Financing energy efficiency initiatives: there are a number of widely available federal and state incentive programs--including tax incentives--to ease the burden of companies interested in financing their energy efficiency and green energy initiatives.

AuthorCook, David R., Jr.
PositionFINANCING

Historically, companies have adopted energy efficiency and green energy initiatives primarily for their intangible benefits. These are attractive to existing and potential customers and investors and can garner favorable media coverage. The recent economic downturn, however, has caused companies to carefully evaluate the costs and the tangible benefits of such initiatives before moving forward with them.

While many projects can reduce costs over the long term, companies currently recovering from the downturn are focused on short-term upfront expenses and project costs. As such, it is more important than ever for them to explore various grants, low-cost loans and tax credits that can make such initiatives economically viable.

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A company's approach to green energy might consist of efficiency measures, green energy power projects or a combination of both. The size of such programs can vary greatly. For example, introducing energy efficiency measures in an office building will involve different levels of cost and complexity than adopting initiatives for a distribution center or factory, and the incentives available depend on the type and size of the project.

For commercial and industrial energy efficiency projects, little federal funding is available except in the form of tax credits, while grants, loans and incentives are available through the private sector, state and local programs and local electric and gas utilities. For green energy power projects, federal grants and loan guarantees are available, especially for larger projects, as are federal tax incentives. Smaller power projects might also benefit from state and local programs.

Grants, Loans and Loan Guarantees

Federal and state grants and loan guarantees are available for certain green energy projects, including solar, biomass, wind and combined heat and power projects.

Many of the federal programs were launched by or received initial funding through the American Recovery and Reinvestment Act of 2009 (ARRA), which was enacted by Congress in part to stimulate renewable energy investments. ARRA included more than $42 billion in energy-related funding to be distributed through several governmental agencies.

The primary programs of interest to companies are administered by the U.S. Department of Energy (DOE). DOE offers grants, loans and loan guarantees to private companies for a wide variety of projects.

The small business division of DOE offers grants for various energy efficiency measures for industrial applications and commodity manufacturing and the development of various clean energy technologies, such as cooling and waste heat recovery, bioenergy...

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