I have been spending some time, ok a lot of time, looking at why companies are not taking advantage of the various rebates and incentives for making data centers more energy efficient. There are so many programs offered by utilities, state and local Governments, and the green energy marketplace I wanted to figure out why more projects weren't getting off the ground. What I found can be summed up in a word - money.
Without exception, access to financing was the number one reason projects never got started. Companies would engage utilities, energy audit firms, constuction firms and other professionals to examine their current energy usage so that they can establish a baseline of what their energy usage profile is today. Many of these services are provided free of charge, and some firms charge for their services.
Once the basline was established through a thorough energy audit, a project plan was drafted detailing the equipment that could be installed to harvest energy savings. In most cases I found that the savings were substatial - 30-50% on average. In real numbers, if a data center operator spends $200,000 per month on their electricity, they would pay $100,000-140,000 per month with the new equipment, saving upwards of $1M per year. This is a no brainer, right?
Unfortunately it is not a no brainer and here is why: The new equipment to harvest the savings is expensive and goes on balance sheet. so if a company has an extra million dollars or two to spend, will it be spent on a data center upgrade or retrofit or on expanding the business? Most companies opt for not spending the capex to harvest the savings or only spend money on very short term ROI projects and only take a fraction of the savings back.
So once I figured out that the issue wasn't a desire to do these things (who wants to be known as the company that doesn't support green initiatives), or that they didn't know where to start or what to do - after all they had the audit and project plan in their hands - I focused my attention on solving the problem - where can I find or put together a financing solution that solves the problems?
I would love to tell you that I was smart enough to know exactly who to call to solve the problem - but as many of you know me, know that I am not that smart, but I am lucky in the sense that I am not afraid to pick up the phone and ask a lot of questions and learn what I don't know. So I learned a lot and then got lucky when a colleague in the financial industry called me and said 'I think I have something'.
We have put together a financing program for companies who want to go green, harvest energy savings, and eliminate the capex up to 100% for the equipment., installation, and maintenance services. The beauty of the program is that the savings are dovetailed into the financing so the owner/operator is never out of pocket for the savings because if the savings are 30% per year and the cost of financing amounts to 15% per year, not only does the company get the benefit of the cost savings, they can structure it so that they add cushion to their monthly opex.
Of course if a company has money in their budget for capex purchases they can spend that allocation and finance the rest and do even better. So what's the catch?
At a high level here are the conditions that must be met:
1. Project sizes need to be in the $5M-100M range, based on an energy audit that has been done (or will be done)
2. The Owner operator must have investment grade credit (BBB or better)
3. The owner operator must be willing to sign a new maintenance agreeement on the equipment so the lender knows the new equipment will be taken care of
The whole process - from the energy audit to project start is about six weeks - or less.
The program right now is geared towards the large data center users for obvious reasons - they use a lot of electricity, a lot of it inefficiently, and the greatest improvement can be made with these users. Rest assured that I am working on options for smaller companies with smaller footprints so stay tuned. The other benefit to this program is it is specific to the savings - any tax breaks or additional rebates are kept by the owner operator and not factored into the program.
If you want more information on this program please email Pelagic Advisors and they will reach out.