Financing Energy Efficiency Looking towards 2020

EnergyEnergy

Financing Energy EfficiencyLooking towards 2020

Stefano Panighetti

Directorate-General for EnergyC3 Energy Efficiency

EnergyEnergy

A particular momentum 1/2

A new framework directive to be adopted:

• To complement sectorial directives and introduce binding measures for MS

• Art. 14 & 15a promotion of energy services, financial instruments and incentives

More Stable legislative framework: renewed efforts from MS & investment predictability for investors

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EnergyEnergy

A particular momentum 2/2

A new Multiannual Financial Framework (2014-2020)

• Cohesion funding to allocate some 17 billion € to energy efficiency and renewable energy (doubling current allocations)

• Horizon 2020: 6.5 billion € is to be allocated to research and innovation in "Secure, clean and efficient energy"

Likely to include an IEE-type follow-up programme

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EnergyEnergy

MFF 2014-2020: A new Paradigm for sustainable investments:

•MFF in line with EU 2020 strategy: "smart, sustainable & inclusive growth"

• Conditionality: implementation of relevant EU legislation

• Cohesion policy Thematic concentration: shift to a competitive low carbon economy

• Public authorities to pave the way (public building renovation, use of EPC…)

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• EU funding should provide opportunity to attract & leverage funds from private investors

• However, the big bulk of EE/RES investments should come from private sector, EU and national funding to complement;

• Using market mechanism to avoid crowding out investors and increase leverage;

• Such as Financial Engineering Instrument and EPC;

• Grant to address primarilly market failures, innovative technologies and beyond cost-effective EE projects (deep renovation)

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What is the ‘investment’ need?

• Energy savings potential across sectors requires investment of around 850 billion € (2011-2020)

• Around 85 billion € per year

• Buildings take the lion’s share of around 60 billion € per year

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What are the barriers to EE investments?

Regulatory framework & market barriers: • Procurement rules, public deficit accounting• Split incentives• Low level of awareness & capacity

Access to Financing• High perceived risk -unclear market valuation• Unadapted financing products • High upfront financing• High transaction costs• Grant dependency

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How can the EU support help?

• Cohesion policy funds (2007-2013):• 5,1 billion € for energy efficiency (up to 8 billion € if all MS re-

allocate 4% for housing under ERDF)

• Intelligent Energy Europe Programme (2007-2013):• 735 million € for ‘soft’ energy efficiency/renewables projects• Capacity building, awareness raising, best practices sharing

• ELENA Facility:• 97 million € for technical assistance to mobilise investments• To scale up projects and reduce transaction costs and support

Project development phases

• European Energy Efficiency Fund (EEE-F):• 265 million € for investments into mature, bankable

efficiency/renewables projects• 20 million € for technical assistance• Role model projects, leverage effect, EPC support…

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Best Practices examplesRefurbishment of social housing (FR)

• Investments of € 320 M of ERDF in whole country• Average support by ERDF = € 2,886 per dwelling (14% of

total needs)• Impacts:

• generated over € 1 billion in investment in energy performance in social housing in FR

• helped to create and maintain 15,000 local jobs & potentially 31,000 with measures in the pipeline

• 50,000 households with modest incomes supported to fight energy poverty (heating costs reduced on average by 40%)

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EnergyEnergy

Kredex Revolving Fund in Estonia

• Switch from grants to a revolving fund

• KredEx (Credit and Export Guarantee Fund of the State) supports this

• Why revolving fund?

• Opportunity for re-usage of the funds

• Funds stay in state

• Loan is needed for reconstruction anyway

• Easier to administer, lower administrative costs

• End-beneficiary is used to take loan

• Innovative scheme, help from kfW

• Started 06/2009

• March 2010: 70 contracts with multi-apartment buildings, total 5,1 mn € (average 74 400 €, 2035 apartments, saving 33%)

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• JESSICA Holding Fund amounts to € 227 million:• € 127 million ERDF • € 100 million National co-financing• Expected later: some funds by

commercial bank

• Implementation started June 2010• To date, circa 100 projects have been

approved for funding.

• Planned to modernize 24.000 houses, by the year 2020

• This example:• 45 apartment multi family building• Insulated external walls and roof

Windows replaced• Glazing of balconies• Modernization of heating substation

& heating systems• Energy efficiency improvement of

60 %

JESSICA fund in Lithuania

EnergyEnergy

Energy Performance Contracting (EPC)

Campaign

Directorate-General for EnergyEnergy Efficiency

EnergyEnergy

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The EPC Opportunity• New Regulatory Frameworks provide an opportunity

to develop the EPC market

• Multi-annual Financial Framework- Use of Structural and Cohesion Funds to provide financing for EPCs- Potential to develop MS policy to reflect the EPC opportunity

• Energy Efficiency Directive- Article 3 – required renovation of 3% of central government buildings- Article 7 – energy efficiency obligations 1.5% target to be met- Article 19 – removal of barrier to energy efficiency in accounting rules- Article 20 – Maximising the benefits of multiple financing schemes

EnergyEnergy

Aims of the EPC Campaign

• To highlight awareness of EPC at national, regional and local levels

• To hold a series of practical workshops to- Increase knowledge- Build confidence- Share experience- Create dialogue among all stakeholders (public, private,

regional and national level)

• Three pillars working to complement each other: EPEC, ManagEnergy and Covenant of Mayors

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EnergyEnergy

EPC Campaign Structure NationalEPEC

RegionalManagEnergy

LocalCovenant of Mayors

2012-13 – series of national events planned

Targeting key policymakers at national level

Focus on implementation of EPC frameworks, use of cohesion policy funds, and practical examples of EPC benefits

2012-14 – 42 events planned

Aimed at regional authorities and energy agencies

Focus on forthcoming changes to regulatory framework and potential replication of EPC projects

2012-14 Webinar events

Capacity building events for local stakeholders

Focus on barriers encountered, solutions, and practical ways to roll-out more EPC projects locally

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Key Stakeholders

• National Administrations, including Ministries of Finance, Energy, Environment, Public Works

• National Energy Agencies• Financial Community• Municipalities• ESCo's• Energy Services Industry (products, technology, energy

management systems)

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Accounting for EPCs in the Public Sector

There is significant potential for energy savings in the public sector, which could be facilitated by the uptake of EPCs

EAS 95 – when “most project risk” is transferred to the private partner to a government in a PPP (public private partnership), then the assets involved in the PPP should not be reported on the government balance sheet.

'Off-balance sheet' financing to could be an incentive to encourage public sector organisations to consider energy efficiency investment

May require changes to the reporting structures on PPPs to Eurostat in some MS

• How do you account for EPCs?

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EnergyEnergy

Thank you for your attention

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