Heat as a Service Financing

Mark Brescia
Proposal Status
Ready for Committee Review
Username
Mark Brescia
Proposer First Name
Mark
Proposer Email
bresciam@coned.com
Proposer Last Name
Brescia
Proposed Session Description
Although a few high-profile properties have converted from fossil fuel heating, most large buildings in NYC have been slow to adopt heat pump technologies despite significant utility incentives over the last 2 years. A variety of loan offers are available but owners have multiple challenges with taking on debt. The Power Purchase Agreement (PPA) 3rd-party ownership business model was transformative for the solar industry and Heat as a Service (HaaS) has that potential for heat pumps in large NYC buildings. Con Edison launched HaaS Marketing this spring to train Contractors on using this financing model. This panel discussion with financing providers and contractors explains the business model, customer benefits and Con Edison’s approach.
Why is this session important?
Con Edison has the highest incentives for heat pumps of any utility under the NYS Clean Heat program and has seen rapid adoption by single-family homeowners but large multifamily and commercial customers have been slow to adopt. Large projects have increased complexity and do not benefit from economies of scale so installation costs remain high. Multifamily & commercial building owners that make the investment don't receive the benefits of the upgrades, generally reserve capital expenditure for core business or emergency purchases and either may not have access to proper capital funding or cannot spare time to secure scarce traditional debt. Non-profits, particularly houses of worship, may be ineligible for potential tax credits for technologies well suited to their building type. Heat as a Service overcomes the financing gap not solved by traditional loans needed for large customers to undertake heat pump projects. These customers have the capabilities to keep current inefficient fossil heating equipment operating well beyond useful life so they are among the largest emitters and any like-for-life replacement will still be in-service past dates necessary to curb climate change and the devastating effects that will impact NYC earlier than most.

Comments

Mark Morales Thu, 04/28/2022 - 1:46 pm

Round 1 Yes. Heating large buildings from fossil fuels is the source of a sizeable amount of exisitng emissions and one of those "glaringly obvious" deficits in bridging the gap in getting closer to building electrificaiton becasue it is a "big rock". The proposed provides educaton on financing and education on the local utility's exisitng go-to market approach.  Getting momentum behind heat pump deployment in Multres and CRE can create a synergy for other proptech solutions that support electrificaton and meeting LL97 emsissions reducitons targets.  A case study of an installed project would be helpful.     

Jeannine Altavilla Tue, 05/03/2022 - 4:41 pm

Round 1 Yes. Seems great to share this information broadly. Need to consider the right mix of panelists to really deliver the information and motivation here addressing many of these barriers from the market perspective. Agree with Mark's comment on a case study being a good potential addition.May want to consider whether to target only building owners/operators OR financers. I think the session's importance and description could be swapped, and the title could be more targeted for interest.

Jim Sullivan Wed, 05/04/2022 - 2:28 pm

Round 1 - maybe.  Area of focus seems more aligned with business and finance.

Ben Sachs-Hamilton Mon, 05/09/2022 - 11:54 am

Round 1 Discussion:do they have case studies yet? panelists not yet identified, but could be contractor and owner. Additional info needed. We want a case study example to explain HaaS.This seems new (compared to PACE or NYSERDA), so worth giving it some attention. Ask if they might be open to combining with proposal 123.

Mark Morales Thu, 05/26/2022 - 4:58 am

Heating as a Service ConEdison Interview Questions
Marc Brescia Con Edison
HaaS is a tool to deploy heat pumps.
1. What are your top 1-3 goals for the next two quarters?
HaaS was designed to drastically increase/scale heat pumps in MF and C&I buildings. Heat pump adoption through HaaS, Residential is huge not in MF and CRE/C&I.
Goal: Grown from 10 projects to 50 projects. Only a handful presently and project timelines are protracted.
2. What are your top 1-3 most recent projects, and are there accompanied case studies?
Don’t have them yet. Vendors will provide case studies. Studies will not be in ConEdison. They will be from MA and CA
3. Can you describe the existing “regulations” on heat pumps in NYC buildings?
Nonexistent. People are going to heat pumps because of LL97. Buildings are motivated to adopt heat pumps to meet LL97 benchmarks. LL97 fines are near or higher than the cost to install heat pumps.
4. What is the right mix of panelist to deliver the session?
2-3 heat pump financing vendors: 1) C&I, MF and a moderator. ICF is the implementation contractor. ConEdison is the marketer. Taking a free market and private capital approach.
5. Is this low interest financing?
No, this is not a loan. HaaS has many alternative attractions from C-Pace, etc. Benefit of HaaS is that it is NOT a loan. It is a lease. Payment on capital but it is NOT on the books as debt. Capital can be taken from other funding sources. Shows as an O&M expense on the books. The process is more streamlined than traditional products. HaaS shows up as a monthly O&M expense, paired with HVAC. Non financing benefits that attract customers who can't have debt on the "books."
6. Is there an opportunity to have an owner and contractor as part of the panel?
Yes, no issue. Contractor for sure and quite possibly an owner.
7. How could you change the title of the session to be more targeted to building owners/operators? Re: Interest in owner/operators
Open to revising the title of the session to: “Converting to Heat Pumps without the Upfront Costs,” or “LL97 compliance Without the Upfront Costs.”
8. Would you be open to combining sessions with “Predevelopment Financing for LMI Electrification and Passive House Design?”
No. The described session is a new construction approach which has different financing. Haas is geared to existing buildings.
9. Do you also have a story about learnings from mistakes on heat pumps?
Equipment is not installed yet, so it is unlikely that there are mistakes stories.
Skills Gap
Heat pump installers are being trained to lead with HaaS. Contractor and manager sales approach. Contractors are being trained to sell HaaS.
Technology Gap
Finance Gap- Space HaaS "plays." Low/no interest is NOT the problem loans for heat pump financing. Those are abundant yet haven’t yielded the volume needed for big deployment. Making it easier and off-balance sheet is the goal. HaaS is ideal for large houses of worship for example. MF building owners who reserve capital for emergencies and improvements will find HaaS ideal becasue they are avoidant of debt. This is not a loan and is easier to integrate into existing buildings.
Equity Gap

Mark Morales Thu, 05/26/2022 - 5:05 am

Round 2 - Yes.  The program is designed to overcome 2 existng barreirs for deployment of heat pumps:  1) training contractors to sell HaaS along with AC/Heat.  2) Offers a non loan program that meets the off balance sheet requiremtns for multifamily building mangers.
Also, a bill was presented in Congress on 5/04/2022 called the HEATR Act to give companies the confidence to go all in on heat pumps.  Should greatly help with accelerating building electrification.   

Learning Objectives
Understand the off-balance sheet financing business model for customer sited projects like solar, heat pumps or energy efficiency
Why traditional loans, even at low or no interest, may not be attractive to large multifamily & commercial customers for heat pump conversion projects and current lack up adoption from these customers even with large incentives vs. overwhelming amount of residential projects
Why Con Edison has chosen a B2B marketing and contractor training approach instead of direct to customer
Know how to review potential heat as a service financing offers and find additional info about specific financing offers if they are a building owner, how to connect with Con Edison or selected financing providers for ongoing training if they are a designer/installer of heat pumps, or what information is necessary for consideration of inclusion if they are a financing provider
Has this session been presented before?
No

NYC 2022 Areas of Focus

Session Format
Lightning Round (several brief idea pitches followed by discussion)

Strongest Content Connection - NYC 2022

Comments about your speaker roster
Ideas for financing vendor speakers are MBE certified or veteran, and utility implementation contractor as panelist or moderator is also MBE
Reviewer 1
Morales, Mark
Reviewer 2
Morales, Mark
Proposal #
131
Committee Decision
Being Considered