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7 Key Selling Points for Energy Projects

February 21, 2013 By Eric A. Woodroof, Ph.D.

Eric A. Woodroof, Ph.D.
When I began working in the energy management/financing industry, “lack of capital” was the prevailing excuse why a good project (less than a 3 year payback) was not being approved/implemented. When I did my Ph.D. research on this topic, about 35% of projects were postponed/canceled due to “lack of upfront capital”. Today the postponed percentage is closer to 50%! Although the global economy does have an influence on the percent of projects that are being initiated/financed, I still believe strongly that we can do MUCH more in this area to get more projects implemented that save energy, improve economic competitiveness and enable environmental prosperity.I want to mention a few key concepts that you may be able to use today. These are “quick thoughts” that I think you should keep in mind on all projects. The section below is a modified excerpt from chapter 1 of my latest book: “How to Finance Energy Management Projects”.

Key Concepts for Successful Presentation of Energy Projects:

  1. Presentation Point: If your energy project has an Internal Rate of Return that is greater than your company’s profit margin, then the energy project is the best place to invest shareholder’s dollars. This is often the case as many energy projects have IRRs > 25%.
  2. Presentation Point: If your energy project has a Return that is greater than the finance rate (borrowing rate), then you can finance the project (zero upfront cost) and you will improve cash flow to your organization, with relatively little risk. A good phrase to use is: “The cost of delay is greater than the cost of financing”.
  3. Presentation Point: “Savings = Waste”… Any energy savings that you could be getting via a potential project is also an existing waste stream that (by doing nothing) continues to drain your operating cash and is essentially a penalty you pay every month. Most people will take quicker action to avoid a penalty than to receive an equivalently valued reward.
  1. FYI: Saving energy has a far greater impact than just reducing the utility bill. Recent research has shown that maintenance material and labor are almost always directly impacted and are reduced as well. Externalities also include reduced risk to price spikes, reduced pollution and health care costs. Energy security (independence) can also be affected, as well as your company’s “green image”, employee morale and even human relations/recruitment. Many young people want to work for companies that are “energy efficient”, “green” or at least are executing some type of sustainability strategy.
  2. FYI: Know the Codes, Standards and Laws that are driving activity in your building sector/geographic region. Whether it’s the Federal Government or a local energy efficiency requirement, these “rules” can keep your project moving forward, as well as motivate projects that you never imagined.
  3. FYI: Know where you can get free money for your projects. This can be Tax Credits/Deductions, Utility Rebates, Special Energy Financing Rates, Utility Energy Service Contracts, etc.. See www.DSIREusa.org for a list by state. Also see EERE and FEMP websites (just Google those acronyms)… very useful info.

7. Presentation Point: Your audience only has the attention span to solve one problem at a time… Make Your Presentation the Most Exciting Solution Possible… so they can’t resist approving it.

I can’t stress how important your work is… and how much I value your efforts to implement energy efficiency projects. In my opinion, there are very few endeavors in today’s capitalistic world, where “The More you do, the Better”… your progress in energy efficiency does all of the following:

–reduces your organization’s expenses (and improves cash flow);

–reduces your country’s dependence on energy sources;

–reduces your country’s dependence on raw materials;

–reduces your environmental impact (less pollution);

–improves your organization’s “green image”;

–likely improves your building’s value (if leasing or selling);

–likely improves your organization’s morale and productivity.

When you are presenting your project, remember the above…because your project is not just an energy project… it may positively impact the Marketing, Administrative, Finance, Legal, Human Resources, Security and Productivity Departments too. If I have learned anything from the hundreds of organizations I have analyzed, or the thousands of students I have taught- one common denominator of behavior is evident: “Necessity is the Mother of Invention”. Basically, if your project is “needed” by more of those departments, more people will be in the mood to approve your ideas.

Eric A. Woodroof, Ph.D., is the founder of Profitable Green Solutions, and is completely committed to helping businesses and organizations “go green,” while improving profits. His clients include government agencies, airports, utilities, cities, universities and foreign governments. Private clients include IBM, Pepsi, GM, Verizon, Hertz, Visteon, JP Morgan-Chase, and Lockheed Martin. This article was originally published in Buildings Magazine, and reprinted with permission from Eric A. Woodroof.


5 comments on “7 Key Selling Points for Energy Projects

  1. Hi Eric,

    I like your article 7 Key Selling Points for Energy Projects. If possible will you please send me a copy of your book How to Finance Energy Management Projects in PDF format, I would like to learn many terms associated with EE projects such as ROI, SPB etc. Being an engineer sometime I face difficulty to convey it to my customers.

    Thanks
    Dipak Parikh

  2. Great article, Eric, that highlights how big the opportunity cost of NOT investing in efficiency really is.
    This is something we see all the time in EDF Climate Corps, where our fellows have found an average of $1m in savings for each participating organization. With their specialized training and laser focus on efficiency, they’re able to build a business case for efficiency projects that the CFO can say yes to.

  3. Yes, it would be great if you could send a copy of your book via pdf and let me know if there is a charge. I am in the financing industry and would love to focus on this industry. It has all the key aspects of an exciting, vibrant and profitable market for the next decade. Go Green, Go Eric.

  4. Eric, I have one question and one (constructive) criticism. One of the other main obstacles to funding energy projects is economic uncertainty. Many of the businesses I deal with are hesitant to commit large sums in such turbulent times. For every study that projects oil at 120-150/bbl, there is another that predicts the collapse of the Euro, dollar or similar event to bring about deflation and/or crashing energy prices. Any thoughts on dealing with this situation?

    My criticism is the use of the term “free money” to describe various incentives. This money is not free. Someone else is paying a tax, the deficit is widening, or the currency is being devalued, but someone is paying for it. It gives those opposed to free enterprise an opportunity to shout corporate welfare, or tax loopholes for the rich, or whatever the whine of the day.

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