Financing and Managing Energy Efficiency Improvements: the IPEEC Experience

Amit Bando, Executive Director, IPEECMoscow, 25 June 2012

1 What is IPEEC? 2 Energy Efficiency Finance.3 Energy Management.4 IPEEC-Russia Energy Management Training Program – A Proposal.

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What is IPEEC? 1.

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IPEEC is a High Level International ForumProvides global leadership on energy efficiency by

identifying and facilitating government implementation of policies and programs that yield high energy-efficiency gains.

Aims to promote information exchange on best practices and facilitates initiatives to improve energy efficiency.

Accelerates adoption of energy-efficient policies & practices through international cooperation & information sharing on policy analysis, programs, tools, & proven practices.

Reports to ministerial forums such as the Clean Energy Ministerial (CEM) and the G-8/G-20 Summits.

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IPEEC is an Autonomous Entity

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FORMALLY ESTABLISHED IN 2009 AT THE G8 SUMMIT IN L'AQUILA, ITALY

RESULTING FROM THE HEILIGENDAMM DIALOGUE PROCESS

The IPEEC Secretariat is located in Paris, France

MEMBERS ACCOUNT FOR OVER 80% OF WORLD GDP AND ENERGY USE

Italy

Russia

Japan

Republic of KoreaChina

India

Australia

GermanyUnited

KingdomFrance

Canada

USA

Mexico

Brazil

EU

IPEEC - Guiding Principles Improving energy saving and energy efficiency is one of the

quickest, greenest, and most cost-effective ways to address energy security and climate change as well as to ensure sustainable economic growth 

All countries share common interests in improving their energy efficiency

There is abundant potential for international cooperation among them

Will contribute to improvement of energy efficiency at the global level

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A WORLD WHERE KEY NATIONAL POLICY MAKERS VIEW ENERGY EFFICIENCY AS AS

RESOURCE AND IMPLEMENT COST EFFECTIVE POLICIES TO PROMOTE IT.

Basic research

Technologyjourney

Applied research Early demonstration Full demonstration Marketed product Warranted product

Proofof...Principle Concept Validity Viability Value Quality

Individual innovators

Companyjourney

Small group: start-up/unit in a company

Medium-size operation Large scale operation

Owncapital Venturecapital Revenues Prof it

s

Demonstration& sample distribution

Market journey

Early adopters & niches Rational economic purchase Technology& market evaluation

Awareness Positivepotential Marketpull Feedback

General regulation

Regulation journey

General regulation Specific regulation General regulation General regulation

Negativeoftenunintended Neutral Positive Positive Neutral orpositive

Transition Technologies, Productsand Services Follow Parallel Journeys

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Energy Efficiency – Program Potential

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Energy Efficiency Finance

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IPEEC Member Experience

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Findings from France, India, Japan, Russia & USA :

•Key observations: Most countries target the residential sector (except

Japan that focuses on the industrial & commercial sector)

Most EE financing programmes are subsidized (e.g. USA & France)

Return on investment from EE is higher than the incremental return from public expenditures

•Initiatives to promote EE finance: Super ESCOs Clean Development Mechanism (CDM) Eliminate free riders Credit lines, revolving funds & special purpose fund Partial credit guarantees & loss reserves

Support Mechanisms: ESCOs

Regulations needed for an ESCO to be efficientEnsure quality of services and service delivery from ESCOs

Implement proper M&V protocols Set standard procedures for ESCO project implementation

Form a separate quasi-legal body with adequate technical knowledge to arbitrate disputes between ESCOs and project owners 11

Financial Institution

Contractor Customer

Service:- financing,- planning & installation of

energy saving measures- energy savings guarantee

Loan & interest payments

Loan(s)

RemunerationEnergy Performance Contracting

Source: Berlin Energy Agency

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Maturity of MarketsPremature Market

Market in Transition

Mature Market

Finance Mechanisms

• Grants• Subsidies

• Performance contracting• Carbon financing

• Innovative lending

Main barriers

• High initial & transaction costs• Liquidity issues

Recourse financing, lack of M&V, implementation issues

• Risk perception• Split incentives

Financing tools

• Accelerated depreciation• Tax deductions • Tax Credits• Rebates & subsidies

• Guaranteed savings• Shared savings• Carbon financing • Free lending

• Interest rate• Loan loss reserve• Risk guarantee funding• On-bill financing• Revenue decoupling,• Revolving loan funding

EE Finance in IPEEC CountriesChina:

RMB 4.57 trillion (US$1 = RMB 6.36) in total government subsidies (95% of residential building retrofits)

India: Bureau of Energy Efficiency (BEE) provides

support for private investors: Risk sharing instruments, preferential rate loans, risk

guarantees, loan guarantees, ESCO policiesMexico:

Development of « green mortgage » Integrated urban development – systemic

approach Use of climate finance: CDM, NAMAs

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The Russian Sustainable Energy Financing Facility (RUSEFF)

US$ 300 million from EBRD for on-lending through local banks for EE & RE investments.

Eligibility: US$ 500,000 to US$ 6.5 million. 

Supported by a comprehensive technical assistance package, to help identify & develop projects. 14

Energy Management3.

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IPEEC’s Energy Performance Work• Reducing global energy use in industrial facilities and

commercial buildings to improve energy security and reduce global greenhouse gas emissions by:

– Encouraging industrial facilities and commercial buildings to pursue continuous improvements in energy efficiency.

– Promoting public‐private partnerships for cooperation on specific technologies or in individual energy‐intensive sectors.

COOL ROOFS

STEEL CEMENTPOWER

Working Groups

ENERGY MGMT

CHP

IPEEC - Key Focus AreasEnergy Management

Foster & accelerate energy management & continuous energy performance improvements in industrial facilities & commercial buildings

Cool Roofs

Accelerate the development and deployment of cool roofs and other passive technologies

Sectoral: Power, Steel, Cement

Public-Private Partnership to:- Promote state-of-the-art technologies- Share best practices- Conduct performance benchmarking

Combined Heat & Power (CHP)

Increase awareness of the vast potential of CHP & District Heating & Cooling (DHC) to:- Decrease emissions of GHG gases & other air pollutants- Reduce fuel consumption & dependence on imported energy- Identify barriers to use CHP & DHC - Recommend policies to overcome them

A Systemic Approach – Local Government Action

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New York Plan:85% of the NYC 2030 building stock already exists

todayGoal: reduce citywide GHG emissions by 30% by

2030Three important measures:

New York City Energy Conservation Code Greener, Greater Building Plan Emission cuts in municipal and institutional

buildings  If fully realized, the EE policies that have been

achieved/ongoing/proposed by 2010 should result in 80% of the 2030 GHG reductions required from efficient buildings

 Other US Cities are now trying to catch-up (e.g.: Chicago)

Holistic City Management – Public Private Partnership

Broad range of services linked with EE to address new urban challenges:

Energy servicesMobility services: traffic reduction, network managementWater management & supplyPublic safety, healthcare & administrationBuilding EEResources optimisation

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IPEEC-Russia Energy Management Training Program – A Proposal

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Proposed IPEEC-Russia Program Highlights & Purpose

Use IPEEC in-house capabilities to design & deliver a comprehensive training program on energy management & program monitoring in Russia Develop qualified workforce in public

authorities/companies who can conduct in-country energy manager training programs: “train the trainers”

Establish synergies with other IPEEC initiatives and relevant training programs.

TRAINING PROGRAM Energy Management &

Program Monitoring

IPEEC In-House Capabilities

IPEEC Members’ Bilateral Initiatives

IPEEC-Russia Program – Proposed Phases

State & Regional

Authorities

Training, Monitoring & Certification Infrastructure

International experts from IPEEC

Industry (State & Private

Owned)

Training Training

• Disseminate information in other countries• Cooperate with other IPEEC member nations to scope out

options for replication of training program outside Russia

Step 1: Establish the infrastructure

Step 2: Train the trainers

Step 3: Expand the program

State & Regional

Universities

IPEEC members’ bilateral initiatives

IPEEC-Russia Program – Proposed Features

Develop a qualified workforce that can conduct in-country energy manager training programs: “train the trainers”

Establish a centralized sharing platform to collect and distribute information about energy management

Develop a common energy savings and management tool kit to be used throughout the program

Coordinate pilot programs across countries to showcase the value proposition of energy management

Work towards national certification programs to recognize entities that comply with energy management system standards such as ISO 50001

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Thank You

Please contact us for further details:

amit.bando@ipeec.org

Tel: + 33 (0) 1 40 57 65 24www.ipeec.org

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