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Financing the energy renovation of buildings

Financing the energy renovation of buildings. Adrien BULLIER Project Advisor, Intelligent Energy Europe and Horizon 2020 programmes European Commission, Executive Agency for Small and Medium-Sized Enterprises (EASME). Finance and sustainable energy Trying to match squares and circles?.

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Financing the energy renovation of buildings

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  1. Financing the energy renovation of buildings Adrien BULLIER Project Advisor, Intelligent Energy Europe and Horizon 2020 programmes European Commission, Executive Agency for Small and Medium-Sized Enterprises (EASME)

  2. Finance and sustainable energyTrying to match squares and circles? We’ve got money, but… we’re looking for projects! Green bonds market forecast at USD 40bn for 2014 (BNEF) • “Investment project” for the financial sector: • technical black box • standardized product • cash-flows, IRR, NPV • predictability of risks • transaction costs Financial sector ESCO? Innovative financing? • “Investment project” for many project developers: • technical design tailored to physical constraints • state-of-the-art technology • energy payback times • “no financing” = “no subsidy” ? We’ve got projects, but… we’re looking for money! Projects developers > 6,100 signatories of Covenant of Mayors + all other stakeholders committed to climate and energy goals Adapted from C. Milin, ECEEE 2013 A. Bullier EASME – Parma 6 May 2014 - This presentation requires oral explanations

  3. Finance and energy efficiency investments: filling the gap through EU programmes We’ve got money, but… we’re looking for projects! Green bonds market forecast at USD 40bn for 2014 (BNEF) Dedicated credit lines National funding Risk-sharing schemes Financial sector Equity provision EE19 Benchmark investments Innovative financing? ESCO ? EU structural and investment funds EE19 Awareness of investors EE19 Organise dialogue EE20 EE21 Capacity building Project dvpt assistance IEE & Horizon 2020 EE21 EPC facilitation EE21 Local financing schemes We’ve got projects, but… we’re looking for money! Project developers +/- €85 bn/year add''l investment required in EE Adapted from C. MILIN, ECEEE 2013 A. Bullier EASME – Parma 6 May 2014 - This presentation requires oral explanations

  4. EEFIG assessment of financing schemes Energy Efficiency Financial Institutions Group – ww.eefig.eu – Final report February 2015 A. Bullier EASME – Parma 6 May 2014 - This presentation requires oral explanations

  5. Local and regional authorities have a key role to play • Investments in sustainable energy are local! Developing a pipeline of projects: • Mobilisation of energy users (building owners, public authorities, companies, households…) • Assistance to develop bankable projects: technical maturity & critical size • Aggregation of small individual projects • Standardisation of contracts • 2014-2020: 12 to 20% of the European Regional Development Funds for the "shift to a low carbon economy" (including buildings renovation) • €23bn over 7 years (twice the allocation in 2007-2013) = €3.3bn/ year • still a drop in the ocean: how to leverage in private finance? • EC recommends the use of revolving "financial instruments" rather than pure grants • Dedicated credit lines • Soft loans: preferential interest rates – often with soft or investment grants • May provide the long-term finance lacking for deep renovation • Many successful examples from Germany, Estonia, Lithuania, France, etc. • Risk-sharing facilities: de-risk / enhance creditworthiness of investments • Loan guarantee funds (few examples of purely EE-targeted schemes): IFC’s CEEF (CEEC) A. Bullier EASME – Parma 6 May 2014 - This presentation requires oral explanations

  6. European Energy Efficiency Fund – an example of risk sharing with EU funds • Operated on commercial standards with public money taking the first loss risk • Address specific needs of commercially viable EE and RES projects • "Final Beneficiaries" are local/regional authorities • Products: • Senior / junior / convertible debt, • equity, • loans, • forfeiting loans (supporting EPC) • Guarantees • Also provides project development assistance • Initial closing at €265m, target €700m • May 2014: €217m allocated to 13 projects Notes Institutional investors Senior – A Shares € 117m EIB, CDP Mezzanine - B Shares € 23m Junior/FLP - C Shares €125m EIB, CDP, Deutsche Bank European Union A. Bullier EASME – Parma 6 May 2014 - This presentation requires oral explanations

  7. Project development assistance facilities: building a project pipeline • Project development assistance facilities for different target groups: • Local/regional authorities: MLEI PDA (EASME), ELENA EIB, ELENA CEB, EEE-F • Financial institutions: ELENA KfW, ELENA EBRD • Private entities (from 2014): EE19 PDA under Horizon 2020 • Altogether €81m to 56 projects expected to trigger €2 billion investments in EE and RES • Examples of projects: • (Bundled) energy performance contracts on public buildings and street lighting • IT, ES, AT, PT, NO, FR • Investment funds, citizen financing: • Cambridge (UK), Oxford (UK), EU-wide • On-bill finance / PACE schemes on private housing: • Newcastle (UK), Birmingham (UK), PadovaFIT (IT), PSEE Alsace (FR) • Public ESCO schemes: • Ile de France (FR), Limburg(BE), North Holland (NL), Bristol (UK), Rhône-Alpes (FR) • Other: district heating, clean urban transport, smart grids, biogas… A. Bullier EASME – Parma 6 May 2014 - This presentation requires oral explanations

  8. EPC for private housing (condominiums) Padova FIT (IT) • The City (and its partners) engage condominium associations to get their approval on renovations • The City of Padova is going to procure an ESCO to sign and carry out EPCs on condominiums (starting July 2014) • Investments should be funded through (to be confirmed): • Tax rebates for homeowners • ESCO equity (20%) • Bank debt (60%) • A private equity fund to be created by Banca Popolare Etica • Energy savings would be collected through energy bills to secure repayment • 2,000 homes (condominiums) / €15m • Expected savings around 30% Source: NewinRetro project A. Bullier EASME – Parma 6 May 2014 - This presentation requires oral explanations

  9. MLEI POSIT'IF (Ile de France, FR) Public ESCO scheme for condominiums Condominium • Investment: €40m • Leverage factor: 19 Administrator "Local facilitators": energyagencies, associations Mature projects 1. Design phase Design of measures 2. Implementation phase EPC (guaranteed savings) Equity (local authorities & privatepartners) General Assembly Third party investment or Long-termloans (lowinterest rates) Financing plan O&M with shared savings ERDF Jessica fund (loans/equity) - potentially Source: José Lopez, Energies POSIT'IF Architects Energies POSIT’IF Grants and taxincentives for home owners (tbc) Thermal engineers Construction companies Soft loans for homeowners (tbc) Sub-contracting or co-contracting agreements Energy service companies A. Bullier EASME – Parma 6 May 2014 - This presentation requires oral explanations

  10. MLEI PSEE Alsace (FR) - Public service of energy efficiency for detached housing (with on-tax financing) • Public service to assist homeowners in order to: • Carry out energy audits • Draft technical specifications • Structure the financing plan • Procure and supervise the works • Operate and maintain correctly the renovated home • If needed, the PSEE can finance part of the works • repaid over time through occupancy taxes (similar to PACE scheme in the US) • no guaranteed savings but the aim is to cover investment costs through savings • the "debt" can passed on or reimbursed when the house is sold or let to a new tenant • Scheme aimed at low-energy retrofit – 40-75% savings • 1,000 homes / €40 million targeted, first investments expected in 2015 A. Bullier EASME – Parma 6 May 2014 - This presentation requires oral explanations

  11. Grazie per l'attenzione For more information: • Horizon 2020 Energy Efficiency call for proposals: http://ec.europa.eu/easme/en/energy • Infoday on 12 December 2014 in Brussels: material available at http://bit.ly/1EjN1ui • Energy Efficiency Financial Institutions Group (EEFIG) – www.eefig.eu • Workshop on innovative financing for energy efficiency and renewables, 28 April 2015, Brussels: http://bit.ly/1F3TQX4 • Innovative financing for energy efficiency and renewables: feedback from successful projects, 8 October 2014: http://bit.ly/1G7tMXC • Innovative financing solutions: experiences from Intelligent Energy Europe projects http://bit.ly/1G9L9VQ • Adrien Bullier & Christophe Milin, Alternative Financing Schemes for Energy Efficiency in Buildings, ECEEE 2013 Summer Study http://bit.ly/1G9L9VQ This presentation requires oral explanations

  12. THE EU FRAMEWORK PROGRAMME FOR RESEARCH AND INNOVATION HORIZON 2020 Finance for sustainable energy Energy Efficiency call for proposalsTopics EE19-20-21 Disclaimer: The content of this presentation is for information purposes only. The relevant legal instruments and the text of the call shall take precedence over the information contained in this presentation. The European Commission or EASME does not accept responsibility for any use made of the information contained therein.

  13. Energy Efficiency funding in Horizon 2020 • Horizon 2020 is the new EU Framework Programme for Research and Innovation. • Its Energy Challenge on 'Secure, clean and efficient energy' includes activities that build on the experience of the previous Intelligent Energy Europe Programme (http://bit.ly/1aWGYgW) in facilitating market uptake of energy technologies and services. • Projects to be financed extend from research to market, including activities building on the experience of the previous IEE Programme in facilitating market uptake of energy technologies and services • Funding topics are defined indicatively for 2 years ahead • Annual calls for proposals – next deadline: 5th June 2014 A. Bullier EASME – Parma 6 May 2014 - This presentation requires oral explanations

  14. H2020 – Energy Efficiency - Finance for Sustainable Energy Key objectives • Engage with financial sector and increase investor confidence • Build a pipeline of lighthouse projects • Roll out of Energy Services (incl Energy Performance Contracting) and other innovative financing schemes • Build capacity for sustainable energy finance solutions in all sectors • "Sustainable energy" refers to energy efficiency and/or renewable energy • Grants under topics EE19-20-21 do not fund hardware investments A. Bullier EASME – Parma 6 May 2014 - This presentation requires oral explanations

  15. H2020 – Energy Efficiency - Finance for sustainable energyOverview of topics • EE 19: Improving the financeability and attractiveness of sustainable energy investments • Development of frameworks for the standardisation and benchmarking of investments • Targeting public institutional investors (e.g. public or semi-public pension schemes) • EU and national sustainable energy financing platforms • EE 20: Project development assistance (PDA) • Public and private entities to develop lighthouse projects • Focus on public & private buildings, retail energy market infrastructure, commercial & logistic properties and sites • EUR 1 from the EU must lead to EUR 15 in investments • EE 21: innovative energy services and financial schemes for sustainable energy • Roll-out of innovative energy efficiency services (e.g. EPC) • Replication of successful innovative financing solutions and energy services • Large-scale capacity building for public authorities and SMEs on innovative financing  Call Deadline 5 June 2014 A. Bullier EASME – Parma 6 May 2014 - This presentation requires oral explanations

  16. H2020 – Energy Efficiency - Finance for Sustainable Energy Which topics are of interest to whom? • Topics EE19-20-21 could be interesting to the following stakeholders or their representatives (associations, federations…) – this list is indicative and not exhaustive: • financial market actors, • standardisation and valuation entities, • industry, • public authorities, • consumers • property owners • public institutional investors • public and private project promoters, • public/private infrastructure operators, • retail chains, • cities, • SMEs/industry • energy services industry A. Bullier EASME – Parma 6 May 2014 - This presentation requires oral explanations

  17. EE 19: Improving the financeability and attractiveness of sustainable energy investments 3 sub-topics: • Development of frameworks for the standardisation and benchmarking of investments • Targeting public institutional investors (e.g. public or semi-public pension schemes) • EU and national sustainable energy financing platforms • Proposals must associate 3 entities from 3 countries, except for national platforms where 1 entity is sufficient • Expected impact (depending on the projects): • reduced uncertainty, increased investors' confidence and trust • innovative (and relevant) asset valuation methodologies agreed by the market • standardised descriptions of sustainable energy investments or measures/contracts • labelling schemes • standardised descriptions of sustainable energy investments or measures/contracts • labelling schemes or harmonised frameworks for sustainable energy investments • national strategies for financing sustainable energy investments A. Bullier EASME – Parma 6 May 2014 - This presentation requires oral explanations

  18. EE 19: Improving the financeability and attractiveness of sustainable energy investments • Development of frameworks for the standardisation and benchmarking of investments, such as • labelling and standardisation of sustainable energy investments or portfolios • valuation techniques integrating the 'green value' of buildings • Proposals integrated in a broader approach such as socially responsible investment or 'green buildings' should focus on the energy component. • Target public institutional investors (e.g. public or semi-public pension schemes)in order to • increase the share of their funds invested in sustainable energy • to develop specific funds or investment products A. Bullier EASME – Parma 6 May 2014 - This presentation requires oral explanations

  19. EE 19: Improving the financeability and attractiveness of sustainable energy investments • Sustainable energy financing platforms • Bridge the gap between the financial sector and the sustainable energy sector: • organise dialogue between all relevant stakeholders • develop roadmaps • propose improvements in the legal frameworks • develop template documents and contracts leading to a better understanding of the market. • Proposals from 1 single entity are eligible for this sub-topic • The mechanism for knowledge sharing between countries will be established by the Commission services A. Bullier EASME – Parma 6 May 2014 - This presentation requires oral explanations

  20. EE 20: Project development assistance (PDA) • €1 of EU support must trigger €15 of investments to be launched by the end of the project (not necessarily fully implemented) • Support project promoters to • mobilise all relevant stakeholders, draw up investment inventories, develop feasibility studies, • set up financial engineering instruments, • address legal and procurement issues • Targeted at public and private project promoters, e.g. - public authorities - retail chains - public/private infrastructure operators - real estate managers - SMEs/ industry • Proposals from 1 single entity are eligible for this topic • €17 million available A. Bullier EASME – Parma 6 May 2014 - This presentation requires oral explanations

  21. EE 20: Project development assistance (PDA) • Triggered investments should be of €6-50 million and target • public and private buildings, • retail energy market infrastructure, e.g. smart grids, e-mobility charging points, public lighting networks, district heating networks, distributed renewables (on-site PV, micro-CHP…), demand response, etc. • commercial and logistic properties and sites • Investments must have a lighthouse dimension • Projects should contain organisational innovation in the mobilisation of the investments and/or the financial approach • Innovation should be demonstrated taking into account the situation in the targeted country. • No technical innovation is required • FAQs on PDA: http://bit.ly/OCPJZD A. Bullier EASME – Parma 6 May 2014 - This presentation requires oral explanations

  22. EE 21: innovative energy services and financial schemes for sustainable energy • Roll-out of business models for innovative energy efficiency services (e.g. energy performance contracting), enabling to fully monetise the resulting energy savings • Replication of successful innovative financing solutions and energy services already implemented across the EU. • Particular attention should be given to innovative solutions enabling aggregation, securitisation, project bundling, structuring of clearing houses, or developing new investment mechanisms (e.g. crowd-funding for sustainable energy). • Large-scale capacity building for public authorities and SMEs to set-up or use innovative financing schemes for sustainable energy • Proposals must associate 3 entities from 3 countries • Expected impacts (depending on the project): • Savings of at least 25 GWh/year for every million Euro of EU support • larger investments in sustainable energy and generated renewable energy • better implementation of energy-efficiency policies, number of policy makers influenced • number of people with increased skills • number of people changing their behaviour. A. Bullier EASME – Parma 6 May 2014 - This presentation requires oral explanations

  23. H2020 – Energy Efficiency callDeadline 5 June 2013 17:00 CET - Online resources • Horizon 2020 work programme 2014-2015 • Secure, clean and efficient energy challenge • Energy Efficiency call • Section D: Finance for sustainable energy • Topics EE19, EE20, EE21 • http://ec.europa.eu/research/participants/data/ref/h2020/wp/2014_2015/main/h2020-wp1415-energy_en.pdf • EE 19: Improving the financeability and attractiveness of sustainable energy investments • Call H2020-EE-2014-3-MarketUptake http://ec.europa.eu/research/participants/portal/desktop/en/opportunities/h2020/topics/2364-ee-19-2014.html • EE 20: Project development assistance (PDA) • Call H2020-EE-2014-4-PDA http://ec.europa.eu/research/participants/portal/desktop/en/opportunities/h2020/calls/h2020-ee-2014-4-pda.html • FAQs on PDA: http://bit.ly/OCPJZD • EE 21: innovative energy services and financial schemes for sustainable energy • Call H2020-EE-2014-3-MarketUptake http://ec.europa.eu/research/participants/portal/desktop/en/opportunities/h2020/topics/2365-ee-21-2014.html • Practical information on H2020: http://ec.europa.eu/programmes/horizon2020/en/how-get-funding A. Bullier EASME – Parma 6 May 2014 - This presentation requires oral explanations

  24. For all questions on the Energy efficiency call, please contact:Executive Agency for Small and Medium-Sized Enterprises (EASME – formerly EACI)EASME-Energy@ec.europa.eu or contact your National Contact Point: http://ec.europa.eu/research/participants/portal/desktop/en/support/national_contact_points.html A. Bullier EASME – Parma 6 May 2014 - This presentation requires oral explanations

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