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There are a wide range of financing options for distributed energy systems. Distributed energy requires an upfront cost that is recovered through revenues or savings over time.
Some of the financing mechanisms include: appropriations, debt (commercial bank loan), mortgage, home equity loan, limited partnership, vendor financing, general obligation bond, revenue bond, lease, energy savings performance contract, utility programs, chauffage (end-use purchase), and grants. Several financial strategies for businesses are also discussed including: venture capital, informal investors, bank and debt financing, and the stock market.
One example of financing, the home mortgage or home equity loan option, has several advantages to making the economics of small-scale DG work. Interest rates on home mortgages are tax deductible, resulting in a lower effective project cost. There are also residential energy efficiency improvement loans of up to $15,000, which are below market interest rates.
Another example is vendor financing, which is common among energy technologies. Vendor financing, where a third party such as a bank is often the actual source of financing, offers an easy, low cost solution and is an effective way for the supplier to stimulate markets. Large companies may use this type of financing, but is most suitable for small projects in the $25,000 to $400,000 range.
Chauffage is an agreement where the customer purchases the electricity, heating, or cooling of the DG project instead of the actual prime mover itself. This allows the customer not to be burdened with development and ongoing operation of the DG project and the risk of non-performance falls totally on the owner/operator of the equipment.
See the following for more information:
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