Innovative financing for energy efficiency
Brussels, 28 November 2014 Roman Doubrava Finance Team Leader, DG ENERGY, Energy Efficiency Unit, European Commission
MFF 2014-2020 – new framework and opportunity • Cohesion policy funding to allocate some EUR 17 billion to EE (tripling current allocations) – better use of Financial Instruments is key to up-scaling of investments • Horizon 2020: EUR 5.6 billion is to be allocated to research and innovation in "Secure, clean and efficient energy" EE call and call on Smart Cities and Communities • LIFE + funding: 80 MEUR in 2014 – 2017 – for "Private Finance 4 Energy Efficiency" • EEEF – funds still available, 217MEUR allocated • Project Development Assistance – 50MEUR under H2020 in 2014 2015, significant role for ESIF! IEE funds still available! 2 Energy
Financial Instruments in MFF 2014-2020 Centrally managed by COM (Financial Regulation)
Research, Development Innovation Deployment Growth, Jobs and Social Cohesion
Infrastructure/ transport/ICT/ energy (incl EE/RES)
Horizon 2020 Equity and Risk Sharing Instruments
Competitiveness & SME (COSME) Equity & guarantees
Creative Europe Guarantee Facility
Social Change & Innovation
Erasmus for all Guarantee Facility
Connecting Europe Facility (CEF) Risk sharing (e.g. project bonds) and equity instruments European Fund for Strategic Investments (proposal) Energy
Shared Management with MS (Common Provisions Regulation)
Instruments under Structural and Cohesion Funds EU level (central management)
National/regional instruments (shared management)
Off-the shelf FIs
Tailor made FIs
Significant higher amounts than currently!
EE finance – practical work Towards a stable and predictable investment climate Proper implementation of the EED/EPBD Work with Member States Inputs to EE financing "political" debate, even at the national level Improving the financing infrastructure Work with DG REGIO (ESIF), DG CLIMA (PF4EE), ENTR (COSME) Work with Financial Institutions Accelerated transformation of Energy Efficiency Market Support for innovation (technology, process, financial) – SET Plan IR Instrument: H2020 Technology development and implementation support Innovation in policy implementation Capacity building Support to innovative financing including project development assistance Energy
H2020 – Energy Efficiency - Finance for Sustainable Energy
Key objectives
Engage with financial sector and increase investor confidence Build a pipeline of lighthouse projects Roll out of Energy Services (incl Energy Performance Contracting) and other innovative financing schemes Build capacity for sustainable energy finance solutions in all sectors "Sustainable energy" refers to energy efficiency and/or renewable energy Grants under topics EE19-20-21 do not fund hardware investments Information on this slide is indicative - Only the Horizon 2020 call for proposals has a legal value
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H2020 – Energy Efficiency - Finance for sustainable energy
Overview of topics
EE 19: Improving the financeability and attractiveness of sustainable energy investments 1. 2. 3.
Development of frameworks for the standardisation and benchmarking of investments Targeting public institutional investors (e.g. public or semi-public pension schemes) EU and national sustainable energy financing platforms
EE 20: Project development assistance (PDA) • • •
Public and private entities to develop lighthouse projects Focus on public & private buildings, retail energy market infrastructure, commercial & logistic properties and sites EUR 1 from the EU must lead to EUR 15 in investments
EE 21: innovative energy services and financial schemes for sustainable energy 1. 2. 3.
Roll-out of innovative energy efficiency services (e.g. EPC) Replication of successful innovative financing solutions and energy services Large-scale capacity building for public authorities and SMEs on innovative financing
Call Deadline 5 June 2015 Information on this slide is indicative - Only the Horizon 2020 call for proposals has a legal value
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H2020 – Energy Efficiency - Finance for Sustainable Energy
Which topics are of interest to whom?
Topics EE19-20-21 could be interesting to the following stakeholders or their representatives (associations, federations…) – this list is indicative and not exhaustive: • • • • • • • • • • • • •
financial market actors, standardisation and valuation entities, industry, public authorities, consumers property owners public institutional investors public and private project promoters, public/private infrastructure operators, retail chains, cities, SMEs/industry energy services industry
Information on this slide is indicative - Only the Horizon 2020 call for proposals has a legal value
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EE 19: Improving the financeability and attractiveness of sustainable energy investments 3 sub-topics: 1. 2. 3.
Development of frameworks for the standardisation and benchmarking of investments Targeting public institutional investors (e.g. public or semi-public pension schemes) EU and national sustainable energy financing platforms
Proposals must associate 3 entities from 3 countries, except for national platforms where 1 entity is sufficient
Expected impact (depending on the projects): • • • • • • •
reduced uncertainty, increased investors' confidence and trust innovative (and relevant) asset valuation methodologies agreed by the market standardised descriptions of sustainable energy investments or measures/contracts labelling schemes standardised descriptions of sustainable energy investments or measures/contracts labelling schemes or harmonised frameworks for sustainable energy investments national strategies for financing sustainable energy investments
Information on this slide is indicative - Only the Horizon 2020 call for proposals has a legal value
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EE 19: Improving the financeability and attractiveness of sustainable energy investments 1. Development of frameworks for the standardisation and benchmarking of investments, such as • labelling and standardisation of sustainable energy investments or portfolios • valuation techniques integrating the 'green value' of buildings
Proposals integrated in a broader approach such as socially responsible investment or 'green buildings' should focus on the energy component. 2. Target public institutional investors (e.g. public or semi-public pension schemes) in order to • increase the share of their funds invested in sustainable energy • to develop specific funds or investment products Information on this slide is indicative - Only the Horizon 2020 call for proposals has a legal value
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EE 19: Improving the financeability and attractiveness of sustainable energy investments 3. Sustainable energy financing platforms
Bridge the gap between the financial sector and the sustainable energy sector: • • • •
organise dialogue between all relevant stakeholders develop roadmaps propose improvements in the legal frameworks develop template documents and contracts leading to a better understanding of the market.
Proposals from 1 single entity are eligible for this sub-topic The mechanism for knowledge sharing between countries will be established by the Commission services Information on this slide is indicative - Only the Horizon 2020 call for proposals has a legal value
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EE 20: Project development assistance (PDA) €1 of EU support must trigger €15 of investments to be launched by the end of the project (not necessarily fully implemented)
Support project promoters to • mobilise all relevant stakeholders, draw up investment inventories, develop feasibility studies, • set up financial engineering instruments, • address legal and procurement issues
Targeted at public and private project promoters, e.g. - public authorities - public/private infrastructure operators - SMEs/ industry
- retail chains - real estate managers
Proposals from 1 single entity are eligible for this topic Information on this slide is indicative - Only the Horizon 2020 call for proposals has a legal value
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EE 20: Project development assistance (PDA) Triggered investments should be of €6-50 million and target • public and private buildings, • retail energy market infrastructure, e.g. smart grids, e-mobility charging points, public lighting networks, district heating networks, distributed renewables (on-site PV, micro-CHP…), demand response, etc. • commercial and logistic properties and sites
Investments must have a lighthouse dimension Projects should contain organisational innovation in the mobilisation of the investments and/or the financial approach • Innovation should be demonstrated taking into account the situation in the targeted country. • No technical innovation is required
FAQs on PDA: http://bit.ly/OCPJZD Information on this slide is indicative - Only the Horizon 2020 call for proposals has a legal value
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EE 21: innovative energy services and financial schemes for sustainable energy 1.
Roll-out of business models for innovative energy efficiency services (e.g. energy performance contracting), enabling to fully monetise the resulting energy savings
2.
Replication of successful innovative financing solutions and energy services already implemented across the EU. •
3.
Particular attention should be given to innovative solutions enabling aggregation, securitisation, project bundling, structuring of clearing houses, or developing new investment mechanisms (e.g. crowd-funding for sustainable energy).
Large-scale capacity building for public authorities and SMEs to set-up or use innovative financing schemes for sustainable energy
Proposals must associate 3 entities from 3 countries
Expected impacts (depending on the project): • • • • •
Savings of at least 25 GWh/year for every million Euro of EU support larger investments in sustainable energy and generated renewable energy better implementation of energy-efficiency policies, number of policy makers influenced number of people with increased skills number of people changing their behaviour.
Information on this slide is indicative - Only the Horizon 2020 call for proposals has a legal value
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H2020 – Energy Efficiency call Preliminary deadline 5 June 2015
Horizon 2020 work programme 2014-2015
Secure, clean and efficient energy challenge Energy Efficiency call Section D: Finance for sustainable energy Topics EE19, EE20, EE21
•
EE 19: Improving the financeability and attractiveness of sustainable energy investments •
•
Call H2020-EE-2014-4-PDA http://ec.europa.eu/research/participants/portal/desktop/en/opportunities/h2020/calls/h2020-ee-2014-4-pda.html FAQs on PDA: http://bit.ly/OCPJZD
EE 21: innovative energy services and financial schemes for sustainable energy •
Call H2020-EE-2014-3-MarketUptake http://ec.europa.eu/research/participants/portal/desktop/en/opportunities/h2020/topics/2364-ee-192014.html
EE 20: Project development assistance (PDA) •
http://ec.europa.eu/research/participants/data/ref/h2020/wp/2014_2015/main/h2020-wp1415energy_en.pdf
Call H2020-EE-2014-3-MarketUptake http://ec.europa.eu/research/participants/portal/desktop/en/opportunities/h2020/topics/2365-ee-21-2014.html
Practical information on H2020: http://ec.europa.eu/programmes/horizon2020/en/how-get-funding
Information on this slide is indicative - Only the Horizon 2020 call for proposals has a legal value
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We’ve got money, but… we’re looking for projects!
Green bonds market forecast at USD 40bn for 2014 (BNEF)
Financial sector
ESCO? Innovative financing?
“Investment project” for the financial sector: • • • • •
technical black box standardized product cash-flows, IRR, NPV predictability of risks transaction costs
“Investment project” for many project developers: We’ve got projects, but… we’re looking for money!
Adapted from C. Milin, ECEEE 2013
• Projects developers > 6,100 signatories of Covenant of Mayors + all other stakeholders committed to climate and energy goals
• • •
technical design tailored to physical constraints state-of-the-art technology energy payback times “no financing” = “no subsidy” ?
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Innovative financing:
addressing supply and demand
Financial sector
National funding
Soft loans
Guarantee funds EUR 38 bn included in Operational Programmes
EU structural and investment funds
Intelligent Energy Europe & Horizon 2020 EE
Risk-sharing facilities
ESCO? Innovative financing? Project dvpt assistance EPC facilitation Local financing schemes
Projects developers Adapted from C. MILIN, ECEEE 2013
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From action plans to actual investments Building a project pipeline Equity, loans, grants Energy performance contracts Public-private partnerships / ESCOs
•
Signing the investment contracts
Project development assistance: • •
?
Procurement Technical and financial engineering
•
ELENA facilities managed by public banks: EIB, EBRD, KfW, CEB MLEI-PDA (IEE) and Horizon 2020 « EE20 » managed by EASME
56 projects expected to trigger €4 billion investments in EE and RES
Setting up a financing scheme
Sustainable energy action plan Mobilisation of local stakeholders Energy
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Leveraging EU funding €1 €15 or 20 in investments
! Payback clause
Investments:
1€
Private equity
Loans
Grants
€15 MLEI PDA, Horizon 2020
€20 ELENA
Project development costs:
Technical specifications
Financial engineering
Public procurement
Due diligence
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Third-party investment (provision of finance) or Facilitating access to finance (loans, grants)
Energy cost (before)
ESCO provides
Energy Costs
Energy performance contracting What is it concretely?
Guaranteed energy saving are used to repay the investment
W O R K S
At the end of the contract, cost savings are for the project host (owner)
Energy cost (after)
Contract starts
Contract ends
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8 innovative solutions: • Targeting public authorities: • Milan (IT): bundling EPCs for public buildings • REDIBA Barcelona (ES): EPCs for street lighting and public buildings, biomass district heating • REFIT London (UK): framework contract and market facilitation for EPC in public buildings • OSER Rhone-Alpes (FR): in-house public ESCO delivering EPC on public buildings • ESCO LIMBURG (BE): public ESCO delivering turnkey contracts for public buildings
• Targeting households: • Oxfutures Oxford (UK): mobilising local communities to finance renewable energy projects • Jessica fund in Lithuania: soft loans to retrofit condominiums • POSIT’IF Ile de France (FR): public ESCO to deliver EPC on condominium Details can be found here: http://managenergy.net/networking_meetings/1739/docs Energy
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Looking for the
snowball effect
• High replication potential but this requires: • Commitment on climate and energy objectives • Awareness and a strong political will • A clear understanding of how to implement such solutions
• The devil is in the details… concrete issues project leaders have faced • • • • • • •
How to organise my team and subcontractors? How to establish a baseline? How to make a project bankable? How to organise procurement? What has worked? What hasn't? How long does each step really take? … Energy
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Thank you for your attention. Questions?
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