Gita Subramony, ERS, for Zondits. March 16, 2016. Image credit: hello_rayman
Zondits spoke with the New York City Energy Efficiency Corporation (NYCEEC) on how their financing solutions move clean energy projects forward.
What is NYCEEC?
We’re a non-profit finance company that provides innovative financing solutions and technical expertise for projects that reduce greenhouse gases. Our loans enable projects that result in substantial savings on energy and water bills for owners and tenants.
How many projects have you financed to date?
Since our launch in 2011, NYCEEC has provided financing for over $75 million of clean energy projects across all neighborhoods and building types, covering more than 5.3 million square feet, 60 buildings, and 3,561 affordable housing units in New York City. These projects will reduce greenhouse gas pollution by over 580,000 metric tons—the equivalent of removing 122,000 cars from the road!
What kind of financing do you offer?
We mainly offer direct loans to building owners for both construction and permanent financing of clean energy projects. Our loans are generally from 3 years up to 10 years, and can range from as small as $50,000 to $10 million. We also provide green mortgages, energy services agreements, and power purchase agreements, depending on borrowers’ needs.
Financing programs for energy efficiency have been tried off and on for decades with limited success. What makes NYCEEC different?
We’ve put together a team of credit specialists, business development and legal professionals, and engineers, who care passionately about our mission to innovate and deliver clean energy financing solutions. This means working closely with our borrowers (building owners, co-op/condo boards, project developers) to meet their needs, while providing a streamlined, simple financing process.
We offer market-responsive, customizing solutions that work for a variety of borrowers. This is different from financing programs in the past that put out a product and expected the market to come to them.
We structure loans that incorporate energy savings—in most cases, making utility cost savings greater than loan payments. This has been a very attractive benefit because it enables buildings to be cash-flow positive from day one. We provide construction financing with multiple draws to match construction milestones. We help borrowers leverage all available incentives.
Our engineering team also provides technical guidance and quality assurance to help building owners maximize cost and energy savings.
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How has NYCEEC addressed some common energy efficiency financing barriers?
A few of the most common real-world financing barriers we’ve seen include mortgage consent, pre-development costs, and mismatch between incentives and construction milestones. What do we do then?
We’ve negotiated with the mortgagee on behalf of the building owner to get consent. We most recently did this with a large, national bank for a cogeneration (combined heat and power or cogen) project in Kips Bay on East 24th Street. Going forward, we have helped this lender implement streamlined approval process and standardized documents, so we won’t hit this roadblock again with them.
Pre-development costs are the upfront costs to doing a clean energy project, such as energy audits, environmental assessments, and property appraisals. These can be significant out-of-pocket expenses for building owners. NYCEEC has created a pre-development loan fund to finance these costs, which are then rolled into the permanent loan.
NYCEEC provides bridge financing to building owners until the receipt of incentives. This allows projects—particularly cogen projects—to keep their momentum and meet their construction milestones.
What types of clean energy projects does NYCEEC finance? Are there any specific technologies or systems that you prioritize?
We finance energy efficiency, cogeneration, renewables, fuel conversions, and demand response technologies. We don’t prioritize any specific technologies or systems.
What types of buildings are best suited to financing through NYCEEC?
We finance projects across all building types and neighborhoods.
Of the buildings in NYCEEC’s current portfolio, 40% are commercial and industrial buildings, 34% are market-rate multifamily properties and 26% are affordable multifamily properties. Sixty-eight percent of
these projects finance energy efficiency measures including high performance buildings such as Passive House, and 30% finance cogeneration systems.
How does NYCEEC address estimated savings calculations for particular projects?
Our engineering team reviews the projected savings calculations from prospective borrowers’ energy surveys or audits. The review vets the technical and operational assumptions and verifies that they make sense in the context of each building’s usage and historic energy consumption. We don’t make our customers redo energy audits.
Through our review process, we help borrowers prioritize improvements and have on occasion found opportunities or mistakes, like the time we reviewed an energy audit that recommended installing a new boiler that burned #6 oil – which is now banned under the local clean heat law.
What are some examples of projects that NYCEEC has worked on?
We’ve financed a wide range of projects, as small as $57,000 to as large as $22 million in total costs, from a simple energy efficiency project in a 5-unit brownstone in Brooklyn to a large cogen system in the Millenium Hilton in Lower Manhattan.
Roosevelt Landings is a nine-building, 1,003-unit multifamily rental complex. The building complex wanted to upgrade outdated systems and improve its resiliency, but the project’s complexity and long payback meant that traditional loans weren’t available. Plus, Roosevelt Landings’ primary lender had the right to approve additional secure lending arrangements.
We helped Roosevelt Landings structure a financing strategy that made sense. We provided a $4.5 million loan to fund a combined energy services agreement for the efficiency measures and power purchase agreement for the cogen system. We’re very proud of this project. Our loan enabled Roosevelt Landings to achieve significant cost savings at no initial cost.
Another example is a 54-unit co-op on West 90th. We provided an unsecured $400,000 loan to fund a #6 oil-to-natural gas conversion and related efficiency measures. We worked closely with the Board to ensure that the loan worked within the co-op’s mortgage covenants.
Our website has more examples of deals we’ve financed.
What is the NYCEEC efficienSEE™ calculator?
efficienSEE is a free, online calculator that provides buildings with a high quality, rapid estimate of energy savings associated with cost-effective energy efficiency measures. Each savings estimate is customized for a specific building based on key building attributes and owner-submitted data under the local benchmarking regulation.
Think of efficienSEE as a quick peek into your potential cost savings—it can’t tell you how to save the energy, though. While efficienSEE does not replace an energy audit, it can be used as an approximate proxy and substantiation of your energy audit results.
efficienSEE is now available for large (≥50,000 square feet) multifamily buildings in NYC.
What’s the future of NYCEEC in the era of REV and the launch of the Clean Energy Fund?
We’re excited. We’ve been very fortunate to work in an environment with policies that align with our mission; this has created many business opportunities. We only see positives in this new era as we continue working together with New York State, NYSERDA, and the City to advance clean energy financing. As the Clean Energy Fund launches, we’re excited to share our lessons learned from our past 5 years of transactional experience.
NYCEEC is a non-profit specialty finance company that develops financing solutions to enable projects that save energy or reduce greenhouse gases. NYCEEC’s custom-tailored solutions close financing gaps for buildings and clean energy project developers.
NYCEEC is not an agency or unit of the City of New York, New York State, or any governmental body.
For more information, visit www.nyceec.com.