Funding Your Data Center with Energy Incentives

Did you know organizations are receiving hundreds of thousands in bottom line cash, with no additional capital investment, beyond planned facility expenditures that reduce energy? 

Carbon emissions, environmental concerns, and continuous growth in demand have made energy reduction a No. 1 priority for government agencies and utilities leading them, to launch incentive programs to meet energy reduction goals. Many of these agencies and utilities provide funding to data centers that meet these energy efficiency goals.

While identifying incentive programs is easy, the real issue lies in how to effectively obtain cash from these entities in a timely manner to meet both the goals of the applicant and the incentive agency, which are audited by state attorney general offices or public utility commissions.

Although similar in objective, incentive agencies throughout the country have different initiatives, processes, timelines, and funding levels. In addition, agencies subcontract third parties to administer many incentive programs due to lack of in-house personnel. 

Therefore, applicant organizations must employ dedicated resources (either in-house talent or outside firms) with expertise and experience in dealing not only with the incentive agencies throughout the US, but their subcontractors. Additionally, these applicants must have an understanding of the criteria and funding levels for the various agencies and energy conservation initiatives.

Best Practice Tip: Double-Dip Opportunities

In certain states, organizations can receive incentive funding from two different agencies for the same site. For example, an organization can receive a new construction incentive from the local utility for the build-out of a suite -- as well as an energy efficiency incentive from a state agency for equipment upgrades.

How does an organization determine if energy incentives are available for its facility locations? Organizations interested in energy incentive programs can consult the Database of State Incentives for Renewables and Efficiency (“DSIRE”) -- overseen by the U.S. Department of Energy.

The types of projects that qualify for energy incentives include:

• Energy Efficient Equipment Installations (HVAC, Chillers, Motors, VFD’s, Lighting)
• New Construction
• Demand Response (DR) Equipment Installations (Switchgear, Load Shedding Controls, UPS)
• Facility Assessments

There are different levels of incentive reimbursements which can be divided into the following areas:

Energy Efficient Equipment: Incentives are often capped at 50 percent of project costs and range from 10 to 22 cents per kWh reduction compared against the energy usage of existing equipment.

New Construction: In calculating kWh reduction, many incentive bodies use local and state building codes (which are often based on ASHRAE standards) as a minimum threshold before kWh reductions are recognized.Often incentives are capped at 50 percent of total construction costs or 75 percent of the incremental cost differential between standard base line and high-efficiency equipment.

Demand Response Equipment: Available in New York and is capped by the lower of (i) DR kW commitment x $200/kW or (ii) 75 percent of project costs.

Facility Assessments: Typically capped at 50 percent of study costs. Facility assessments usually require an extensive amount of time and documentation.

It is important to remember that funding levels change from year-to-year and across various utilities and agencies. It is a good practice for applicants to stay informed of the status of such funding levels prior to investing time in creating, submitting, and processing applications. Furthermore, each incentive body throughout the U.S. has different initiatives and timelines, with varying degrees of effort and documentation required by the applicants. 

To obtain funding, organizations must do more than simply fill out an application. An organization’s “energy team” must keep up to date on the timelines, stages, gates, and measurements/verifications required to secure funding. Furthermore, they should be capable of incorporating these tasks in the overall facility planning.  For instance, agencies will disqualify funding if energy efficient equipment has been ordered prior to submitting the incentive application. In addition, organizations must be mindful that application processing takes approximately 12 weeks from filing to funding, pending install schedule.

If your organization has a “break and fix” or expansion facility budget, you will want to identify and take full advantage of the available energy incentives to offset project costs and maximize your return on investment. 

Jim Embley is CEO of Rubicon Professional Services, a mission-critical construction management firm that takes an owner’s approach to the design and building of data centers, encompassing every complex aspect from design, power load, energy management/ conservation, equipment procurement/integration and even financing.