Surviving a Down Economy Using ENERGY STAR® Tools and Resources

Panel: Panel 5. Energy Efficiency: Investing in Time of Uncertainty

Author:
Neil Zobler, Catalyst Financial Group

Abstract

Many businesses and large national lenders are conserving capital due to market uncertainties. While organizations cannot control the economy, they can control their energy expenditures, which is a good defensive position in a recessionary environment. Most efficiency projects require capital; unfortunately many capital budgets are frozen. Financing these projects using third parties may present viable alternatives. In spite of tightening commercial underwriting criteria and borrowing rates to customers not reflecting the low cost of borrowing made available by ARRA funding, installing energy efficiency projects is a good business decision. Part of the improved cash flow can pay for financing the project, while creating jobs and reducing greenhouse gases.

Traditional financial metrics like Return on Investment and Internal Rate of Return undervalue one of the biggest advantages of efficiency projects improved cash flow. The U.S. Environmental Protection Agency’s (EPA) ENERGY STAR program has developed numerous public domain tools that promote energy efficiency. ENERGY STAR’s Cash Flow Opportunity Calculator monetizes the cost of delaying installations; calculates the amount of new equipment and services that can be paid for with operating budget savings; and compares different interest rate options. It helps non-financial managers make informed decisions, yet is sophisticated
enough to satisfy financial decision makers. Some organizations find that equating the bottom line benefits of energy efficiency projects to equivalent sales helps obtain management approval. The value of energy efficiency improvements increases in line with energy cost increases, making them good short, medium and long term strategies.