EnergyLink launched the Public School Funding Program (PSFP) this summer to help schools create revenue streams that fund the support of students who are struggling academically.
What is the Public School Funding Program?
The Public School Funding Program (PSFP), headed by school program director Nick Lazechko, was founded in response to the education budget cuts that followed COVID-19. The PSFP works by connecting school districts with investors who are interested in renewable energy projects.
Together, the investor and the school district can create a Managed Energy Service Agreement (MESA) or Energy Serve Performance Contract (ESPC) that enables the investor to build a renewable energy project on school facilities – generating revenue for both the school district and the investor. And not only does this process generate positive cash flows but it also provides virtually no risk for the school district. On average, these projects generate anywhere from $500,000 to $2,000,000 in positive cash flows for school districts over a 20 year time period, with all risk absorbed by third-party investors and EnergyLink.
To fully grasp what this process looks like for the Public School Funding Program, let’s jump into how both a MESA and an ESPC function.
What is a Managed Energy Service Agreement?
MESAs are contracts under which a third-party energy efficiency contractor assumes the energy management of a client’s facility. This includes the installation of energy efficiency upgrades and responsibility for utility bills. In exchange, the customer will make regular payments to the investor based on historical energy costs. These periodic payments are usually lower than previous utility expenditures.
What is an Energy Service Performance Contract?
An ESPC is a third-party financing mechanism that can enable building owners to fund energy-saving upgrades by leveraging utility savings from future utility bills and avoided operational expenses created by those same energy-saving upgrades. For more information check out this blog post.
How Does EnergyLink Absorb the School’s Risk?
Using a MESA can be a very smart move for a school district wanting to become more energy efficient. However, there is typically a catch. At the end of 6 years, the investor (also called the sponsor), will sell the renewable energy project at a reduced cost back to the facility owner in order to mitigate their own risk.
While the public school would own the renewable energy project and capitalize on the reduced utility bills that come with it (which the savings of often outweigh the financed debt payments for), they accept project risk by taking out financing to purchase back the project. But, after brainstorming, EnergyLink discovered that we can help to absorb this risk after they buy the project from the investor. By combining a MESA with an ESPC, EnergyLink can absorb all risks involved with these projects. We also can guarantee the generation of positive cash flows for a school district for at least twenty years.
So, how exactly does it work? Essentially, when a school district that’s a part of the Public School Funding Program enters into a MESA with an investor, EnergyLink can create a contract that legally guarantees that a school district’s utility savings from purchasing the renewable energy project from the investor will be larger than the debt payments they make on the loan taken out to purchase the project.
If during any year the debt payments for the loan outweigh the utility savings the school experiences, EnergyLink will write your school district a check for the difference. This enables school districts to create $500,000 – $2,000,000 in cash flows over a 20-year-period with virtually no risk. This money then can be used to support their students and implement district-wide initiatives.
How Does the Public School Funding Program Process Work?
The Public School Funding Program requires a clear and efficient 5-step journey.
1. Energy Audit
The first step of the process begins with EnergyLink providing an in-depth engineering-auditing service to the school district to determine what types of renewable energy projects are possible that will attract investors.
2. Financial Analysis
Once potential projects are determined, EnergyLink will conduct a financial analysis to help the school district determine how much potential revenue could be gained from engaging in the Public School Funding Program.
3. Find Investors
If the school would like to continue, EnergyLink begins to garner interest from investors, lenders, and sponsors of the potential project.
4. Create a MESA
EnergyLink will then work with the school district, the lenders, and the investor to create a MESA that benefits all parties involved, providing the most benefit to the school district.
5. Draft an ESPC
At this time, EnergyLink will also draft an ESPC that guarantees the project’s cash flows to the school district for the life of the project to ensure the school district can only make money from the proposed arrangements.
Our Goal with the Public School Funding Program
Our goal behind the Public School Funding Program is to utilize our expertise to provide funding to support struggling students. Not only that, as a design-build engineering firm, we hope these funds can empower students to enter a field that can benefit both the community and the environment.
For More Information
For more helpful information related to the Public School Funding program, check out some of these blog posts.
- What is an Energy Service Performance Contract?
- How a MESA Can Help During Economic Uncertainty
- How Nonprofits Can Afford Solar Panels
If you are a public school wanting to join this funding program, contact us for a free energy audit!