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By Tim McGreevy • April 19, 2018

4 Reasons: Why Investing in Energy Efficiency Projects BEATS Investing in Wall Street

Question: Do you want less risk, better returns and to pay less in taxes on your investment?

I think it is fair to say the answer to that question is an emphatic “YES!” for most business owners. This next question is a little harder to answer: Which is a better investment for a building owner, investing in the stock market or investing in an energy efficiency project for your building?

This article will discuss 4 reasons why I believe the answer to that question (which might be surprising and eye-opening for some) is  – an energy efficiency project is the better investment!

Reason 1: Less Risky & Better Returns

This example (below) compares the performance of Dow Jones Index over the past 9 years versus a typical energy efficiency project.  The energy efficiency project yielded a conservative 5-year simple payback, equating to a 20% return on investment.

This is a year by year comparison of value if you invested $1 in either Wall Street or an Energy Efficiency project 9 years ago:

  

 

Returns: EEP vs. DJI

   

 

In this case the Energy Project would have yielded $5.16 (net gain of 4.16) versus the DJI which would have only yielded you $2.82 (net gain of $1.82)!

Here are some questions on risk:

  • Do we have any control over Wall Street’s performance? No.
  • Do we have more control over an energy efficiency project? Yes.
  • Is the stock market volatile? Yes. (ask your FA, he will agree)

And here are some questions to ask yourself:

  • Can you predict what the stock market will do?
  • Are building operations relatively constant year to year?
  • Do you have energy bills every year?
  • Are your energy bills inevitable, even if you don’t invest in an energy efficiency project?
  • Is reducing those bills an investment worth capturing?
  • Do you have another investment/project that beats 20%? Maybe you do, but will it continue to do that every single year? An energy efficiency project will!

 

 

But wait … depending on the Wall Street investment, in some cases, don’t you have to pay taxes on your gains in the stock market too? Enter Reason 2…

 

 

Reason 2: Tax Deductions & Credits

  • Enter...Tax Deduction 179D

“The extra tax deduction is $1.80 per square foot if you do qualifying energy efficiency projects. For example, if you had a 1,000,000 square-foot building, you could get an extra $1,800,000 tax deduction. For a company paying 33% tax rate, this translates to about $600,000 in cash.

Note that for any manufacturer or business in general, to make an equivalent $600,000 in cash (profit), you would have to sell a lot of products (maybe $6,000,000 at a 10% profit margin to get the same result as this tax break). And the tax break approach is far less risky than assuming you could actually sell more products.”

How 179D Deduction Works
 
 
 

"The 179D Commercial Energy Efficiency Tax Deduction is a special tax break that’s not linked to assets, but related to square footage of a building that installed energy-efficiency equipment. Therefore it’s an extra tax deduction to take advantage of (if your project qualifies)."

 

 

 

 

 

Learn more about our economic engineering, or in other words, leveraging tax credits and deductions using energy efficiency projects.  Ask us about how we can make your money work, by utilizing government incentives and savings:

 

 

LEARN ABOUT THE 100% DEDUCTION

LEARN ABOUT ACCELERATED 5YR DEPRECIATION (20% DEDUCTION - YEAR 1)



Human hand holding bulb with money tree inside. Wealth concept

 

 

  • Tax Credits: Geothermal and Solar Installation & R&D

 

10% Tax Credit on Geothermal!

If you choose to install an energy saving,  Geothermal Energy System in your commercial building - you will receive a 10% Federal Tax Credit on the installation cost.

 

30% Tax Credit on Solar!

For choosing to install an energy savings Solar/Photovoltaic Energy System on your commercial building through an energy efficiency project - you will receive a 30% Federal Tax Credit on the installation cost.

 

 

 

Learn more about our economic engineering, or in other words, leveraging tax credits and deductions using energy efficiency projects.  Ask us about how we can make your money work, by utilizing government incentives and savings:

 

LEARN ABOUT THE $1 FOR $1 R&D TAX CREDIT

 

 


Business man looking at factory that makes money from ideas concept

 

 

 

Reason 3: The Public Likes It!

In the research article below, John R. Wingender and Eric A. Woodroof found substantial evidence that:“Announcements of energy management projects correlate with a 21.33% increase in stock price.” The researchers examined 23 publicly traded companies that made announcements about their Energy Management Project in a major US newspaper, news wire or a monthly trade magazine between the years of 1986 and 1995.

"WHEN FIRMS PUBLICIZE ENERGY MANAGEMENT PROJECTS THEIR STOCK PRICES GO UP" PDF

 

Close up of businessman drawing money making formula

 

 

 

Reason 4: New Equipment, Better Controls, Less Maintenance & Better Operating Efficiency!

 

 

 

3D Money growing on a tree - financial concepts

 

BONUS REASON:

IT’S GOOD FOR THE ENVIRONMENT AND OUR WORLD'S FUTURE!

 
 
 
 

We hope this article was helpful and interesting to you!

If you would like to hear more about Effectiv, our Economic Engineering  and/or our Energy Reduction Plans please click the "I want to do more with less." link below and fill in your email on the next page. Someone from the Effectiv Team will reach out to you soon to talk further and see how we can add value to your facility:

 

"I WANT TO DO MORE WITH LESS."

 

Sincerely - The Effectiv Team

Please contact Tim with any questions or if we can help in anyway:

Timothy R. McGreevy
Director of Business Development
EffectivEnergy Solutions LP
(484) 995 – 5213
tim@effectiv.us

www.effectiv.us

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