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Financing Energy Efficiency Towards 2020 and beyond

Financing Energy Efficiency Towards 2020 and beyond. Dr. Tóth András György Európai Bizottság Energiaügyi Főigazgatóság Energiahatékonyság Osztály. OUTLINE. 2020 Challenges Implementation of the existing framework

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Financing Energy Efficiency Towards 2020 and beyond

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  1. Financing Energy EfficiencyTowards 2020 and beyond Dr. Tóth András György Európai Bizottság Energiaügyi Főigazgatóság Energiahatékonyság Osztály

  2. OUTLINE • 2020 Challenges • Implementation of the existing framework • Making energy efficiency „investible“ – ensuring the access to affordable and properly designed finance

  3. 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)

  4. Current EU RegulatoryFramework 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)

  5. 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

  6. 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

  7. Priority #1: implementation • 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.

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

  9. 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

  10. 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…

  11. 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

  12. 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…)

  13. 'Traditional' implementation structure Grant support • Ex-post reimbursement • For projects or project components without revenue-generating capacity • One-off support Managing Authority Grants Final recipients

  14. EU Funding: more value for money • 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

  15. Innovative Financial Instruments • 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

  16. The EEE F: a new EU Financial Instrument Size at first closing € 265m Target Up to € 700m Senior – A Shares Notes Institutional investors Public banks & institutional investors EIB, CDP € 117m Mezzanine - B Shares Public financial institutions EIB, CDP, Deutsche Bank Junior/FLP - C Shares € € 23m EU € 125m • 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

  17. 'Financial instruments' implementation structure Managing Authority Operational Programme / public policies / resources Holding Fund (HF) Fund / Financial Intermediary Fund / Financial Intermediary Co-financing Additional resources Financial products Financial products Final recipients Final recipients Market situation & appropriate promotional instruments

  18. What is Energy Performance Contracting?

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

  20. 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

  21. Example 2: London ReFit (1) • Financing structure:

  22. Example 2: London ReFit (2) 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

  23. 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/

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