UK EE Financing Programmes: An Update

Transcription

1 UK EE Financing Programmes: An Update Dr. Steven Fawkes ACEEE Financing Forum 15 th May 2013

2 Agenda Update on: Green Deal ECO Green Investment Bank Other programmes, projects and initiatives 2

3 Green Deal the basics Financing of efficiency with repayment through electricity bills Tied to meter i.e. property Golden Rule: repayments always less than estimated savings Target of 14 billion investment over 10 years Cf. 80 billion requirement Light credit assessment: 80% eligible year debt from private sector Residential focus but can be applied to business 3

4 Eligible measures 45 eligible measures in categories: Heating, ventilating and air conditioning Building fabric Lighting Water heating Microgeneration 4

5 Context housing stock & energy 76% of UK properties built before 1980 Pre % % % % % Post % Homes produce 27% of GHG emissions Domestic energy bills a big social/political issue: : 37.1% real increase in average gas bill 15.5% real increase in average elecricity bill One in five now in debt to energy supplier 6 million households in fuel poverty 9 million by 2016? 5

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7 More energy price rises expected 7

8 Green Deal - Process & Actors Assessment Recommendations Quotes Plan Implementation Repayment Green Deal Assessor Green Deal Provider Green Deal Installer Electricity suppliers Green Deal Finance Company Green Deal Oversight and Registration Body (ORB) 8

9 Green Deal Finance Company (GDFC) Structure and function Industry led consortium > 50 members Provides finance to Green Deal Providers Funded by 7m loan from DECC to cover set-up 69m Loan and Junior Capital from 16 members of GDFCo 30m Junior Capital Facility of 20m and Contingent Capital Facility from DECC 125m Senior Debt from UK Green Investment Bank Negotiating 125m debt with European Investment Bank Customer offer 6.96% Set up charge 63 Annual operating charge 20 Exploring Islamic financing option to access 2.7 million Islamic population 9

10 Additional support for Green Deal DECC 125m to fund Green Deal Cashback Scheme Available on first come first serve 10

11 Green Deal status 16 th April Launched 28 th January Accredited Green Deal Assessor organizations 1,003 Accredited Green Deal Assessors 40 Green Deal Providers 629 Accredited installers 9,268 Green Deal Assessments completed 1 st Green Deal good to go, 2 others being reviewed (11 th April) GDFC established and funded ( 244m) 11

12 Green Deal gaining momentum 1,200 1, The latest figures on the Green Deal show that this new market is gathering real momentum; 9,268 Green Deal assessments taking place in just over two months is very encouraging and shows a genuine interest from consumers. Greg Barker, Minister, DECC Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Assessor organisations Green Deal Providers Individual Advisors Installer organisations 12

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14 Inevitable teething problems We ve had the official launch this time accompanied by a press campaign but the sad reality is that the systems aren t ready yet. The largest part of the system still missing is the finance, but there are also problems with the wording in Green Deal plans, the snail-like pace of certifying Assessors and the lack of guidance about how ECO will work. I d be interested to hear from anyone who has actually produced and financed a Green Deal plan anyone? Diary of a Green Deal Provider 3 rd April

15 Green Deal for Business Always envisaged that Green Deal could be used by business Limited number of Green Deal for Business assessors Lot of potential demand Very early days 15

16 Local Authority GD initiatives - 1 Birmingham 75m Prudential borrrowing 25m from ECO Will fund Green Deals directly and be repaid through electricity bills Intention to aggregate and issue bonds Appointed Carillion as exclusive delivery partner 8 year framework contract worth up to 600m Aim to retro-fit 60,000 houses plus non-domestic buildings Commitment to create local jobs 16

17 Local Authority GD initiatives - 2 Leeds & 10 surrounding local authorities 100m over first 3 to 4 years 12,000 houses Likely to appoint a delivery partner in May Similar initiatives in: Newcastle Sussex London Cambridge looking to create a sustainable energy fund to finance retro-fits and sustainable generation projects 17

18 Issues with Green Deal Max loan of 10,600 under Golden Rule at 7% 25 year loan Quality of GD Assessment (2 day training) Potential scams (already happening) Subsequent property buyers not liking GD liability Potential for massive disappointment if savings are not delivered a mis-selling scandal waiting to happen? 18

19 Green Deal questions Is the demand there? / How do we create demand? Will demand be created in segments that need it most e.g. fuel poor? Why borrow at 6.96% when you can use: Personal loans from 5% Re-mortgage at 1.75 to 2.5% (initial rates) Savings currently earning very low rates? Will savings be delivered? 19

20 ECO Energy Company Obligation A licence condition for suppliers with: > 250,000 domestic customers > 400 GWh electricity supplied to domestic customers > 2,000 GWh gas supplied to domestic customers 1 January 2013 to 31 March 2015 Replaces previous schemes (CERT and CESP) ECO obliges suppliers to spend on efficiency relative to energy supplied c. 1.3 billion per annum ECO money can be used to supplement Green Deals Assists with hard to treat and expensive situations like external wall insulation 20

21 ECO has 3 components Carbon Saving Obligation Solid wall and hard to treat cavity wall insulation that can t be financed under Green Deal Carbon Saving Communities Obligation Insulation measures in specified low income areas (15% of each company s obligation) Affordable Warmth Obligation Insulation and heating measures to consumers in private tenure properties receiving benefits e.g. elderly, disables and families 21

22 ECO brokerage Fortnightly auction Green Deal providers sell lots of future ECO delivery to energy suppliers 6 auctions by end of March Total value 68.9 million to date Energy suppliers very keen to deploy ECO funds 22

23 Green Investment Bank Formally launched November billion to deploy in 3 years Aims to crowd in private investment 3 areas of focus: Off-shore wind Waste to energy Non-Domestic Energy Efficiency (NDEE) Must invest alongside market on market terms No soft capital 23

24 GIB NDEE progress Selected 2 NDEE fund managers - 50m allocated to SDCL - 50m allocated to Equitix Fund managers have to source deals and matching capital Deals size 500k to 30m Deals > 30m will be done directly by GIB 24

25 GIB NDEE progress - 2 5m EPC project for Kingspan Working on a development model with Greater Manchester 50m committed to Aviva REalM Energy Centres Fund Fund has invested in 1 st project ( 36m - 18m from GIB) Cambridge University Hospitals NHS Trust Biomass boilers, CHP and heat recovery from medical waste incineration Energy centres rather than end-use energy efficiency 25

26 GIB issues Lack of soft money to assist development process Lack of skills developing large scale projects in supply chain and end-users Fund managers relatively passive Relatively expensive money Paradox of addressing market failures by investing alongside the market 26

27 Other Local Authority initiatives Peterborough ESCO - Owned by Local Authority Scope: Green Deal NDEE Renewable projects Collective purchasing Energy supply to local consumers Sell excess power to grid Achievements Solar PV framework (1 MW installed) EPC procurement framework due May

28 Other initiatives Royal Bank of Scotland - 200m corporate energy efficiency fund - Draws on government s Funding for Lending scheme - Borrowers must have revenues > 25m - 5 to 7 year tenor 28

29 Summary and conclusions Green Deal launched Activity increasing Early days Potential issues with demand Local Authority led model is promising Green Investment Bank launched NDEE a key area Early days Need to increase flow of investment quality deals Still need to access long-term low cost funds Some other interesting developments Peterborough ESCO Many other Local Authorities gearing up to create ESCOs Royal Bank of Scotland allocation of 200m 29

30 Contact Steve Fawkes Steven Fawkes