Building Energy Projects

The buildings that provide our homes, offices, schools, restaurants, and other services use a lot of energy. In fact, homes and commercial buildings consume 75% of all electricity in the United States and 40% of our total energy.

The Loan Programs Office (LPO) can be a financing resource for projects that will make a significant impact on building energy consumption—particularly where projects are seeking to achieve important policy frameworks, such as compliance with state or local Building Performance Standards (BPS) laws.

LPO also has important limitations and requirements that governmental partners and project companies should consider carefully. 

How LPO Can Help

LPO can finance projects that utilize an eligible technology as set forth in Section 1703(b) of the Title 17 Clean Energy Financing Program. Relevant technologies might include renewable energy systems, efficient end-use energy technologies, and energy storage technologies.

For these projects, LPO will most likely be used to support energy work on a large portfolio of buildings, rather than a single building or several buildings. That is due to a variety of factors, including:

• The more limited scope of eligible costs that LPO can finance relative to the scope of some building projects.
• The requirement that LPO debt must be senior and cannot be subordinated to any other debt on a project, despite having a more limited scope.
• Costs of due diligence during the LPO application process, which typically run to several million dollars, as well as pricing. 
• To expand on the question of scope, LPO might finance the installation of efficient appliances, solar, storage, and charging infrastructure on a portfolio of buildings. Each of those elements will have construction costs, for example, some of which may be eligible to be included in the costs that LPO would finance. 

Nevertheless, LPO has limitations on what can be considered an eligible cost. On a project that seeks to install solar and storage, for example, it is likely that LPO could not finance roof repair or replacement.

In these applications, LPO will consider the applicant’s Independent Engineering report for evidence of how various costs are necessary to meet the policy and regulatory framework as well as to support the functioning of the technology—costs that are "necessary, reasonable, customary and directly related" (10 CFR 609.10(a)) to an eligible project.

Some projects include costs that are eligible for LPO support and other costs that are not. LPO can potentially offer a partial guarantee of a commercial loan that covers both categories of costs, provided that the guarantee is limited to the amount of costs that are eligible for LPO support.

It is also worth noting that LPO loan guarantees can potentially be collateralized by income from service contracts rather than hard assets. 

Federal Requirements

There are a variety of federal requirements that attach to all projects financed by LPO. Examples include the Davis-Bacon Act, National Environmental Policy Act (NEPA), and Cargo Preference Act; for nonprofit and government borrowers, the Build America, Buy America Act applies.

The environmental impact of all projects will be reviewed for NEPA compliance. Projects that involve minor modifications on existing buildings, however, may qualify for a categorical exclusion. Building additions and new construction typically require at least an environmental assessment. LPO will review Part II applications submissions and work with the applicant to determine the level of NEPA review for each project before entering due diligence.

Another important point to consider is that projects cannot benefit directly or indirectly from other federally appropriated funds. A grant from DOE or another federal agency, for example, cannot be part of the project finances. Tax credits that the project is otherwise eligible for, however, are allowable.

Additional Resources on this Topic

Building Performance Standards Webinar (slide deck)

Cargo Preference Act: What You Should Know (slide deck)

LPO and the National Environmental Policy Act (NEPA), Ensuring Informed Environmental Decisions for Communities (blog)

Engaging With LPO Early on NEPA Requirements for Applicants (blog)

Pricing for LPO Financing by Program (blog)