EnergyEnergy

Financing Energy EfficiencyTowards 2020 and beyond

Dr. Tóth András György

Európai BizottságEnergiaügyi FőigazgatóságEnergiahatékonyság Osztály

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OUTLINE

• 2020 Challenges

• Implementation of the existing framework

• Making energy efficiency „investible“ – ensuring the access to affordable and properly designed finance

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Energy Efficiency 2020 target

Growth & Jobs benefits of EE:

•Emissions & carbon intensity reduction

•Energy security & competitiveness improvement

•~17 jobs per €1m invested

•€1 investment generates €2-5 in public revenue (reduced unemployment benefits, increased fiscal revenue)

•Labour intensive activities (mostly in building sector)

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Energy performance of buildings Directive• Minimum energy performance requirements• Energy Performance Certificates • Nearly zero-energy buildings• Certification and inspections

Eco-design and Energy Labelling Directives• Minimum performance requirements on products

24 measures adopted so far: electrical motors, fans, light bulbs, washing machines…

• Labelling

Energy Saving Directive• Indicative 9% EE target by 2016• National EE Action Plans (NEEAPs)

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Current EU Regulatory Framework

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A new Energy Efficiency Directive

• Creating benefits for consumers• National energy efficiency obligation scheme for utilities (1.5%

saving obligation)• Smart metering• Ensure accuracy & frequency of billing based on actual

consumption• Provide appropriate information with the bill

• Energy efficiency in transmission and distribution of energy

• Network tariffs• Monitoring of efficiency levels of generation installations• Priority Access for CHP

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• Public sector to lead by example• Procurement of high energy efficiency products, services and

buildings• Annual renovation rate of 3% of central buildings above 250 m2

• Local energy efficiency plans/Renovation roadmaps• Introduction of energy management systems• Use of Energy Performance Contracting

• Involvement of the private sector• Incentives for SMEs to undergo energy audits• Mandatory audits for large companies

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• Timely transposition and effective implementation key • Interpretative notes addressing the key provisions of the

EED:• Article 5: renovation of central government buildings• Article 6: public procurement• Article 7: energy efficiency obligations (or alternatives)• Article 8: energy audits and energy management systems• Articles 9-11: smart metering and billing• Article 14: energy efficiency in district heating and cooling• Article 15: grids and demand response issues

• Intense schedule of Member States' Committee meetings since September 2012.

Priority #1: implementation

EnergyEnergy*preliminary data; Table available at: http://ec.europa.eu/energy/efficiency/eed/reporting_en.htm

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Priority #2: financing

• Energy savings targets across sectors require investment of around € 850 billion (2011-2020)

• Around € 85 billion per year

• Buildings take lion’s share of ~ € 60 billion/year

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Current EU Financial Support to EE• Cohesion policy funds (2007-2013):

• 5,1 billion € for energy efficiency (up to 8 billion € if all MS re-allocate 4% for housing under ERDF)

• Intelligent Energy Europe Programme (2007-2013):• 735 million € distributed for ‘soft’ energy efficiency / renewables projects• Capacity building, awareness raising, best practices sharing

• ELENA Facility:• 97 million € still available for technical assistance to mobilise investments• To scale up projects and reduce transaction costs and support Project

development phases

• European Energy Efficiency Fund (EEE-F):• 265 million € for investments into mature, bankable efficiency/renewables

projects (195 million € still left)• 20 million € for technical assistance• Role model projects, leverage effect, EPC support…

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A new Multiannual Financial Framework MFF 2014-2020

• Cohesion funding to allocate min. 23 billion € to EE/RES and urban transport (doubling current allocations)

• Horizon 2020: 5.6 billion € is to be allocated to research and innovation in "Secure, clean and efficient energy"

Will include an IEE-type follow-up programme

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A new approach to sustainable investments

•MFF in line with EU 2020 strategy: "smart, sustainable & inclusive growth"

• Conditionality: implementation of relevant EU legislation

• Cohesion policy Thematic concentration: shift to a competitive low carbon economy

• Public authorities to pave the way (public building renovation, use of EPC…)

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'Traditional' implementation structure

Grant support• Ex-post reimbursement • For projects or project

components without revenue-generating capacity

• One-off support

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GrantsGrants

Managing AuthorityManaging Authority

Final recipientsFinal recipients

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EU Funding: more value for money

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. Attract & leverage funds from private investors

. Big bulk of EE/RES investments should come from private sector

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

. Financial Instruments and Energy Performance Contracting

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

. Increase quality of project selection and financing processes: Guidance to be finalised in November

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Innovative Financial Instruments

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•MS as encouraged to make better use of ESI Funds through the set up of FI (leverage private funding, provide market incentives..)

•"Off the shelf" instruments: standard terms and conditions for predefined FI to be set up/implemented by MA on:

• Procurement rules• State Aid compatible• Min. technical and legal requirements

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Public banks & institutional investors

The EEE F: a new EU Financial Instrument

Public financial institutions

Junior/FLP - C Shares €Junior/FLP - C Shares €

Mezzanine - B SharesMezzanine - B Shares

Senior – A SharesSenior – A Shares

NotesNotes

EU

EIB, CDP, Deutsche Bank

Size at first closing € 265m Target Up to € 700m

Institutional investors

EIB, CDP

€ 125m

€ 23m

€ 117m

• Address specific needs of commercially viable EE and RES projects • Final Beneficiaries are local/regional public authorities • Senior/junior/convertible debt, equity, guarantees, forfeiting loans (supporting

EPC)• Technical assistance 20M€ (grant) for project development services

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'Financial instruments' implementation structure

Holding Fund (HF)Holding Fund (HF)

Managing AuthorityManaging Authority

Fund / Financial Intermediary

Fund / Financial Intermediary

Fund / Financial Intermediary

Fund / Financial Intermediary

Final recipientsFinal recipients

Financial products

Final recipientsFinal recipients

Financial products

Co

-fin

anc

ing

Ad

dit

ion

al

reso

urc

es

Operational Programme / public policies / resources

Market situation & appropriate promotional instruments 17

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What is Energy Performance Contracting?

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Example 1: Jewish Museum Berlin (1)• Financing structure:

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Example 1: Jewish Museum Berlin (2)

Measures:•buildings upgrade, energy efficiency

Results:•Reduction of CO2 emissions 1,812t p.a. approx. 55% compared to baseline•Guaranteed energy savings €294,327 p.a. (43.2%)

Highlights:•Pilot project with the forfeiting structure•Attractive investment instrument to support advanced projects•Winner of European Energy Service Initiative's Award

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Example 2: London ReFit (1)

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• Financing structure:

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Results:•£78m investments•CO2 reduction: 60,000t p.a.•680 public sector buildings for 56 organisations•£2,1m annual energy bill savings since 2008

Highlights:•High market replication potential

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Example 2: London ReFit (2)

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Thank you for your attention !

andras.toth@ec.europa.eu

For further information on energy efficiency please consult our website:

http://ec.europa.eu/energy/efficiency/