Energy Efficiency: EU legislative framework - Concrete actions

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2 Energy Efficiency: EU legislative framework - Concrete actions

3 Challenges related to Energy Efficiency financing #EEFIG Lack of knowledge and information Lack of performance data High upfront investments Fragmentation/transaction costs Complexity of financing Sometimes long payback periods The market is not "readable" Financing products do not reflect the EE fundamentals

4 To bridge the investment gap, we need: Projects and projects promoters Driving the demand for finance Large scale capital and investors Driving the supply of finance Functioning market Investment-friendly legislative framework

5 Project Development Assistance (PDA) Topic EE

6 Scope Target group: public and private project promoters (e.g. public authorities or their groupings, public/private infrastructure operators and bodies, energy service companies (ESCOs), retail chains, estate managers and services/industry) Aim: Launch of concrete sustainable energy investment projects and innovative financing solution schemes (focus: capturing untapped high energy efficiency potentials) Building technical, economic and legal expertise

7 Proposals should: Lead to investments launched before end of the action, i.e. signed contracts (or launched tendering procedures as appropriate) Every million Euro of H2020 support should trigger investments worth at least EUR 15 million (1:15). Have an exemplary/showcase dimension in their ambition (i.e. reduced energy consumption and/or investment size) Deliver organisational innovation in financial engineering (e.g. on-bill financing schemes, guarantee funds, factoring funds) and/or mobilisation of investment programme (e.g. bundling, pooling) Demonstrate high degree of replicability and include clear action plan to communicate across EU towards potential replicators

8 Further issues: Focus on existing public and private buildings, street lighting, retrofitting of existing district heating/cooling, energy efficiency in urban transport, energy efficiency in industry and services Size of investment portfolio: EUR 7.5 million EUR 50 million Innovation should be demonstrated taking into account the stateof-the-art Proposals from 1 single entity are eligible for this topic.

9 Expected impacts Delivery of sustainable energy investment projects and innovative financing schemes Leverage of 1:15 Triggering of primary energy savings, renewable energy production and sustainable energy investments during project duration (on territory of participating parties) Demonstration of innovative and replicable investment financing solutions (documenting feedback/uptake form potential replicators)

10 Project examples H2020 PDA RESCOOP MECISE (EU) Portfolio of RES projects in Belgium, Spain, France, UK EEF measures in public buildings/lighting Facilitation of EEF (and RES) investments in member homes Establishment of dedicated financing structure (e.g. revolving fund) or financing facilitation service to enable pooling of resources by "rescoops" for large-scale (bundled) RES/EEF projects EUR 111 million investment after 48 months Energy savings: 16GWh/a, renewable energy: 180 GWh/a

11 MLEI 2020TOGETHER (IT) Refurbishment of public 47 buildings (envelope, boiler exchange) and 5,000 streetlighting points in the City of Torino and municipalities in the Region of Piedmont using an Energy Performance Contracting (EPC) model Building capacity in the administration Development of network procurement as a model to reduce time and cost of administrative tender procedures. Setting up a regional guarantee fund for first losses of EPC projects using Structural Funds (ERDF) EUR 9.4 million investment

12 POSIT'IF (Ile-de-France Region, FR) Promote, Organize, Support, Imagine the Energy Transition in Ile-de-France Major results and successes: As of February 2016, 22 contracts were signed with condominiums in the Ile-de-France Region, representing 3,442 housing. 7 more condominiums were to vote in POSIT'IF has been selected as the first project to benefit from a EUR 400M support programme for energy refurbishment in France set up under the European Fund for Strategic Investment (ESFI) that will provide a guarantee for a EUR 100M loan from the EIB that Energies POSITIF has already negotiated and which it will use to establish its finance pillar and provide finance to condominiums. 12

13 EE Making the energy efficiency market investible

14 The challenge Lack of trust of investors and financiers in the financial viability of energy efficiency measures. Banks, institutional investors and asset managers lack the skills and operational tools to effectively assess sustainable energy investments and integrate energy efficiency in their investment strategies. Access to the capital markets for energy efficiency investments is hampered by the lack of standardisation of assets.

15 The scope 1. Frameworks for the standardisation and benchmarking of energy efficiency investments 2. Gathering, processing and disclosing large-scale data on actual financial performance of energy efficiency investments, 3. Targeting institutional investors

16 1. Frameworks for the standardisation and benchmarking of EE investments Development, demonstration and promotion Frameworks could be (not limited to): labelling schemes, project rating methodologies risk assessment tools, standardised legal and financial structures of assets (loans, guarantees, energy performance contracts etc.) Develop securitisation and rating models for energy efficiency based financial products, to allow access to secondary markets. Proposals integrated in a broader approach such as socially responsible investment should focus on the energy component.

17 2. Data on financial performance of energy efficiency investments Create a track record for energy efficiency in different sectors (buildings, industry, transport, etc.). Gathering, processing and disclosing large-scale data on actual financial performance of energy efficiency investments Further integrating the 'green value' of buildings in property valuation through collection of market data across the EU actions targeted to the key actors in the sale or lease process (e.g. real estate agents, property valuers, notaries, etc.)

18 3. Targeting institutional investors Engaging with institutional investors (e.g. public pension schemes) The objective is that investors will: increase the share of their funds invested in energy efficiency, or develop specific funds or investment products. Supporting the integration of energy efficiency in portfolio management strategies for institutional investors and/or fund managers, including through re-definition of fiduciary duties.

19 The expected impact Reduced uncertainty as regards investments into energy efficiency and increased investor confidence; Frameworks, standardisation, benchmarking, standardised descriptions and data evidence of financial returns of energy efficiency investments agreed and accepted by the market; Higher allocation of institutional investments to energy efficiency; standardisation of assets enabling securitisation; development of a secondary market for energy efficiency assets.

20 Relevant projects examples (call 2014) Investor Confidence Project Europe (ICP Europe): Increase investor confidence and reduce transaction costs through standardisation Joint development with the finance sector of protocols for process and data management in building energy retrofit projects Replicates a US initiative in 5 European countries. SEI Metrics: Develop an assessment toolbox that will enable to measure the performance of investors' portfolios vis-à-vis climate and energy scenarios. Create visibility on the market in order to monitor the impact of investment portfolios.

21 Relevant projects selected in 2015 (contract in preparation) ET RISK Methodology to assess the risks associated to an Energy Transition scenario for institutional investors. Equity valuation models and credit risk models will be integrated into the products of mainstream service providers such as Standard & Poor's. SEAF IT based framework for valuation and benchmarking of smaller sized sustainable energy projects (energy efficiency, demand response, distributed renewable generation etc.), reduction of transaction costs and risks and enhancement of bankability enhance investors' confidence, through innovative and relevant asset valuation methodologies accepted by the market and standardized descriptions of sustainable energy investments.

22 EE Development and roll-out of innovative energy efficiency services

23 The Challenge Scaling up of EE investments needed (~100 bn /a) Tapping private investments Monetise energy savings to create revenues of EE measures Support for new funding approaches and business models to reach full market potential

24 The Scope Developing, demonstrating and standardising new types of energy efficiency services and business models In all sectors (incl. mobility) New types of actors and/or new market segments Business models for implementation of energy audit recommendations in industrial and service companies (with focus on high thermal demand)

25 The Expected Impact Viability of innovative energy efficiency services. Investments in sustainable energy (in million Euro of investments per million Euro of EU funding) Primary energy savings triggered by the project within its duration (in GWh/year per million Euro of EU funding) Renewable energy production triggered by the project within its duration (in GWh/year per million Euro of EU funding)

26 Intelligent Energy Europe (IEE) Project Examples EESI2020: Training of EPC market facilitators Transparense: Country-specific Code of Conducts for EPC project developers Streetlight EPC: support public authorities to develop EPC projects in street lighting

27 Horizon 2020 projects (Call 2014) EPC+: standardized technical and contractual solutions for specific market sectors, training of clusters of companies, EPC platform Trust EPC South: financial valuation tool for EPC on commercial buildings based on Green Rating methodology, tailored capacity building activities. EnPC-INTRANS: large-scale capacity building for local public authorities and SMEs on EPC in less developed markets

28 Horizon 2020 projects (Call 2015) GuarantEE Development of model contracts to overcome split incentives dilemma in buildings Project development with tripple-win approach EPC trainings Coordinator: Berlin Energy Agency (BEA)

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