Possible and Profitable: Energy Efficiency Investments in the
Building Sector
From www.GreenBuildings.com
The Goal: 100 Percent Private Energy Efficiency Financing
As the above examples demonstrate, most of the activity in the realm of energy efficiency finance for buildings has involved a partnership between the public and private sectors. To truly exploit the opportunities available, however, the private sector will have to take the lead. The capital markets will always be able to finance investments more efficiently and on a larger scale than government or not-for-profit spending. The key is to establish a self-sustaining model that puts energy efficiency investments on an equal playing field with investments that yield similar risk and return ratios.
Perhaps the company that has come the closest to making this model a reality is Transcend Equity based in Dallas, Texas. Transcend takes on the utility payments of a building for 10 years. In exchange, the building pays Transcend a payment based on its historic utility costs and energy prices. Transcend then make improvements on the building and pockets any energy savings.
Unlike other systems, Transcend's business model is based on equity, not debt. They take all the risk and reap all the rewards. By providing their services as truly cost-neutral for customers, the traditional market barriers are removed.
Transcend's largest public client is Corporate Office Properties Trust (COPT), a large mid-Atlantic REIT. Capitalizing on the success of their relationship with COPT, Transcend has recently begun raising money from hedge funds to expand their business model. If their success continues, don't be surprised if many of the large ESCOs and banks start getting into the act.
