A new financing approach is helping smaller residential developments access funding for geoexchange systems by bundling multiple projects into a single financing facility to reduce costs and secure better terms.
Vancity Community Investment Bank (VCIB) is working with Forum Asset Management—an asset manager, investor, and developer—and with Subterra Renewables, a North American geothermal exchange utility. Together, they are financing projects that supply heating and cooling in new residential buildings across Ontario.
The projects will install geoexchange systems, also known as ground-source heat pumps, which use underground pipes to pull or store heat from the earth for smaller multi-residential buildings, mostly condos. It’s the second such agreement between VCIB and its partners.
“We’ve become especially adept at financing where we see there to be a market gap, which is in smaller building scale, energy efficiency, and renewable energy projects,” Trish Nixon, VCIB’s managing director of climate finance, told The Energy Mix.
“We have an ability to aggregate portfolios of small projects and apply a project finance approach, particularly for energy-as-a-service models.”
Generally, project financing involves considerable costs, including lender fees, legal fees, and contracting with independent engineers and insurance consultants. This financial burden often makes project financing unavailable for smaller projects, Nixon said.
But VCIB is collaborating with the two other companies to apply the model to a number of smaller geoexchange projects that, when included together in the same portfolio, can get financing terms similar to those available to larger, utility-scale energy projects.
“We worked with them to structure a single, larger financing facility, which provides certainty and flexibility to finance individual projects as they are contracted and constructed, while allowing costs to be distributed over more projects,” Nixon said.
VCIB estimates that, by replacing traditional fossil-fuelled heating and cooling systems, the projects will avoid up to 8,500 tonnes of carbon emissions each year, equal to “taking more than 1,800 cars off the road each year or planting more than 141,000 trees.”
While Vancity also finances other decarbonized energy solutions, this partnership focuses on geoexchange. Subterra, as the developer, owns and operates the systems to provide heating and cooling as a service to building owners and condo corporations.
“We can provide efficient financing to each individual project out of this larger committed facility,” Nixon said, an approach that can be helpful for projects where upper capital is a barrier.
[Disclosure: Energy Mix Productions provides occasional editorial services to VCIB.]
