The November 2024 issue of the Blueprint establishes five strategies to decarbonize U.S. industry:

1. Accelerate deployment of commercially available lower-carbon solutions
2. Demonstrate emerging technologies at commercial scale
3. Increase data use to drive efficiency gains that can significantly improve performance
4. Innovate and advance research to develop transformative processes and products for deep GHG emissions reductions
5. Integrate sustainability across the product life cycle to reduce embodied GHG emissions in industrial products and minimize waste

The Blueprint emphasizes the deployment of capital, both public and private, to accelerate energy efficiency and industrial decarbonization projects. There is ample funding available for industrial energy efficiency and decarbonization including:

1. Department of Energy’s ITAC Implementation Grant
2. USDA’s REAP Grant
3. Utility incentives
4. Tax credits
5. Long term green financing

However, having funding without technical guidance is like having a crate of car parts without the tools or design to assemble it and drive away. Without the right guidance, the intended results are unlikely to be achieved. As the Blueprint states, “Coordinated technical assistance is critical for successful implementation, ensuring that manufacturers can effectively develop, execute, and monitor energy efficiency projects.”

The Blueprint highlights that combining funding with technical assistance effectively de-risks investments. Technical assistance ensures resources are used wisely and data drives investment choices. This approach builds confidence in energy efficiency projects, helping businesses reduce operational costs, lower emissions, and increase profitability, all while modernizing their processes and infrastructure.

Financing Energy Efficiency is Essential

The Inflation Reduction Act (IRA), Bipartisan Infrastructure Law (BIL), and utility-administered public ‘benefits charge’ programs have made substantial resources available for energy investments through grants and incentives. In the Northeast, these funding opportunities can be combined to cover 50-75% of the total energy efficiency investment. Although this is an incredible opportunity, these funds are often disbursed at the end of the project. As a result, businesses must front the capital for their investments and wait 6-12 months for reimbursement. This delay can create financial uncertainty, discouraging larger, impactful energy retrofits and favoring smaller, incremental upgrades like LEDs and Solar. This issue is reminiscent of the 2010s, when LED lighting was rapidly adopted and over-funded while more impactful energy investments were overlooked, due to slightly longer payback periods. Thankfully, commercially available financing, like C-PACE, provides a smart solution for industrial facilities.

Why C-PACE Stands Out for Energy Efficiency Projects

Financing solutions like C-PACE (Commercial Property Assessed Clean Energy) address funding challenges by allowing industrial facilities to spread the cost of upgrades over the effective life of the equipment, often up to 20 years. The long repayment period ensures projects meet the statutory requirement of a savings-to-investment ratio of 1.0. This means the project’s savings cover the financed costs over the life of the loan. Depending on the mix of energy measures, the loan can even be structured so that energy savings exceed loan payments. This model makes it feasible to bundle energy efficiency measures with infrastructure improvements, turning high upfront costs into manageable, cash-flow-positive investments. This model ultimately reduces annual payments and enables more comprehensive and thorough upgrades. With rigorous underwriting and third-party validation, C-PACE transforms high-cost investments into self-sustaining energy programs.

Financing Solutions for Non-building Owners

C-PACE loans are currently only available to building owners, limiting access for tenants and other stakeholders who could benefit from this form of energy efficiency financing. Luckily, other financing mechanisms are available, such as loans through the National Energy Improvement Fund. Although they often have shorter repayment terms than C-PACE loans, they still bridge the gap between project development and post-implementation incentives and grants.

On-bill financing, where available, is another particularly attractive financing tool because the loan is tied directly with the operational budget. This financing option has a shorter term (up to 60 months), but allows businesses to repay energy upgrade costs directly through utility bills. This off-balance sheet structure integrates repayment into operational budgets, ensuring flexibility without adding traditional debt to financial statements.

These financing models support industry growth by preserving capital for core business priorities while enabling high-impact energy improvements.

Addressable Barriers to Energy Efficiency

The Blueprint highlights the need to address key challenges that hinder manufacturers from adopting energy efficiency and decarbonization programs. These challenges commonly stem from financial, technical, and operational constraints. Therefore, they must be tackled through a combination of tailored technical guidance and financial support outside of the standard incentive and grant offerings. Here are some common challenges.

Lack of Technical Expertise
Many manufacturers lack the in-house expertise to identify opportunities, evaluate savings, and execute energy efficiency projects while also keeping the plant functioning. Offering comprehensive technical support through feasibility studies, energy audits, or better yet leveraging a holistic solution like OCOsink’s agile Energy Program Facilitation services, can provide the guidance manufacturers need to successfully invest in comprehensive energy programs.

Delayed Incentives and Grants
Many incentive programs disburse funds only after project completion, tying up capital that manufacturers could otherwise invest in growth. Innovative approaches, such as those discussed in the financing section, are needed to bridge this gap, allowing businesses to pursue energy efficiency projects AND keep cash on hand for growth opportunities.

Competing Priorities
Manufacturers often prioritize investments in production capacity or process improvements over energy efficiency projects. Energy efficiency and resiliency can directly reduce operational costs and improve EBITDA, making it a hidden growth-oriented investment. Establishing energy performance indicators can help track project effectiveness and performance related to the manufacturer’s output.

Perceived Risk
The energy efficiency industry is not without risk. It is not uncommon for projects to underperform in terms of savings or operational outcomes. However, having a dedicated, customer-focused technical resource can mitigate this uncertainty. By performing proper measurement and verification (M&V) along with an unbiased savings estimate, a technical expert can ensure realistic expectations and greater confidence in project performance.

By addressing these barriers, the Blueprint provides a pathway for manufacturers to adopt meaningful energy efficiency measures. With the right technical support, financial tools, and policy alignment, the industrial sector can achieve its dual goals of economic growth and decarbonization, driving progress for both businesses and the environment.

The Blueprint concisely identifies a core challenge that we have been working to address:
“The initial capital investment for advanced technologies and infrastructure modifications can be daunting, particularly for companies operating on thin margins. Many companies face high internal investment hurdles because they must navigate complex approval processes and justifications for diverting funds from conventional projects to innovative emission reduction initiatives.”

The cost of borrowing for energy efficiency with a traditional loan in states without revolving funds to subsidize interest rates is often set at treasury yield plus 3%. As of November 2024, this totals to about 7.4%, which makes investing in energy efficiency difficult for most borrowers.

As outlined in the Blueprint, several supply-side investment strategies need to be adopted to make financing more affordable to support larger investments.

These strategies include:

1. Grants to de-risk emerging technology and accelerate commercial adoption.
2. Low-interest loans for existing technologies to make them more cost effective.
3. Clean manufacturing production tax credits to incentivize energy efficiency and production with lower carbon emissions.
4. Investment tax credits for deployment of proven technologies to incentivize the construction of new low-carbon manufacturing plants.
5. Revolving loan financing with below-market interest rates.
6. Public programs that provide financial support for expanding or retrofitting facilities with clean technologies or feedstocks. 

With C-PACE being an existing, and nationwide, funding program that naturally de-risks investments through a property tax assessment, it is logical to leverage this program further. C-PACE addresses investment strategies #2 and #5, above, as rates are below market and currently in the 5% range. Pairing this with technical support, like through OCOsink’s Energy Program Facilitation pathway, also ensures successful project development, oversight during implementation, commissioning, and post-project measurement and verification (M&V). While energy savings are typically not guaranteed in this scenario, independent and data driven savings projections offered through technical guidance minimizes risks. This structure has several benefits over traditional demand-side incentives and grants, including :

• Funds are deployed upfront, making energy efficiency upgrades immediately actionable.
• Technical oversight ensures project viability and accurate savings projections.
• Lower interest rates with flexible loan terms make C-PACE financing even more attractive, enabling manufacturers to commit to larger, transformative projects.

This approach provides expert guidance to ensure tailored and unbiased solutions and prioritizes project success, while upfront funding bridges traditional delays between the technical energy assessment and implementation.

In August 2024, OCOsink and the Connecticut Green Bank partnered to launch a pilot program offering an interest rate reduction for projects developed and managed by OCOsink and financed through the C-PACE program. This initiative leverages OCOsink’s Energy Program Facilitation (EPF) services and an interest rate reduction to make energy efficiency investments more accessible and financially viable for industrial and commercial businesses.

By lowering financing costs, the program reduces the financial barriers to implementing large-scale energy and decarbonization upgrades. It also ensures that projects are strategically planned and executed under expert, customer-focused oversight. This pilot program was created to accelerate decarbonization efforts and foster a more resilient and competitive manufacturing industry here in Connecticut. It aligns perfectly with the guidance from the Blueprint.

Consider the impact if interest rates for energy efficiency projects were incentivized to reach near 0%. This would shift traditional incentives to the start of a project rather than disbursing them upon completion. This approach would provide manufacturers with upfront financing, reducing financial burdens and accelerating the adoption of transformative energy solutions. The impact of near-zero interest rates could drive significant progress toward efficiency and emission goals. Here’s a short list of potential benefits:

• Unprecedented accessibility for businesses of all sizes to pursue energy upgrades.
• Immediate and widespread adoption of comprehensive retrofits.
• Self-funding projects, where operational savings exceed loan repayments.
• Built-in technical and administrative oversight to ensure accountability and performance.
• Enhanced industry competitiveness through reduced operating costs.
• Adoption of advanced technologies like electrification of industrial heat processes or alternative “green” fuels like hydrogen.
• Job creation, especially in the trades, to support the rapid investment in energy efficiency.
• Alignment with national and state climate goals, accelerating progress toward decarbonization.

What pathways can Connecticut pursue to further reduce interest rates, building on its pioneering approach to clean energy finance? Connecticut’s Green Bank model has shown the power of leveraging public and private capital for clean energy investments. Now it’s time to build on that success. We urge policymakers and funding bodies to direct additional federal and state resources into enhanced interest rate buydown strategies through the CT Green Bank. By strengthening these existing, proven tools, Connecticut can accelerate the adoption of energy efficiency projects. This will solidify our state’s position as a national leader in sustainable finance.

Why Interest Rate Buy-Downs Are Transformative

Imagine this scenario: An industrial company invests in a $1,000,000 energy project financed at near 0% interest over 10 years. The project also qualifies for a 30% utility incentive and a $300,000 ITAC Implementation Grant from the Department of Energy’s Office of Manufacturing and Energy Supply Chains (MESC). The project is fully funded without using the company’s own capital, structured to immediately reduce operational costs.

In this scenario, the completed energy program has many benefits. It supports local trades, the supply chain related to installed equipment, and reduces local carbon emissions. Let’s not forget that the manufacturer will eventually receive the long-awaited grants and incentives, providing additional funds to reinvest in its core business.

We believe interest rate subsidies are a powerful catalyst for accelerating energy efficiency investments. By covering development and construction costs upfront, they eliminate the funding gap caused by delayed grants and incentives. This enables manufacturers to adopt modern energy solutions while reserving their capital for investments in core business growth. This allows manufacturers to implement modern energy solutions without diverting capital from core business priorities.

Please take time to share your thoughts. We want to hear from you!

How viable are interest rate buy-downs and could they play a role in accelerating energy efficiency investments and industrial growth? We want to hear from you! Like, comment, and repost to help shape the future of a Clean & Competitive Industrial Sector. Together, we can take this Blueprint and build an immediately actionable pathway.

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Transitioning to Industrial Heat Pumps (IHPs) from gas-fired applications represents a step towards decarbonizing industrial heating solutions. Unlike gas furnaces, which emit carbon dioxide and other greenhouse gases during operation, IHPs powered by electricity, particularly from renewable sources, contribute to lower greenhouse gas emissions. This transition not only aligns with global sustainability goals but also potentially positions industries to benefit from incentives aimed at promoting cleaner energy solutions.

The operational cost reductions, coupled with the environmental benefits, make IHPs a compelling choice for industries looking to modernize their heating solutions while aligning with sustainability goals. Although the COP of IHPs decreases with higher operating temperatures, their overall operational cost and environmental footprint remain competitive, showcasing their potential as a viable heating solution in various industrial applications.

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Discover the benefits of enhancing indoor air quality for manufacturers. Improved IAQ boosts employee health, productivity, and product quality, while reducing operational costs.

Indoor Air Quality (IAQ) is an often-overlooked Key Performance Indicator for manufacturers, however IAQ influences the health and well-being of the workforce and operational productivity, efficiency, and the quality of the end products. Our guidance pulls from recommendations from ASHRAE and the U.S. Environmental Protection Agency (EPA) and aims to create an action plan to improve IAQ. Your action plan should aim to address humidity and temperature management and removal of airborne contaminants like oil, moisture, and particulates specific to many manufacturers.

ASHRAE standard 62.1 provides code and best practices for managing ventilation and indoor air quality for nonresidential buildings. According to ASHRAE, the primary contributors to poor Indoor Air Quality (IAQ) are:

• Moisture and Dirt in Ventilation Systems: Accumulation of particulates and poor management of moisture in ventilation systems can result in biological growth, leading to IAQ problems.
• Indoor Contaminant Sources: Many IAQ issues arise from indoor contaminant sources that cannot be managed by typical or code-compliant levels of outdoor air ventilation. These contaminants can be released by processes like griding, milling, coolant overspray, etc.
• Inadequate Ventilation Rates: Poorly ventilated buildings increase the likelihood of IAQ problems. Some manufacturing plants may not have cooling and rely on gas-fired makeup air units (MAUs) and exhaust fans (EFs) for maintaining indoor air quality and comfort. Control of the MAUs and EFs may be limited to a simple thermostat, which doesn’t enable consistent ventilation, especially in the summertime.
• Ineffective Filtration and Air Cleaning: Quarterly changes of air filters may be frequent enough for office buildings; however, the manufacturing environment may require monthly filter changes to maintain IAQ and fan efficiency. Saturated filters are not effective in removing airborne contaminants as air can flow around the filters or even have enough pressure to pull the filter through. Poor air filtration can redistribute many indoor air pollutants, affecting processes and health throughout the plant.
• Lack of Measurements and Controls: Improving IAQ requires calibrated monitoring equipment and integration with HVAC controls. You cannot address IAQ without measurements and establishing a baseline; OCOsink recommends monitoring CO2, particulates, and Volatile Organic Compounds (VOCs) and integrating the measurement results into your building automation system.

EPA’s Indoor Air Quality Guidance

The US EPA provides basic principles and general actions recommended to improve indoor air quality (IAQ) outlined in their Clean Air in Buildings Challenge. Below are some actionable steps of this program with manufacturing-specific insights.

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