Vol. 22   No. 3
Fall 2016
  • MGE Talks Business
Hot Topics

Shared Savings Upgrade an Easy Decision for Alexander

State certifies 57-acre Westport site for development

Nicolas Alexander at Alexander Real Estate Services.

Gathering and analyzing the data needed to make decisions about energy-saving upgrades can be time-consuming. But thanks to financial support from MGE's Shared Savings and the hard work of energy services company E3 Coalition, LLC, deciding to upgrade lighting at nine properties became "…a decision that could be made without a second thought," said Nicolas Alexander, Director of Commercial Portfolio Management at Alexander Real Estate Services.

A long-time proponent of energy efficiency, Alexander's recent upgrade started with outreach to E3 Coalition from Viroqua, Wis. "Alexander Real Estate Services contacted us because they were concerned about high energy use at some of their facilities," said Jim Olson, President, E3. "We quickly landed on lighting in the common areas—hallways, bathrooms and parking lots—as the most effective place to start. Financing from MGE's Shared Savings was a dealmaker on the project."

Alexander Real Estate Services Energy Savings at a Glance

  • Number of facilities: 9
  • Original construction dates: Range from 1991 to the present
  • Square footage: 527,800
  • Total project cost: $212,000
  • Project payback: Blended payback of 2.8 years

Shared Savings: Leveraging energy savings to fund energy efficiency upgrades

Shared Savings is a revolving loan program for MGE customers. MGE provides upfront financing and the customer repays the loan through energy savings. Customers can choose the repayment schedule that works best for them, with payback periods of up to 10 years. Many customers try to align their loan payment to match energy savings.

"The fact that monthly energy savings often outweigh the cost of the loan is the beauty of the program," said Olson. "Being able to upgrade your equipment and maintain a positive cash flow is the real story for many businesses."

"Shared Savings can be a key factor in a project moving ahead," said Randy Popp, Senior Engineer at MGE. "The capital investment for an upgrade can be substantial, and everyone benefits from the fact that MGE understands the nuances of an energy efficiency upgrade and makes the financing process seamless."

Alexander agreed. "MGE was very responsive and showed a real willingness to make this project happen. Some programs can be littered with bureaucratic red tape that slows the implementation process down, but that couldn't be further from the truth in this instance. Plus, they offered very competitive interest rates."

"If you get financing from a traditional source, such as a bank, they won't necessarily cover the soft costs, such as engineering and consulting fees," Olson said. "MGE understands how critical these elements are and includes them in the package."

To participate in Shared Savings, a business must submit their proposal to MGE prior to construction/installation. The approval process has two steps:

  1. A technical check to ensure the project meets MGE's energy-saving standards.
  2. Due diligence to determine that the customer can meet the terms of the loan.

Lighting—especially LEDs—a common upgrade choice

"LEDs have become a popular choice for both interior and exterior lighting," said Jesse Shields, Key Account Manager at MGE. "We've long recommended LEDs because they can last up to 25 times longer than incandescent lighting while using only 20% to 25% of the energy—but price held people back. But prices have dropped significantly. Plus LEDs can now be used in a much wider variety of applications."

Focus on Energy a key project partner

"Part of our job is to be aware of incentives, tax credits, deductions and financing that will buydown a project's cost and make it affordable for our clients," said Olson. "In addition to the support from MGE, this project also benefited from Focus on Energy programs."

Focus on Energy is a statewide energy efficiency and renewable resource program. Alexander's projects qualified for financial incentives from two programs: the Small Business program and ELO, their exterior lighting optimization program.

"These programs were excellent ways to ensure we qualified for Shared Savings," Olson stressed.

Popp agreed. "We work in partnership with Focus on Energy and they serve as a virtual 'pre-screen' for Shared Savings projects. Their blessing on a project almost ensures ours."

Multi-building upgrade adds to efficiency and cost savings

Alexander Real Estate Services also benefited from upgrading nine facilities at once. "We were able to negotiate quantity discounts, but that's just part of the story," Olson said. "Having the same fixtures in multiple buildings helps with maintenance and documentation, it will be much easier to track going forward."

Energy-efficiency upgrades a win for everyone

"With environmental issues being more of a concern than ever before, taking action that reflects your commitment to the environment illustrates your priorities as a landlord and business owner," Alexander stressed. "Selecting a landlord is a big decision for a business owner, and that decision becomes a little easier when you know you're forging a relationship with someone that cares about the same things you do: cost savings, energy efficiency and sustainability."

  • Number of facilities: 9
  • Original construction dates: Range from 1991 to the present
  • Square footage: 527,800
  • Total project cost: $212,000
  • Project payback: Blended payback of 2.8 years