How to Secure Long-Term Capital for Your Clean-Energy Projects
If your company is like many others, it is committed to using cleaner, greener energy. Perhaps you’re switching to LED lighting in your facility, installing a more energy-efficient HVAC system or even developing a microgrid to increase your energy independence.
Yet funding these clean-energy projects is another story. How will you pay for them? Many clean-tech efforts are long-term efforts requiring long-term financing. Fortunately, a variety of financing options are available. Using one of these, or a combination of them, should offer a path to meeting your sustainability financing goals.
Evaluate priorities
Interest rates have dropped somewhat, but are still much higher than they were a few years ago. As eager as companies – and their customers – are to implement long-term clean technology, they must find a careful balance between the financial realities of running a business and achieving sustainability goals.
Companies are wise to take time for thorough analysis on clean-tech projects and priorities. With changing interest rates, what made sense five years ago may not now. Continually evolving clean-energy technologies and government incentives may also impact decisions. And while the supply-chain issues are largely in the past, businesses still must look at sources for electronic components necessary for some projects.
Research government funding
Programs throughout North America are available to help businesses with financing for clean-energy projects. In Canada, programs at the federal and provincial levels offer a variety of options to support clean-energy projects, ranging from interest-free homeowner loans to funding for renewable-power projects. In the United States, federal, state and local governments and agencies offer a multitude of programs offering long-term loans and other financing for clean-energy projects.
Because programs are numerous, fluctuating and often complex, it can be helpful to work with a financing provider knowledgeable in the space. Providers often maintain comprehensive networks of resources to help clients navigate government funding options.
Consider energy-as-a-service
As-a-service models seem to be everywhere these days, and clean energy is no exception. Energy-as-a-service (EaaS) is a business model that allows a company to pay for energy services without making an upfront capital investment. Instead, it pays a recurring subscription fee or is billed on a usage basis. The energy service provider takes responsibility for the installation, maintenance and operation of the energy system. The customer can focus on its core business and have more cash available to fund operations and growth initiatives.
Along with benefits to the customer, the as-a-service model can be beneficial to energy providers. It allows the provider to own their assets – often some type of infrastructure – outright and generate a constant source of recurring revenue.
Working with a financing partner that is familiar with EaaS models can make a real difference in sustainable financing for clean-energy projects. EaaS is not restricted to large-scale enterprises and projects. Many financing companies regularly work with small and mid-sized companies as well as larger ones.
Take a look at a power purchase agreement
A power purchase agreement (PPA) is a financing option that lets an energy buyer purchase electricity generated by a renewable energy system. The energy provider installs, owns and operates the system, while the buyer purchases the electricity produced by the system under terms of the agreement.
A PPA can be an ideal way to finance a clean-energy project for a business that wants to avoid the upfront costs of project development – and that does not want (or need) the asset on its balance sheet.
PPAs are especially well-suited for energy-resiliency projects. For example, a manufacturer or distributor looking to install a microgrid could sign a PPA with the developer to deliver the power. Significant utility savings can pay for the costs of the agreement over time.
Negotiate customer contracts
Companies concerned about ongoing or future inflation may negotiate contracts to incorporate inflationary levers, passing those costs through to customers. The strategy is akin to how construction companies build provisions into homebuilding contracts to increase prices if lumber costs exceed a certain level.
Clean, green, sustainable financing
These are just a few of the ways companies can secure long-term financing for clean-tech projects. A strong financing provider will be able to suggest programs – both traditional and novel – that work for your business model and your long-term sustainability goals.
Mitsubishi HC Capital America is a commercial finance company that provides customized solutions to help organizations of all sizes accelerate growth. Our experts throughout North America are leaders and innovators in the clean-energy financing industry. If you are ready to learn how to secure long-term financing for your clean-energy projects, contact us.