City Project Financing

Highlights

  • The Department of Energy’s Better Buildings Financing Navigator provides an overview of an array of financing options ranging from traditional self and debt financing to emerging innovating options including Property Assessed Clean Energy (PACE) and Energy Service Performance Contracting (ESPC)
  • In Texas, the LoanSTAR Revolving Loan Program offers cities and other public sector entities low-interest financing for energy and water efficiency upgrades and performance contracting in their facilities.
  • Internal financing, including revolving loan funds, can provide cities a high level of control and flexibility in their energy efficiency project development.

Financing Energy Efficiency

Most city leaders can agree that energy and water efficiency is a good idea – the benefits of reducing energy bills, increasing employee comfort, conserving resources, and creating positive engagement with residents are universally positive. However, financing efficiency projects can present a challenge for many municipal organizations. Understanding the landscape of traditional and emerging financing options may be the key to progressing your city’s efficiency goals.

Better Buildings Energy Efficiency Financing Navigator

The US Department of Energy (DOE)’s Better Buildings Financing Navigator is a free online resources that uses basic project information to identify financing options that best align with your project’s needs. The Navigator can save significant time and reduce the research barrier for cities who are taking the initial step of exploring the world of available financing options.

Source: US Department of Energy.

Local governments also have the option to “Connect with Financial Allies” straight from the Navigator, where they can identify partners who are experienced and knowledgeable about financing energy efficiency and PACE projects.

Explore the financing navigator, find financing that fits your city’s needs, and connect with partners here.

LoanSTAR Revolving Loan Program

In Texas, the LoanSTAR Revolving Loan Program offers cities and other public sector entities low-interest financing for energy and water efficiency upgrades and performance contracting in their facilities.

The LoanSTAR program is administered by the State Energy Conservation Office (SECO). Since its inception, the program has funded over 290 loans and achieved cumulative energy cost savings of $571 million for participating facilities. The measures installed through LoanSTAR funding have prevented the release of over 15,801 tons of nitrogen oxide, 5.5 million tons of carbon dioxide, and 11,795 tons of sulfur dioxide into the atmosphere.

Resources

Energy Service Performance Contracting (ESPC)

Energy Service Performance Contracting (ESPC) is a financing option that enables local governments to finance energy and water efficiency with zero upfront capital and repay the loan through utility cost savings.

Under the ESPC model, cities partner with an energy services company (ESCO). The ESCO performs an investment-grade energy audit of city facilities, identifies energy and water saving measures, and creates a proposal from those audit findings. If the project moves forward to the implementation stage, the ESCO guarantees the performance savings from installed measures. Measurement and verification of the measures is performed on an ongoing basis to ensure the savings are being met.

Source: US Department of Energy – Office of Energy Efficiency and Renewable Energy.

Energy Savings Performance Contracting Toolkit

The U.S. Department of Energy developed the Energy Savings Performance Contracting Toolkit as a comprehensive resource for establishment, implementation, and evaluation of ESPC projects.

Highlights of the Better Buildings ESPC Toolkit include:

Explore the entire Better Buildings ESPC Toolkit here to learn more

Other ESPC Resources

Case Study: Energy Service Performance Contracting in Fort Worth

The City of Fort Worth has successfully used energy service performance contracting to reduce energy consumption in more than 200 city-owned buildings, saving an estimated $5.9 million in energy costs first year with an estimated 11 year payback. The State Energy Conservation Office (SECO), HARC, and SPEER developed a case study of Ft. Worth’s experience detailing anticipated construction costs and energy savings, payback period estimates, and actual energy and cost savings over a ten year period.

Read the City of Fort Worth’s ESPC case study here.

Internal Funding and Revolving Funds

Funding efficiency projects through existing budget or capital improvement funds enables cities to manage more aspects of the financing without relying on external partners. However, internal financing requires a high level of communication among various city departments to ensure all parties understand the project details, the agreed-upon process, and the saving goals.

The Better Buildings Financing Navigator provides guidance on internal funding to assist local governments who are considering this option. The Navigator outlines advantages and drawbacks of several internal methods that cities can use finance energy conservation projects including:

  • Operating or Capital Budget Expenditure
  • Self-Funded Energy Service Performance Contract
  • Capital Investment Fund
  • Revolving Loan Fund
  • Internal Carbon Pricing

Learn more about each internal funding option at the navigator here.

Case Study: City of San Antonio's Revolving Loan

The City of San Antonio finances energy conservation projects through its own internal revolving loan fund. The fund was established in 2011 with seed funding from the American Reinvestment and Recovery Act (ARRA).

The city uses this fund to manage energy efficiency building measures as well as efficiency improvements in larger capital projects. As the efficiency projects realize savings, the city returns a portion of the savings to the fund to be used in future projects.

Benefits of the city’s revolving fund include a reduced debt burden for energy efficiency projects, positive cash flow, the flexibility to implement projects quickly, internal management of projects, and significant energy reductions.

Read the full San Antonio “Revolving Loans for City Efficiency Projects” case study.

Report: Current Practices in Efficiency Financing

Lawrence Berkeley National Lab (LBNL) created a detailed report entitled Current Practices in Efficiency Financing: An Overview for State and Local Governments.” This guide covers all customer-facing financial products that state and local governments use to finance energy efficiency.

The report contains information on traditional financing products (unsecured loans, secured loans, and leases) and specialized financing products (on-bill financing, PACE, ESPC, and more) along with information on the advantages, disadvantages, and tradeoffs of each approach.

PACE Financing

For information on PACE Financing, including how local governments can create PACE Districts, please see our PACE Financing module.