Financing Energy Efficiency Towards 2020 and beyond

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/