At a glance: Financing energy efficiency upgrades

• Multiple financing methods for energy projects are available for commercial facilities.
• Utility rebates in 2026 can reduce project costs by 20–50%.
• ENERGY STAR-qualified upgrades qualify for most open incentive programs.
• LED lighting and controls projects often achieve 2–4 year payback periods with rebates.
• Combining financing with incentives can lower upfront project costs by over 40%.

Businesses across commercial and industrial sectors are under growing pressure to reduce operating costs while meeting sustainability goals. For many facility managers and property owners, the real challenge is not deciding whether to move forward with efficiency upgrades but understanding the available financing options for energy projects and how to save money on energy upgrades without straining capital budgets.

Fortunately, today’s market offers a range of funding pathways that make energy efficiency projects more accessible than ever, especially when paired with financial incentives and expert rebate management support from firms like Incentive Rebate360.

How do equipment loans help businesses implement LED upgrades without high upfront costs?

Purchasing equipment outright remains the most straightforward approach, allowing organizations to capitalize on the asset and utilize equipment depreciation, such as Section 179D tax deductions, to offset investment costs over time.

For businesses that prefer to preserve cash flow, equipment loans are a practical option. Most lenders require a 20 to 25 percent down payment and secure the loan against the installed hardware. With properly scoped projects, specifically ENERGY STAR-qualified LED upgrades, monthly loan payments can often be structured to fall below projected energy savings. This allows organizations to implement improvements immediately while maintaining a net-positive cash position.

What is CPACE financing, and how can it support long-term efficiency upgrades?

Commercial Property Assessed Clean Energy (CPACE) is a financing tool available in many states that allows repayment through an assessment added to the property tax bill. These programs typically offer longer repayment terms of 10 to 20 years. Because the financing remains tied to the property rather than the owner, CPACE is often a strong fit for facilities planning long-term upgrades such as ENERGY STAR-qualified HVAC systems, LED lighting improvements, or building envelope upgrades.

How does on-bill financing work for HVAC and building automation projects?

On-bill financing programs remain open for application in many utility territories in 2026. These programs allow borrowers to repay project costs directly through their monthly utility bills, often at low or zero interest rates. This structure works especially well for projects under $350,000, including HVAC upgrades, advanced lighting controls, and building automation systems that meet performance benchmarks.

What financing options are available through leasing or performance contracts?

Leasing allows businesses to use new equipment for a fixed monthly fee without immediate ownership. Capital leases function more like installment purchases, enabling depreciation of benefits over time.

Performance contracting offers another option. Under this model, an Energy Service Company (ESCO) manages implementation and guarantees that energy savings will cover financing costs, helping reduce financial risk for the facility.

Service agreements, such as PPAs or ESAs, are commonly used for solar and renewable energy projects. These arrangements allow third-party providers to own and maintain equipment, with the customer paying for energy output or verified savings over a 5- to 15-year term.

Which commercial rebate programs are available for energy upgrades in 2026?

In 2026, many open rebate programs support ENERGY STAR-qualified LED lighting, HVAC systems, and networked controls, frequently covering 20–50% of total project costs. Regional utility programs continue to offer incentives for LED retrofits, occupancy sensors, daylight harvesting systems, and smart building technologies. These opportunities typically require pre-approval prior to installation and remain open depending on utility funding cycles.

Quick Definitions for Energy Financing

• ESA (Energy Services Agreement): A “pay-for-performance” model where customers pay for realized energy savings rather than the equipment itself.
• Section 179D: A federal tax deduction for owners of commercial buildings who install systems that reduce total energy and power costs.
• PPA (Power Purchase Agreement): A financial arrangement where a third-party developer owns, operates, and maintains a photovoltaic (PV) system, and a host customer agrees to site the system and purchase the electricity output.
• CPACE (Commercial Property Assessed Clean Energy): A long-term financing option that allows businesses to repay energy efficiency project costs through a property tax assessment, making upgrades like LED lighting or HVAC improvements more manageable without large upfront capital.
• ESCO (Energy Service Company): A provider that designs and implements energy efficiency projects while guaranteeing that projected energy savings will offset financing costs.

Partnering with a rebate management expert ensures projects are optimized to capture these available incentives, helping businesses save money on energy upgrades while improving long-term return on investment.

Click here to read the full article originally published by ENERGY STAR.