Finance for lighting
25th November 2017
Installing energy efficient lighting can be an easy decision to make especially if you need no upfront finance. But trust is an issue. Tim McManan-Smith spoke to Energy Works’ founder Harvey Sinclair about how its energy services agreement can invigorate the adoption of LEDs.
In many areas outside of energy saving in business such as vehicles, IT and even process equipment, it is normal to use financed solutions. But until recently that option was not readily available for energy saving equipment, except in the case of very large projects.
Getting finance for energy projects has been a perennial problem for many energy professionals. Internally there are often company objectives that take priority and are core to the business’ operation. External finance has been seen as an expensive, complex or that there must be catch. Energy Works aims to aid the implementation of LED lighting technology by paying for the equipment and installation and funding this through shared savings.
Having an energy services agreement such as this produces positive cash fl ow from the start.
Finance LED solution
Energy Works’ solution operates on a seven year contract with 25% of the savings going to Energy Works and 75% remaining with the customer. While many LED projects will deliver payback in under two years – even a year if tied to maintenance – Energy Works’ boss Harvey Sinclair claims that the net present value (NPV) of the cash that client’s save with immediate effect (the 75%) is better than the 25% paid to Energy Works.
Prospects don’t always believe the numbers.
“Trust is an issue,” says Sinclair. “Many potential customers think, what’s the catch? Also it is a seven year commitment, they ask do I trust the numbers, are they real? Am I going to lose my job and be the fi rst one to look a plonker for doing this?”
Related to trust is confidence in data.
“A customer needs to know what their lighting costs. Currently, many don’t know. So they have to be comfortable with the costs we show from sub-metering and believe that the savings are possible,” says Sinclair.
Energy Works will soon bundle in other technologies. The company started its business with LED implementations “because it is a straightforward process to commoditise”, according to Sinclair.
Energy Works uses third party finance houses to fund the projects – and financiers think the sector is lagging in uptake. One major bank interviewed for the Financing Energy Efficiency report (available as a free download at theenergyst.com) expressed surprise that even the biggest lighting suppliers had not yet got to grips with finance as a core proposition.
Sinclair though believes it is a tool that can help ensure clients get the best return from the best equipment. Self-funding is fine, he says, but cutting corners on price for lack of funds will only lead to higher lifetime costs.