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Innovative Financial Models and Programmes for
the Delivery of Energy Efficiency Projects
Steven Fawkes
4th October 2017
Innovative Financial Models and Programmes for the Delivery of Energy Efficiency Projects
Innovative Financial Models and Programmes for the Delivery of Energy Efficiency Projects
To achieve “66% 2oC” scenario
requires average investment into
energy efficiency > USD 1 trillion a
year between 2016 and 2050
i.e. circa 5 x current level
The Bridge Slide
• Multiple investment by x 5
• IEA / IRENA numbers?
Energy
efficiency
people
Finance
people
What we need
to build
What we have
Trillions of
€ of capital
Billions of €
potential
projects
We need to build the jigsaw of energy efficiency finance
Just providing finance is not enough!
What do people mean by “innovative financial models”?
Usually code for subsidy or magic
The financial world
The energy efficiency world
Innovative Financial Models and Programmes for the Delivery of Energy Efficiency Projects
….....and RISKAll investments have VALUE
Innovative Financial Models and Programmes for the Delivery of Energy Efficiency Projects
Risk
Sources of
finance
Players &
vehicles
Development Construction Operation
High risk Medium risk Low risk
Private & public
equity
Grants
Short term debt Long term debt
ESCOs
Project developers
Equity crowdfunding
Energy efficiency funds
Forfaiting
Warehouses
Bonds
Banks
Yield companies
Debt crowdfunding
Energy efficiency finance and project life cycle
Financial products that can be used for energy efficiency
Financial instruments
– EIB PF4EE (Private Finance for Energy Efficiency)
• Available to financial intermediaries (banks)
• Long term financing
• Expert Support Facility
• Currently in:
– CZ, ES, FR, BE, IT
Property loans
- Commercial
- Residential
Financial products that can be used for energy efficiency - 2
Consumer loans
- unsecured / secured loans
Specialised energy efficiency funds
- London Energy Efficiency Fund (LEEF)
- European Energy Efficiency Fund (EEEF)
- Bulgarian Energy Efficiency & Renewable Sources Fund (BEERS)
- Eiffel Energy Transition Fund
- SUSI Energy Efficiency Fund
Financial products that can be used for energy efficiency - 3
Property Funds specialising in energy efficient buildings
– Credit Suisse European Climate Value Property Fund
– The Low Carbon Workplace Fund
• Buying commercial property and upgrading it to increase value
– Average EPC improvement from E to B
– BREEAM Excellent status awarded to all buildings
– 60% more efficient than CIBSE’s ECON19 office benchmark
– 35% more efficient than Better Building Partnership’s Environmental Benchmark
Financial products that can be used for energy efficiency - 4
Green Bonds
– Growing market
• Mainly for re-financing, not primary financing
• Questions over what is green?
– City of Gothenburg SEK 500m (USD 77m)
– AA+ rated
Forfaiting Funds
- Forfaiting revenues from implemented Energy Performance Contracts
- Latvian Baltic Energy Efficiency Facility (LABEEF)
Innovations in energy efficiency financing - 1
Property Assessed Clean Energy (PACE)
– US & Canada
• Collection by local authority, addition on property taxes
• Residential and commercial property
• Growing market, $2-3bn has been refinanced
• Low-risk, long-term financing
• Project to bring PACE type financing to Europe (through H2020)
Innovations in energy efficiency financing - 2
On Bill Recovery (OBR)
– Pioneered in US but EU examples (e.g. Green Deal in UK)
• Collection by addition to energy bills
• Low-risk, long-term financing
Innovations in energy efficiency financing - 3
Warehouses
– Aggregating loans prior to re-financing
• Warehouse for Energy Efficiency Loans (WHEEL)
– Created by Pennsylvania Treasury
– Unsecured residential EE loans
– Issued $12.8m green bond backed by $16m of loans
– Still VERY small for Debt Capital Markets
Innovations in energy efficiency financing - 4
Green mortgages
– mortgages for green / energy efficient houses
– predicated on assumptions that:
• lower energy bills produces a higher asset value
• lower energy bills imply lower risk of default
– European Mortgage Federation (EMF) / European Covered Bonds Council
(ECBC) project: Energy Efficient Mortgage Initiative
Innovations in programmes
We need to build the jigsaw of energy efficiency finance
There are good examples from around the world
Innovations in programmes - 1
Carbon & Energy Fund (CEF)
– UK National Health Service procurement framework
• Energy Performance Contracts in large hospitals
• Hospital pays a fee to join
• CEF oversees and manages project development
• CEF sources ESCO from its framework
• CEF sources finance
• CEF specifies M&V
• Hospital pays a % fee on capital expenditure and % on on-going M&V
Innovations in programmes - 2
Dubai Super ESCO
– Owned by Dubai Electricity & Water Authority
• Only deals with property portfolio owners – no single buildings
• Oversees development of project
• Selects ESCO to implement project
• Sources finance
• Oversees M&V
Innovations in programmes - 3
Energy Efficiency Services Ltd (EESL)
– Indian “Super ESCO”
• Aggregates demand
• 265 million LEDS in 3 years
• Now starting on other technologies
– Ceiling fans
– Motors
– Smart meters
– EVs
Summary
Energy efficiency won’t change finance - the basics are fixed
Don’t expect subsidy or magic
There are some innovations in financing
• Property Assessed Clean Energy
• On Bill Recovery
• Warehouses
• Green mortgages
There are some innovations in programmes
• Carbon & Energy Fund
• Dubai Super ESCO
• Energy Efficiency Services Ltd
Success stories need to be studied and copied
Steven Fawkes
EnergyPro Ltd
+44 77 0223 1995
steven.fawkes@energyproltd.com
@DrSteveFawkes
Steven Fawkes
EnergyPro Ltd
+44 77 0223 1995
steven.fawkes@energyproltd.com
@DrSteveFawkes

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Innovative Financial Models and Programmes for the Delivery of Energy Efficiency Projects

  • 1. Innovative Financial Models and Programmes for the Delivery of Energy Efficiency Projects Steven Fawkes 4th October 2017
  • 4. To achieve “66% 2oC” scenario requires average investment into energy efficiency > USD 1 trillion a year between 2016 and 2050 i.e. circa 5 x current level
  • 5. The Bridge Slide • Multiple investment by x 5 • IEA / IRENA numbers? Energy efficiency people Finance people What we need to build What we have Trillions of € of capital Billions of € potential projects
  • 6. We need to build the jigsaw of energy efficiency finance Just providing finance is not enough!
  • 7. What do people mean by “innovative financial models”? Usually code for subsidy or magic
  • 13. Risk Sources of finance Players & vehicles Development Construction Operation High risk Medium risk Low risk Private & public equity Grants Short term debt Long term debt ESCOs Project developers Equity crowdfunding Energy efficiency funds Forfaiting Warehouses Bonds Banks Yield companies Debt crowdfunding Energy efficiency finance and project life cycle
  • 14. Financial products that can be used for energy efficiency Financial instruments – EIB PF4EE (Private Finance for Energy Efficiency) • Available to financial intermediaries (banks) • Long term financing • Expert Support Facility • Currently in: – CZ, ES, FR, BE, IT Property loans - Commercial - Residential
  • 15. Financial products that can be used for energy efficiency - 2 Consumer loans - unsecured / secured loans Specialised energy efficiency funds - London Energy Efficiency Fund (LEEF) - European Energy Efficiency Fund (EEEF) - Bulgarian Energy Efficiency & Renewable Sources Fund (BEERS) - Eiffel Energy Transition Fund - SUSI Energy Efficiency Fund
  • 16. Financial products that can be used for energy efficiency - 3 Property Funds specialising in energy efficient buildings – Credit Suisse European Climate Value Property Fund – The Low Carbon Workplace Fund • Buying commercial property and upgrading it to increase value – Average EPC improvement from E to B – BREEAM Excellent status awarded to all buildings – 60% more efficient than CIBSE’s ECON19 office benchmark – 35% more efficient than Better Building Partnership’s Environmental Benchmark
  • 17. Financial products that can be used for energy efficiency - 4 Green Bonds – Growing market • Mainly for re-financing, not primary financing • Questions over what is green? – City of Gothenburg SEK 500m (USD 77m) – AA+ rated Forfaiting Funds - Forfaiting revenues from implemented Energy Performance Contracts - Latvian Baltic Energy Efficiency Facility (LABEEF)
  • 18. Innovations in energy efficiency financing - 1 Property Assessed Clean Energy (PACE) – US & Canada • Collection by local authority, addition on property taxes • Residential and commercial property • Growing market, $2-3bn has been refinanced • Low-risk, long-term financing • Project to bring PACE type financing to Europe (through H2020)
  • 19. Innovations in energy efficiency financing - 2 On Bill Recovery (OBR) – Pioneered in US but EU examples (e.g. Green Deal in UK) • Collection by addition to energy bills • Low-risk, long-term financing
  • 20. Innovations in energy efficiency financing - 3 Warehouses – Aggregating loans prior to re-financing • Warehouse for Energy Efficiency Loans (WHEEL) – Created by Pennsylvania Treasury – Unsecured residential EE loans – Issued $12.8m green bond backed by $16m of loans – Still VERY small for Debt Capital Markets
  • 21. Innovations in energy efficiency financing - 4 Green mortgages – mortgages for green / energy efficient houses – predicated on assumptions that: • lower energy bills produces a higher asset value • lower energy bills imply lower risk of default – European Mortgage Federation (EMF) / European Covered Bonds Council (ECBC) project: Energy Efficient Mortgage Initiative
  • 23. We need to build the jigsaw of energy efficiency finance There are good examples from around the world
  • 24. Innovations in programmes - 1 Carbon & Energy Fund (CEF) – UK National Health Service procurement framework • Energy Performance Contracts in large hospitals • Hospital pays a fee to join • CEF oversees and manages project development • CEF sources ESCO from its framework • CEF sources finance • CEF specifies M&V • Hospital pays a % fee on capital expenditure and % on on-going M&V
  • 25. Innovations in programmes - 2 Dubai Super ESCO – Owned by Dubai Electricity & Water Authority • Only deals with property portfolio owners – no single buildings • Oversees development of project • Selects ESCO to implement project • Sources finance • Oversees M&V
  • 26. Innovations in programmes - 3 Energy Efficiency Services Ltd (EESL) – Indian “Super ESCO” • Aggregates demand • 265 million LEDS in 3 years • Now starting on other technologies – Ceiling fans – Motors – Smart meters – EVs
  • 27. Summary Energy efficiency won’t change finance - the basics are fixed Don’t expect subsidy or magic There are some innovations in financing • Property Assessed Clean Energy • On Bill Recovery • Warehouses • Green mortgages There are some innovations in programmes • Carbon & Energy Fund • Dubai Super ESCO • Energy Efficiency Services Ltd Success stories need to be studied and copied
  • 28. Steven Fawkes EnergyPro Ltd +44 77 0223 1995 steven.fawkes@energyproltd.com @DrSteveFawkes
  • 29. Steven Fawkes EnergyPro Ltd +44 77 0223 1995 steven.fawkes@energyproltd.com @DrSteveFawkes

Editor's Notes

  1. Good afternoon Today I have been asked to talk about standardization to support the evaluation of enegry efficiency projects and analysing the risks of projects