative & K-12 Schools • Better Buildings Initiative: make municipal, commercial and industrial buildings 20% more efficient by 2020 • Better Buildings Challenge o Partners, including K-12 school districts, make a commitment, take action, and share results o DOE provides recognition, technical assistance, and facilitates connections among energy stakeholders • Better Buildings Alliance o Same general criteria, but not quite as stringent o Project Teams offer long-term opportunities for peer exchange, including finance and ESPC
- 15. 15 • Visit the Solution Center (Guide is featured on homepage) www.eere.energy.gov/wip/solutioncenter/ • Submit an application for assistance www.eere.energy.gov/wip/solutioncenter/technical_assistance.html • Join the Better Buildings Challenge or Alliance For more information email Crystal McDonald at [email protected] • Sign up for our mailing list and email us your questions/suggestions [email protected] How to Get Engaged with DOE