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Part 1: Utility Rebates And Incentives Help Justify Energy Efficiency Upgrades
By Maryellen Lo Bosco
September 2012 -
Power & Communication Article Use Policy
Factoring utility rebates and incentives into the justification for energy efficiency upgrades can bring a big boost to a project's chances of getting approved. After all, financial executives are more likely to approve projects when rebates improve the return on investment. And even when projects that boost efficiency are mandatory for other reasons, the CFO will be happier if facility managers can find savings that offset the cost of new projects.
But there is a risk. If for some reason the incentive doesn't come through, the facility manager may get called on the carpet to explain why the project isn't hitting its ROI numbers. That can be a painful process in and of itself, and it may not be the end of the story: Once burned, the CFO may well shy away the next time the facility manager mentions the possibility of rebates or other incentives.
That raises the stakes for facility managers who incorporate incentives into financial planning, increasing the chances that an upgrade investment will get okayed, but also making it imperative that those facility managers take steps to ensure that those incentives are actually received.
It isn't unusual for facility managers to use incentives to help justify a project.
"I always ask whether a rebate is attached to a project," says Bob Holesko, vice president of facilities at HEI Hotels and Resorts. To get a capital project approved, Holesko has to show a three-year ROI. For such projects he is able to get approval from the CFO nine times out of ten, he says.
"There is a culture at HEI that we will do everything we can to save energy," he says. Engineers know that they have a good chance of getting a project approved if it's tied to a rebate. HEI has 43 hotels in 16 states, and he says that some states are more active than others when it comes to rebates.
Incentives from utilities and other groups also factor into upgrade planning at SL Green Realty Corp. "We conduct in-depth building analyses to find out what future retrofits we might be able to consider," says Jay Black, director of sustainability. "When we propose a measure to the executive team, we include the rebate or incentive as part of the overall equation that we can use to help offset the cost." Those incentives make efficiency programs — from lighting and heating projects to air-conditioning retrofits and solar installations — more economically viable.
Part 2: Utility Rebates Can Determine Whether Capital Projects Get Off The Ground
Part 3: Documentation Critical To Fulfilling Utility Rebate Requirements