2. European Commission Disclaimer
This project has received funding from the European
Union’s Horizon 2020 research and innovation programme
under grant agreement No 649836.
The sole responsibility for the content of this presentation
lies with the authors. It does not necessarily reflect the
opinion of the European Union. Neither the EASME nor the
European Commission are responsible for any use that may
be made of the information contained therein.
3. Status report on EE financing
• Scale of market potential recognized
• Co-benefits increasingly recognized
• Growing interest from institutional investors
• Slow development of the EE financing market
– leading to frustration
✔
✔
✔
✗
“The ratio of conferences to deals is too
high!”
4. • Strong demand by owners and investors
• Highly skilled and accredited workforce
• A mix of financing products at attractive rates
• Standardized tools for tracking and quantifying
savings
• Active secondary market
A healthy European energy efficiency
market would have:
13. “From a financier's perspective, energy efficiency projects
entail high transaction costs and are perceived to be
risky due to the difficulty of predicting accurately
energy cost savings. Sufficient experience with
underwriting energy efficiency loans and standardized
evaluation methods for measuring and verifying
energy savings is still lacking. The lack of secondary
markets to provide exit opportunities for investors, or
further liquidity to the investments is another important
barrier.”
— JRC Science and Policy Report, Financing Building Energy Renovations
(2014), Marina Economidou and Paolo Bertoldi
JRC conclusions
14. Citigroup conclusions
Energy efficiency is in a category by itself. With the
exception of one company packaging energy efficiency,
energy efficiency projects do not yet meet the
requirements of capital markets. The industry is just
too disaggregated. No two projects or contracts are
alike. Securitization is not practical or possible under
these circumstances. Say you have 1,000 energy
efficiency projects, Standard & Poor’s would have
to read 1,000 documents to assess the risk. Fees
won’t pay for that level of review.
Michael Eckhart
Managing Director & Global Head of Finance and
Sustainability at Citigroup
15. International Energy Agency conclusions
The IEA’s Energy Efficiency Market Report 2014
highlighted ICP as a program that will “facilitate a
global market for financings by institutional
investors that look to rely on standardized
products.”
18. Current lack of standardization
Greater performance risk
Higher transaction costs
Cannot build capacity
Cannot aggregate
19. ICP Energy Performance Protocols
BASELINING
• Existing Building
• Drawings
• Weather File
• Energy Usage
• Energy Rates
• Occupancy
SAVINGS
• Model File
• Calibration Data
• Bid Packages
• Certifications
COMMISSION
• Cx Plan
• Cx Authority
• Test Procedures
• Facilities Req.
OPERATIONS
• BMS Points
• Fault Plan
• Maintenance Plan
MEASUREME
• M&V Model
• Regression
Model
• Adjustments
• Impact
• Baseline
Adjustments
C
x
20. ICP Protocol development process
Organize market leaders
to provide input into the
development of the
protocols
– Financiers
– Building owners
– Developers, installers,
ESCOs
– Government agencies
– Utilities
21. ICP North American Protocols
Large Commercial
Standard Commercial
Targeted Commercial
Large Residential
Standard Residential
Targeted Residential
27. 20172016
Investor Confidence Project Europe
CREATE TOOLS
Protocols
Accreditation
Labels
Open data
TAKE TOOLS TO MARKET
Private investors
Public programmes
Developers
Property owners
Utilities
BE A CATALYST FOR CHANGE
Inspire action
Connect projects to capital
Create working examples
2015
29. EE is so boring
• Large yawn
Energy efficiency is
so……boring
30. Supply system benefits
- Power supply
- T&D capacity
- Environmental
- Losses & reserves
- Risk
- Credit & collection
Participant benefits
- Productivity
- Quality
- O&M costs
- Health impacts
- Employee productivity
- Lower absenteeism
Society benefits
- Air quality
- Water
- Solid waste
- Energy security
- Economic development
- Health
31. Examples of co-benefits
• Removing constraints on production expansion (Costa
Coffee)
• Increased retail sales (M&S)
• Reduced need for operator intervention (Worsley Alumina)
• Increased throughput (Metalexacto)
• Reduced corrosion inhibitor & reduced corrosion (Danish
liquid gases company)
• 39% reduction in days lost at work (New Zealand)
• Office productivity (Springfield, OR utility)
32. Capacity building demand side
• ISO50001
• Value co-benefits
• Integrated design
• Consider outsourced energy services
– Bring expertise and finance
– Can accelerate deployment
35. Mind the development gap
• Overcoming the development gap requires:
– Vision
– Skills
– Finance
– Standards
• Need to develop multi-building projects to
achieve scale
37. Traditional EPC / ESCO is not the answer
• Usually on balance sheet
• Debt constrained by mortgage covenant or
structure
• Guarantee is not a credit enhancement
• Transaction costs
• Tenant-landlord split incentive
• May work well in public sector but not in
commercial property sector
38. Innovation is appearing
• Efficiency Services Agreement (ESA)
• Managed Energy Services Agreement (MESA)
• Measured Energy Efficiency Transaction
(MEETS)
We need more innovation
42. Capacity building - financial
• Standardisation
• Training on:
– Multiple benefits
– Technologies
– Contract types
– Standards
– Available support e.g. EC, EIB, national programmes
44. You can cut the
jigsaw pieces
precisely to make
them fit better but if
you don’t have all
the pieces you can’t
finish the puzzle
WORK ON ALL THE PIECES
45. Policy considerations
• Reward all the value streams
• Design energy market to value the benefits
• Consider cross Ministry benefits e.g. health
• Ensure supply-demand decisions are balanced
e.g. network operator regulation
• Phased move away from top-down programmes
to creating markets for efficiency
• Stable policies
48. • Strong demand by owners and investors
• Highly skilled and accredited workforce
• A mix of financing products at attractive rates
• Standardized tools for tracking and quantifying
savings
• Active secondary market
A healthy European energy efficiency
market would have:
49. Energy financing - now
Standardized
Mainstream
Large volume
Multiple sources
Standardized
Mainstream
Large volume
Multiple sources
NOT standardized
NOT mainstream
SMALL volume
FEW sources
50. Energy financing – the future
Standardized
Mainstream
Large volume
Multiple sources
Standardized
Mainstream
Large volume
Multiple sources
Standardized
Mainstream
Large volume
Multiple sources
We need to increase investor confidence in energy efficiency
Lots of big institutional investors want to invest but they need more confidence
Skip the appraisal introduction and QA for now. Concentrate on “investment ready” as a designation and what that means to the market
Skip the appraisal introduction and QA for now. Concentrate on “investment ready” as a designation and what that means to the market
ICPEU Consortium members (UK, Portugal, Germany, Austria, Bulgaria)
----- Meeting Notes (1/29/15 17:38) -----
Agora
So we have seen EE has huge potential for profit and many other benefits BUT EE is so boring!!!!!!
And of course there is the layer cake of benefits – it is not just about the value of energy savings – there are so many co-benefits including improved productivity, improved employee retention and so on.
Our building performance models are on the whole, pretty terrrible.
In California residential model 50% out 25% of the time. Not good.
This is a major elephant in the room.
Some good work going on eg Sefaira’s modelling
Thanks to Jan for asking me back to EcoSummit to talk again about the magic of energy efficiency.