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There is little to love about budget season other than the fact that, at most companies, it comes in the same season as Santa and New Year celebrations. The good news is unless you work for the US government, eventually a final budget gets approved every year and project teams are free to move forward to implement approved plans.
Unfortunately, by the time you get your approval, schedules already may be behind so there is often added pressure to move forward aggressively to hit needed implementation dates. If your projects are energy efficient and you are planning to collect rebates as part of gaining budget approval, utility requirements can throw a big wrench into your project implementation schedules.
The following are the most common rebate-capture related concerns you will have with respect to budget season and scheduling projects thereafter, especially if your budget approval comes later than optimal. The key point is failing to pay heed to these issues (and others) will result in fewer captured incentives and a slower or lower return on capital than approved.
• To maximize your chance for project approvals you will need sound rebate estimates to include in payback analyses for the projects you propose. This means completing eligibility assessments and rebate estimates well before budgets are proposed, let alone approved.
• Understanding product-related rebate eligibility is increasingly important, especially for emerging technologies such as LEDs. Customers that select equipment unacceptable to utilities have almost no chance of capturing incentives without a sizable effort aimed at working hands-on with utilities to overcome approval hurdles.
• If budgets are likely to be approved late and schedules are tight, utility pre-inspection and approval processes will present a significant challenge to ensuring receipt of incentives later on.
o It is important to have flexibility AND control over the project schedules. By knowing which incentives will require pre-approvals from utilities, you can optimize work schedules to ensure suitable time for incentives to be maximized. Even a simple understanding of pre-project versus post-project filing requirements will greatly impact your opportunity to capture incentives.
o Pay attention when vendors/contractors are offering incentive capture as they most often will favor maximizing their most cost-efficient deployment of their labor, especially if under-staffed, rather than allotting suitable time for incentive approvals with respect to timing and/or product issues.
• Get your rebate team involved with your vendors at the time of contract award so documentation requirements for vendors are built into their project plans and commitments.
o Missing the details on site specific audits which are required to properly apply for an incentive will result in no rebate being captured. Such details prove to be difficult to obtain when not sorted out early in the planning process..
Rebates programs are designed to propel your projects through the competition for scarce budget dollars by providing incremental funding to improve their financial returns. Rebates are designed to offset the incremental cost of choosing the most efficient option over standard efficiency options, leaving the savings from increased efficiency entirely to the company’s benefit. Most programs look to drive 4 and 5 year paybacks on higher efficiency projects down to the 2 to 3 year paybacks generally required for projects to dodge the dreaded budget axe.
Make sure you identify and organize around capturing incentives early in the budget process to maximize your wins in budget season and to make sure you deliver on the financial returns your project promised.
© 2014 Trade Press Media Group, Inc.
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