1. UK EE Financing Programmes:
An Update
Dr. Steven Fawkes
ACEEE Financing Forum
15th May 2013

2. Brits in the US this week
2

3. 3

4. Agenda
Update on Green Deal
- Latest numbers in over night
ECO, GIB & other initiatives in an Appendix to PPT
4

5. Green Deal – the basics
• Financing of efficiency with repayment through
electricity bills
• Tied to meter i.e. property
• Golden Rule:
– repayments always less than estimated savings
• Target of £14 billion investment over 10 years
– cf. £80 billion requirement
• ‘Light’ credit assessment:
– 80% eligible
• 10-25 year debt from private sector
• Residential focus but can be applied to business
5

6. Eligible measures
45 eligible measures in categories:
• Heating, ventilating and air conditioning
• Building fabric
• Lighting
• Water heating
• Microgeneration
6

7. Context – housing stock & energy
• 76% of UK properties built before 1980
– Pre 1919 – 21%
– 1919-1944 – 16%
– 1945-1964 – 19%
– 1965-1980 – 22%
– 1981-1990 – 9%
– Post 1990 – 12%
• Homes produce 27% of GHG emissions
• Domestic energy bills a big social/political issue:
– 2007 – 2012:
• 37.1% real increase in average gas bill
• 15.5% real increase in average elecricity bill
– One in five now in debt to energy supplier
– 6 million households in fuel poverty – 9 million by 2016? 7

8. 8

9. More energy price rises expected
9

10. Green Deal - Process & Actors
Assessment
Recommendations
Quotes
Plan
Implementation
Repayment
Green Deal Assessor
Green Deal Provider
Green Deal Installer
Electricity suppliers
GreenDealOversightand
RegistrationBody(ORB)
Green Deal
Finance
Company
10

11. Green Deal Finance Company (GDFC)
Structure and function
• Industry led consortium > 50 members
• Provides finance to Green Deal Providers
Funded by
• £7m loan from DECC to cover set-up
• £69m Loan and Junior Capital from 16 members of GDFCo
• £30m Junior Capital Facility of £20m and Contingent Capital Facility from DECC
• £125m Senior Debt from UK Green Investment Bank
• Negotiating £125m debt with European Investment Bank
Customer offer
• 6.96%
• Set up charge £63
• Annual operating charge £20
• Exploring Islamic financing option to access 2.7 million Islamic population
11

12. Additional support for Green Deal
• DECC £125m to fund ‘Green Deal Cashback Scheme’
• Available on ‘first come first serve’
12

13. Green Deal status 16th April
Launched 28th January 2013
• 108 Accredited Green Deal Assessor organizations
• 1,003 Accredited Green Deal Assessors
• 40 Green Deal Providers
• 629 Accredited installers
• 9,268 Green Deal Assessments completed
• 1st Green Deal ‘good to go’, 2 others being reviewed (11th
April)
• GDFC established and funded (£244m)
13
STOP PRESS
14th May 2013
- 152
- 1,274
- 55
- 942
- 18,861

14. Green Deal gaining momentum
0
200
400
600
800
1,000
1,200
Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13
Assessor organisations Individual Advisors
Green Deal Providers Installer organisations
‘The latest figures on the Green
Deal show that this new market is
gathering real momentum; 9,268
Green Deal assessments taking
place in just over two months is
very encouraging and shows a
genuine interest from consumers.’
Greg Barker, Minister, DECC, April
14

15. 15

16. Inevitable teething problems
‘We’ve had the official launch – this time accompanied by a
press campaign – but the sad reality is that the systems
aren’t ready yet. The largest part of the system still missing is
the finance, but there are also problems with the wording in
Green Deal plans, the snail-like pace of certifying Assessors
and the lack of guidance about how ECO will work. I’d be
interested to hear from anyone who has actually produced
and financed a Green Deal plan… anyone?’
Diary of a Green Deal Provider
3rd April 2013
http://www.localenergy.org.uk/diary-of-a-green-deal-provider/
16

17. Green Deal for Business
• Always envisaged that Green Deal could be used by
business
• Limited number of Green Deal for Business assessors
• Lot of potential demand
• Very early days
17

18. Local Authority GD initiatives - 1
Birmingham
• £75m Prudential borrrowing
• £25m from ECO (Energy Company Obligation)
• Will fund Green Deals directly and be repaid through
electricity bills
• Intention to aggregate and issue bonds
• Appointed Carillion as exclusive delivery partner
• 8 year framework contract worth up to £600m
• Aim to retro-fit 60,000 houses plus non-domestic buildings
• Commitment to create local jobs
18

19. Local Authority GD initiatives - 2
Leeds & 10 surrounding local authorities
• £100m over first 3 to 4 years
• 12,000 houses
• Likely to appoint a delivery partner in May
Similar initiatives in:
• Newcastle
• Sussex
• London
Cambridge looking to create a sustainable energy fund to finance
retro-fits and sustainable generation projects
19

20. Issues with Green Deal
• Max loan of £10,600 under Golden Rule at 7% 25
year loan
• Quality of GD Assessment (2 day training)
• Potential scams (already happening)
• Subsequent property buyers not liking GD liability
• Potential for massive disappointment if savings are
not delivered
– a mis-selling scandal waiting to happen?
20

21. Green Deal questions
• Is the demand there? / How do we create demand?
• Will demand be created in segments that need it
most e.g. fuel poor?
• Why borrow at 6.96% when you can use:
– Personal loans from 5%
– Re-mortgage at 1.75 to 2.5% (initial rates)
– Savings currently earning very low rates?
• Will savings be delivered?
21

22. Green Deal summary
Green Deal launched!!!
• Activity increasing
• Early days
• Potential issues with demand
– Conversion rate from Assessment to Green Deals?
– Assessment and implementation rate once early DECC
supported GDAs are completed
• Local Authority led model is promising
22

23. ECO – Energy Company Obligation
• A licence condition for suppliers with:
> 250,000 domestic customers
> 400 GWh electricity supplied to domestic customers
> 2,000 GWh gas supplied to domestic customers
• 1 January 2013 to 31 March 2015
• Replaces previous schemes (CERT and CESP)
• ECO obliges suppliers to spend on efficiency relative to
energy supplied
• c.£1.3 billion per annum
• ECO money can be used to supplement Green Deals
– Assists with ‘hard to treat’ and expensive situations like external
wall insulation
23

24. ECO has 3 components
Carbon Saving Obligation
• Solid wall and hard to treat cavity wall insulation that
can’t be financed under Green Deal
Carbon Saving Communities Obligation
• Insulation measures in specified low income areas (15%
of each company’s obligation)
Affordable Warmth Obligation
• Insulation and heating measures to consumers in private
tenure properties receiving benefits e.g. elderly, disables
and families
24

25. ECO brokerage
• Fortnightly auction
• Green Deal providers sell ‘lots’ of future ECO delivery
to energy suppliers
• 6 auctions by end of March
• Total value £68.9 million to date
• Energy suppliers very keen to deploy ECO funds
25

26. Green Investment Bank
• Formally launched November 2012
• £3 billion to deploy in 3 years
• Aims to ‘crowd in’ private investment
• 3 areas of focus:
– Off-shore wind
– Waste to energy
– Non-Domestic Energy Efficiency (NDEE)
• Must invest alongside market on market terms
• No soft capital
26

27. GIB NDEE progress
• Selected 2 NDEE fund managers
- £50m allocated to SDCL
- £50m allocated to Equitix
• Fund managers have to source deals and matching
capital
• Deals size £500k to £30m
• Deals > £30m will be done directly by GIB
27

28. GIB NDEE progress - 2
• £5m EPC project for Kingspan
• Working on a development model with Greater
Manchester
• £50m committed to Aviva REalM Energy Centres
Fund
– Fund has invested in 1st project (£36m - £18m from GIB)
• Cambridge University Hospitals NHS Trust
• Biomass boilers, CHP and heat recovery from medical waste
incineration
• Energy centres rather than end-use energy efficiency
28

29. GIB issues
• Lack of soft money to assist development process
• Lack of skills developing large scale projects in supply
chain and end-users
• Fund managers relatively passive
• Relatively expensive money
• Paradox of ‘addressing market failures’ by investing
alongside the market
29

30. Other Local Authority initiatives
Peterborough ESCO -
• Owned by Local Authority
Scope:
• Green Deal
• NDEE
• Renewable projects
• Collective purchasing
• Energy supply to local consumers
• Sell excess power to grid
Achievements
• Solar PV framework (1 MW installed)
• EPC procurement framework due May 2013
30

31. Other initiatives
Royal Bank of Scotland
- £200m corporate energy efficiency fund
- Draws on government’s Funding for Lending scheme
- Borrowers must have revenues > £25m
- 5 to 7 year tenor
31

32. Summary and conclusions
Green Deal launched
• Activity increasing
• Early days
• Potential issues with demand
• Local Authority led model is promising
Green Investment Bank launched
• NDEE a key area
• Early days
• Need to increase flow of investment quality deals
• Still need to access long-term low cost funds
Some other interesting developments
• Peterborough ESCO
• Many other Local Authorities gearing up to create ESCOs
• Royal Bank of Scotland allocation of £200m
32

33. Contact
Steve Fawkes
sfawkes@dayoneenergy.com
+44 77 0223 1995
www.onlyelevenpercent.com
@DrSteveFawkes
© Steven Fawkes 2013
33