EnergyEnergy

Financing Energy Efficiency

Roman Doubrava

Directorate-General for EnergyC3 Energy Efficiency

SFEI Event, 4.12.12

EnergyEnergy

FINANCE: A PARTICULAR MOMENTUM

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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FINANCE: A PARTICULAR MOMENTUM

• Energy Efficiency Directive (2012/27/EU)

• New Regulatory Frameworks provide an opportunity to develop the EPC market

- Article 3 – required renovation of 3% of central government buildings- Article 7 – energy efficiency obligations 1.5% target to be met- Article 8 - obliges large companies to carry out mandatory energy audits- Article 19 – removal of barrier to energy efficiency in accounting rules- Article 20 – Maximising the benefits of multiple financing schemes

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

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FINANCE: A PARTICULAR MOMENTUM

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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, with EU and national funding to complement;

. Using market mechanisms to avoid crowding out investors and increase leverage;

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

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COHESION POLICY PACKAGE NEGOTIATIONS

• EU General Regulation, ERDF, CF, ESF regulations under discussions between EP-council

• In parallel, EC to start bilateral discussions on country partnership contract to define each MS's priorities (further implemented through OPs)

DG ENER providing input on country status regarding EE/RES investments, implementation of EU legislation, financing schemes… & provide recommendations

• Country position papers will be sent to MS

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WHAT ARE THE BARRIERS TO INVESTMENT?

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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• Cohesion policy funds (2007-2013):

• 5,1 billion € for energy efficiency

• Intelligent Energy Europe Programme – IEE II (2007-

2013):

• 735 million € for ‘soft’ energy efficiency/ renewables projects

• ELENA Facility and MLEI under the IEE II:

• 97 million € for technical assistance to mobilise investments

• European Energy Efficiency Fund (EEE-F):

• 265 million € for investments into mature, bankable

efficiency/renewables projects

FINANCIAL INSTRUMENTS FOR ENERGY EFFICIENCY

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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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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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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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THE EPC OPPORTUNITY

Source: International performance, measurement and verification protocol, EVO, 2010

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THE EPC OPPORTUNITY

CustomerInvestor (Bank)

ESCO

Provision of loan

Repayment of loan

Guarantee for

payments

Payments for

services

Guarantee for savings

Source: European Energy Service Initiative

Financing by

Bank

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DG ENER Energy Performance Contracting (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 and share experience

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

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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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WHAT CAN YOU DO?

You can assist in facilitating the development of the energy services market, by understanding the financial and regulatory frameworks necessary to overcome barriers to EPC

•Identify stakeholders in your MS, including possible speakers

•Highlight best practice examples for dissemination

•Facilitate and present at workshops

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Thank you very much!

For further information on the EPC Campaign please consult our website:

http://ec.europa.eu/energy/efficiency/financing/campaign_en.htm