Alternative financing schemes for energy efficiency in buildings A - - PowerPoint PPT Presentation

Alternative financing schemes for energy efficiency in buildings

A presentation of paper 3-221-13 of the ECEEE Summer Study 2013 Hyères, 5 June 2013

Adrien BULLIER Project officer Intelligent Energy Europe programme, European Commission abullier@gmail.com

The sole responsibility for the content of this presentation lies with the authors. It does not necessarily reflect the opinion

• f the European Commission or ADEME, which are not responsible for any use that may be made of the information

contained therein.

Christophe MILIN Economist ADEME christophe.milin@gmail.com

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Looking for the right tool…

• To achieve the EU's 2050 objectives we need (among others):

Deep renovation of buildings (50%-80% savings, investments on building envelope) + A higher renovation rate

• Investments required = €60bn/year on buildings
• The only adapted financial resource is the future energy savings
• Current schemes not scalable or generate lower savings (20-40%):
• Grants and tax incentives have a direct impact on public budgets
• Soft loan schemes are limited by householders' debt capacity
• Energy performance contracting focusses on HVAC systems
• The absence of proven, scalable and sustainable financial models

is a key obstacle to make those investments happen

• There is already a lot happening across Europe…
• A. Bullier, C. Milin – Alternative financing schemes for energy efficiency in buildings – ECEEE Summer Study 2013 - This presentation requires oral explanations

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Financing deep renovation of buildings

15 y 50+ y 25 y 5 y Payback / cost

Operation & maintenance HVAC + O&M Insulated building envelope (+ Renewables) + HVAC + O&M Very insulated building envelope Ventilation and air tightness + HVAC (+ Renewables) + Regulation / O&M

Energy savings Deep renovation Factor 4 / low energy retrofit HVAC systems Low hanging fruits

• A. Bullier, C. Milin – Alternative financing schemes for energy efficiency in buildings – ECEEE Summer Study 2013 - This presentation requires oral explanations

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Energy performance contracting Can it be adapted for deep renovation?

Energy Cost

Contract starts Contract ends

Energy cost (after)

• A. Bullier, C. Milin – Alternative financing schemes for energy efficiency in buildings – ECEEE Summer Study 2013 - This presentation requires oral explanations

W O R K S

Energy cost (before)

• 1. Extension of

contract duration to allow payback of deep renovation At the end of the contract, cost savings are for the building owner

• 2. Extra contribution to reimburse

the investments: grants or contribution of building owner

• 3. Lower cost of

capital to reduce the contract duration Guaranteed energy saving are used to repay the investment

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• A. Bullier, C. Milin – Alternative financing schemes for energy efficiency in buildings – ECEEE Summer Study 2013 - This presentation requires oral explanations

IEE project MLEI Accelerate (Spain)

Supporting EPC uptake…

Energy service companies

What is an EPC? How much savings can we do? How to make it bankable? How to procure an EPC? Audits Performance requirements Technical specifications Legal framework Procurement (negotiated procedure or competitive dialogue)

Pooling Bundling

Owner A Owner B Owner C

Berlin Energy Savings Partnership

Market facilitation Assistance to building owners

IEE project MLEI ENSAMB (Norway) IEE project MLEI PARIDE (Italy) With more buildings I can level risks and reduce transaction costs

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IEE project MLEI PARIDE (Teramo, IT)

Bundling EPCs to reach a critical size Contractual options for joint procurement

• A. Bullier, C. Milin – Alternative financing schemes for energy efficiency in buildings – ECEEE Summer Study 2013 - This presentation requires oral explanations

Beneficiary Beneficiary Beneficiary Ad hoc structure Contractor Beneficiary Beneficiary Beneficiary Contractor Shared liability 1 investment contract Back-to-back contracts Beneficiary Beneficiary Beneficiary Contractor Shared procurement with X packages X investment contracts 1 2 3 1 investment contract

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IEE project MLEI Newinretro Newcastle (UK)

Disconnecting debt from the building owner - Using the UK's Green Deal

• A. Bullier, C. Milin – Alternative financing schemes for energy efficiency in buildings – ECEEE Summer Study 2013 - This presentation requires oral explanations

Source: Martin Walker, Newcastle City Council

!

Interest rates @ 7% / 25 y => low or medium savings

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Public third-party investment operators to develop the market – French pilots

• A. Bullier, C. Milin – Alternative financing schemes for energy efficiency in buildings – ECEEE Summer Study 2013 - This presentation requires oral explanations

Energies Posit'If (Ile de France, condominiums) OSER (Rhône-Alpes, public buildings

Source: Caisse des Dépôts et Consignations, 2010

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Energies POSIT’IF Condominium Administrator

Energies POSIT'IF: public third party investment operator for condominiums

• A. Bullier, C. Milin – Alternative financing schemes for energy efficiency in buildings – ECEEE Summer Study 2013 - This presentation requires oral explanations

"Local facilitators": energy agencies, associations Architects Thermal engineers Energy service companies Construction companies

Mature projects Sub-contracting

• r co-contracting

agreements

Source: José Lopez, Energies POSIT'IF

• 1. Unconditional

phase Design of measures

• 2. Conditional phase with options

Implementation

• f the works

EPC (guaranteed savings) O&M with shared savings

+

• r

IEE project MLEI POSIT'IF Ile de France (FR)

Third party investment ERDF Jessica fund (loans/equity) - potentially Grants and tax incentives for home owners (tbc) Soft loans for homeowners (tbc) Long-term loans (low interest rates) Financing plan Equity (local authorities & private partners)

10 EPC EPC EPC

ESCO / 3rd party investor Bank

Loan Annuities Capex Energy savings

ESCO / 3rd party investor Bank

EPC EPC EPC

Forfaiting – transferring the ESCO's debt to banks

• A. Bullier, C. Milin – Alternative financing schemes for energy efficiency in buildings – ECEEE Summer Study 2013 - This presentation requires oral explanations

After 1-2 years, the contract becomes a safe stream of revenue

EPC with TPI Forfaiting

Guarantee O&M fees

ESCO's intervention potential is limited by its debt capacity

Buy future receivables Assign claim to the bank

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ESCO Bank Factoring fund Financial markets

Loan

Guarantee fund(s) to cover first losses Soft loans / interest rates buy down

Loan EPC Securitisation Bonds

Initial capital + first risk coverage

Increasing available funding Public support schemes

Portfolio guarantee fund for payment delays

!

Requires critical size and standardised assets  pipeline of projects

BGEEF (Bulgaria) BGEEF (Bulgaria) Estonia, Lithuania London EE Fund EESF (Bulgaria)

!

Banks don't want to increase their debts either

!

Banks don't trust energy savings as revenues

!

High interest rates kill savings potential

• A. Bullier, C. Milin – Alternative financing schemes for energy efficiency in buildings – ECEEE Summer Study 2013 - This presentation requires oral explanations

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Scaling up Public intervention needed !

• 20% of EU structural funds allocated to EE and RES

= €17bn (2014-2020) = 2% of required investments by 2020 (€115bn / year)

 Use public subsidies to leverage private funding

• "Jessica" funds using EU Structural funds for soft loans

(Estonia, Lituania, London), guarantees on loans, or equity

• Project development assistance: €1 in grant leads to €20 invested

(ELENA, MLEI PDA – IEE programme)

• We have all the pieces of the puzzle! But the vision is lacking…
• Diffusion of the existing models is essential to replicate them
• Massive capacity building is needed for public authorities
• A. Bullier, C. Milin – Alternative financing schemes for energy efficiency in buildings – ECEEE Summer Study 2013 - This presentation requires oral explanations