Building Energy Efficiency challenges and opportunities for
EBRD
Peter Hobson
European Bank for Reconstruction and Development
Outline
• EBRD Sustainable Energy Initiative
• Sustainable energy financing in the building sector - constrains and
opportunities
• Bank’s operations in the sector
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EBRD Sustainable Energy Initiative (SEI)
Overview
The SEI responds to the specific needs of the energy transition in the EBRD region,
as well as to the call of the G8 at the 2005 Gleneagles Summit for the IFIs to scale-up
climate change mitigation investment.
SEI Phase 1 (2006-2008) was launched in May 2006 with the objectives to:
• Scale up EBRD sustainable energy investments to €1.5 billion
• Strengthen the EBRD capacity to scale up delivery and “mainstream” climate and energy
efficiency across the Bank’s operations
• Expand the market for sustainable energy technologies in the region
SEI Phase 2 Targets (2009 – 2011)
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▪
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EBRD SEI financing: €3 to 5 billion (total project value of €9 to15 billion)
Carbon emissions reduction: 25 to 35 million tonnes CO2/annum
TA grant funding mobilisation: €100 million , Investment grants – €250 million
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SEI Results
SEI Results 2006- 2010 (YTD):
– EBRD SEI investments of € 4.6 billion for total project value of over € 23 billion
– Investments in 266 projects and 27 countries
– EBRD SEI financing account on average for 20% of the Bank’s total investment
– Annual emission reduction of 29 million tons of CO2
1. Industrial
Energy
Efficiency
2. Sustainable
Energy Financing
Facilities
3. Power Sector
Energy
Efficiency
4. Renewable
Energy Scale-up
5. Municipal
Infrastructure
Energy
Efficiency
6. Carbon
Markets
Development
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Buildings – the largest and the most cost effective carbon
abatement opportunities
SOURCE: 1- McKinsey
Global Institute, 2007
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Buildings – how the Bank responds?
1.1
0.7
0.2
0.2
Renewables
Municipal
infrastructure
Forestry
Transport
0
Agriculture
1.0
Natural
resources
1.5
1.4
Industry
• Financing models
available;
5.6
Buildings
• High level support;
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5
4
3
2
1
0
Power
generation
• Building EE as one of new
priority areas under SEIPhase 2;
Low carbon costs (<EUR 20/t) annual capital demands,
EUR billion
• Technical assistance: professional consultants, training and
capacity building TCs, dedicated marketing;
• Maintaining Policy Dialogue (policy&regulatory barriers);
• Low energy properties financed – a driver toward capacity
building and expanding market for EE techniques;
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Barriers to sustainable energy financing for banks
Similar in all the countries in the region:
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Uncertainties about market demand for EE financing
High transaction costs
Liability of stakeholders
Legal enforcement in the property and residential sector
Lack of technical expertise for appraisal and risk assessment
Information asymmetries and misconceptions about the technical risks and
financial benefits of energy efficiency
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▪
▪
Lack of specific structures for implementation
No specific marketing tools or budget allocated for such activities
Tenors needed longer than those of commercial business lending
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Institutional and regulatory barriers
•
Insufficiencies of housing legislation:
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▪
▪
▪
▪
•
Legal statute of associations of apartment owners;
Responsibilities and legal liabilities of Associations;
Management of Associations
Decision making procedures
Relationship with management companies and utilities
Insufficiencies of building regulatory
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▪
▪
▪
▪
Lack of energy performance classification
Lack of energy certification scheme
Structure and complexity of energy efficiency requirements
Lack of institutionalised energy assessment procedures
Insufficient institutional framework supporting energy performance
assessment
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EBRD integrated approach
•
Tailor made financing vehicles reflecting country and market specifics:
▪
REECL-type (Bulgaria);
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SlovSEFF type (Slovakia)
•
Capacity building: local banks, technical consultants & engineers, local authorities
•
Awareness raising: general public, project stakeholders, authorities
•
Corporate sector: technology and service providers, utilities, project developers;
•
Policy dialogue: assistance on development/upgrade of supportive legal and regulatory
framework:
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Secondary legislation on EE of buildings: Russia
▪
Law on Energy efficiency of buildings (Moldova, Kyrgyzstan)
▪
Regulations, technical reglaments, ministerial decree/ordinances (Ukraine, Moldova,
Kyrgyzstan);
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•
Sustainable Energy Action Plans (Kazakhstan, Moldova, Russia, Ukraine, Turkey)
High leverage of national (Donor funded) support programs;
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EBRD Financing mechanisms (1)
REECL – type: addressing dwelling level EE
(apartments, family houses)
• Financing disbursed:
€ 43 million (Oct. ‘05–Jan.’10)
• Leverage of technical assistance
to total investments is 31.6
EBRD
Support Program
Funded Contract
Credit
Training
And Marketing
Support
Project
Consultant
ConfirmsSub-Project compliance;
Verifies implementation
€ Line
Participating
Banks
Loan € Agreement
Sub-Borrower
• Leverage of incentives to total
investments is 5.9
• Number of projects:
28,125 (ab. 7,000 per year)
• Number of residents affected
with improved housing conditions:
69,100
• Financial revenues from energy
savings: € 10.6 million per year
•Energy savings:
124.3 GWh per year
• Energy generation capacity
substituted: 19.1 MW
• Carbon reductions: 170,530
tons CO2 per year
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EBRD Financing mechanisms (2): REECL market penetration rate
High performing (eligible)
technologies
2004
2010
Share
funded
by
REECL
EE Windows;
Close to zero
=> 4%
30%
High grade insulation (roof, wall, floor);
Close to zero
=> 3%
18%
Efficient Gas boilers and associated
heating systems;
Close to 45%
=> 78%
13%
Biomass Boilers and Stoves
Close to 30%
=>40%
6%
Solar Water Heaters
Close to 8%
=> 14%
34%
Heat Pump Heating (air-to-air)
Close to 5%
=> 25%
18%
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EBRD Financing mechanisms (3)
REECL 2 – type: addressing both dwelling as well as building level EE (groups of
residents, informal associations, associations as legal entities, ESCOs,
management companies, construction companies)
•
Accent on promotion and support of Housing Associations:
▪ Legal advise;
▪ Standard set of institutional/management documentations
▪ Conceptual design for complex building refurbishment;
▪ Attendance on General Meetings when decisions on refurbishment made;
•
Wider spectre of eligible techniques (gasification, photovoltaics, heat recovery
mechanical ventilation in addition);
•
No incentives for participating banks;
•
High performance requirements of eligible techniques;
•
Variable incentives for different categories of Borrowers and per type of
projects
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Financing mechanisms (4)
SlovSEFF – type: addressing complex building refurbishment through financing
housing associations (adequate housing legislation required)
Support Program
Funded Contract
EBRD
Support Program
Funded Contract
Credit € Line
Consultant
Technical Assistance
Energy Audits
Training
And Marketing
Support
Participating
Bank
Independent Energy
Expert
Implementation Verification
Loan € Agreement
Sub-Borrower
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SlovSEFF results
• Financing disbursed: € 38 million (2008-2009)
• Leverage of technical assistance to total investments is 32
• Leverage of incentives to total investments is 7.4
• Number of projects: 218 apartment buildings (12,000 apartments)
• Number of residents affected with improved housing conditions: 25,000
• Financial revenues from energy savings: ab. € 3.2 million per year
•Energy savings: 55 GWh per year
• Carbon reductions: 28,400 tons CO2 per year
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Commercial buildings: Case Study – Pulkovo Airport (Russia, 2010)
 Total investment costs of € 1,236 M for
extension of air fields, refurbishment of
existing and development of a new Terminal
 The EBRD arranged an energy audit with
cost benefit analysis and recommendations
 The airport operator FRAPORT incorporated
recommendations in the Project
EBRD finance: €120 M, including €17.2 of energy efficiency investments
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▪
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Advanced thermal protection of all building premises
Implementation of advanced HVAC (heat recovery, VSD fans&pumps, etc)
Integrated Building Management System
Small-scale gas turbine CHP: 7 MW and absorption cooling: 5.8 MW
Snow harvesting and biogas plant still under consideration
Energy/carbon savings: 42,120 MWh/ 12,396tCO2
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EPC Programme Outline

Aim to support development of public EPC market in
CEE and CIS, initially: Russia, Ukraine, Romania
and Bulgaria

Use initial TA to assess market and identify main
obstacles

Implement capacity building programme to support
cities, ESCOs and banks

Provide initial financing through local authorities or
dedicated funds
Status – Russia and Ukraine

Completed studies in Russia and Ukraine of scope for EPC
inlcuding market assessment and analysis of legal framework.
Conclusion: it can be done!

Advising Russian government on dedicated EPC legislation in
energy efficiency law (261-FZ) and need for amendments in
related legislation (budget code and procurement law)

Funding in place ($10m from GEF) for broad capacity building
programme to help Russian cities prepare EPC tenders

Working with Ukraine cities to provide municipal loan to finance
initial EPC programme combined with similar capacity building
support
Status – Romania and Bulgaria

Market studies to be completed end 2010. Initial
indications positive

Funding in place in Romania ($5m, GEF) and
Bulgaria (€5m KIDSF) for capacity building and
municipal support TA programme

Discussions with public energy efficiency funds
(BEEF and FREE) to recapitalise for funding EPC
contracts through purchase of receivables

Directly financed private sector ESCOs also being
prepared
Conclusions
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High level support on financing EE is present at EBRD;
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Policy dialogue between EBRD and the national Governments
needs to result in concrete outputs;
▪
Resources, experience and mechanisms of financing EE
available at EBRD;
Thank you!
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