SFEI Energy Investment Day
EPEC and Energy Efficiency
Stuart Broom
26 November 2012, Bratislava
EPEC: Who we are and what we do
EPEC and Energy Efficiency
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The European PPP Expertise Centre
•
Established in September 2008;
•
A unique cooperative initiative of the EIB,
the European Commission and EU
Candidate and Member States;
•
International team of 18 professionals;
•
Membership: Initially 20, EPEC now
numbers 35 Members;
•
Excellent engagement from Members with
more than 120 participations annually in
EPEC working groups
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EPEC Mission
To help the public sector deliver more, and better, PPP deals
EPEC’s activities:
•
Collaborative
Working
–
Information
sharing
through
member working groups;
•
Institutional Strengthening – Policy
and programme support through
bilateral working with member
organisations;
•
Helpdesk – Service offered to
members providing rapid responses
to enquiries
EPEC and Energy Efficiency
EPEC works by:
•
Sharing information,
and expertise;
•
Strengthening the organizational
capacity of public authorities to
develop PPP programmes;
•
Promoting good practice across the
public sector
experience
4
EPEC and Energy Efficiency
Why EPEC?
• Clear public sector need for private sector knowledge
and expertise
Why now?
• Energy Efficiency is key part of EU 2020 strategy;
• The Energy Efficiency Directive recently approved
imposes energy saving obligations on Member States;
• The Cohesion Policy proposals for 2014 -2020 allocate
a significant amount of funding to Energy Efficiency
and Renewable Energy;
•
ELENA, JESSICA, EEEF to support investment in Energy
Efficiency/Renewable Energy
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Energy Efficiency (EE) Mandate
Raising awareness within national authorities on:
• EU Legislation and financing framework
related to Energy Efficiency (EE) and
Renewable Energy (RE) in buildings;
• Structural and Cohesion Funds available for
investment in EE and RE;
• Energy Performance Contracting (EPC)
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Energy Efficiency (EE) Mandate
Materials: guidance and
fact-sheets
• EE in public buildings
• Street-lighting
• Cohesion Policy 2014 2020
• ESCOs and EPC
• Information about
ELENA, JESSICA, EEEF
EPEC and Energy Efficiency
Events
• Workshops
• Round tables
• Seminars
• Conferences
Knowledge-sharing
• Dedicated website
http://www.eib.org/ep
ec/ee
• Case-study database
• Cooperation with key
EE stakeholders, e.g.
SF Energy Invest
7
Energy Performance Contracting (EPC)
Campaign
• Launched by DG ENER in October 2012;
• Awareness of EPC at national, regional and
local levels;
• Series of practical workshops to increase
knowledge, build confidence and share
experience;
• Three pillars working to complement each
other: EPEC, ManagEnergy and Covenant of
Mayors
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EPC Campaign Structure
National
Regional
EPEC
ManagEnergy
Local
Covenant of
Mayors
• Series of events planned
for 2014 – 2020;
• 42 Events planned for
2012 – 2014;
• Webinars planned for
2012-2014;
• Targeting key
policymakers at national
level;
• Targeting regional
authorities and energy
agencies;
• Capacity building events
for local stakeholders;
• Focus on EPC
implementations,
practical examples of EPC
benefits, use of Cohesion
Policy Funds
EPEC and Energy Efficiency
• Focus on forthcoming
changes to regulatory
framework and potential
replications of EPC
projects;
• Focus on barriers
encountered/solutions
and practical ways to rollout more EPC projects
locally
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Energy Performance Contracting (EPC)
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Energy Performance Contracting (EPC)
and Energy Service Companies (ESCOs)
Energy services include energy analysis and audits, energy management, project design and
implementation, maintenance and operation, monitoring and evaluation of savings, property
management, and energy and equipment supply
•
•
•
•
•
•
Private sector expertise to design, implement EE investments and optimised operation
Building owner get access to outside capital for projects by transferring the risk to the ESCO
Guaranteed/ Shared savings based on actual EE performance, reduced operating costs
Immediate benefits: upgrade with modern, reliable EE equipment; comfort conditions;
reduced carbon emissions
ESCOs can provide turnkey solutions and comprehensive measures (deep retrofits)
Potential for off balance sheet financing on commercial basis (factoring/forfeiting)
Industry
Public
buildings
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Commercial
buildings
Residential
buildings
Streetlighting
Heating
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The EPC Opportunity
Source:
International
performance,
measurement
and verification
protocol, EVO,
2010
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Comparative perspective European ESCO market (2010)
Estimated EU market size at €6.7-8.5bn / potential up to €25bn
Czech Republic 2-4
Finland 4
Bulgaria 6
Denmark 8-25
Slovakia 10-12
Austria 10-15
Poland 10-25
Portugal 10-30
Romania
50
Sweden
60-80
>100
Spain
387
Italy
UK
400
Germany
France
0
500
Estimate/low estimate
High estimate
1,700 – 2,400
1000
1500
2000
2500
3000
4,000-5,000
3500
4000
4500
5000
Data source: Energy Services Companies Market in Europe. Status Report 2010– DG Joint Research Centre
http://publications.jrc.ec.europa.eu/repository/bitstream/111111111/15108/1/jrc59863%20real%20final%20esco%20report%202010.pdf
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Current EU Issues
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Energy Efficiency Directive (EED)
A new regulatory framework that provides an
opportunity to develop the EPC market:
• Article 3 – Required renovation of 3% of
central government buildings
• Article 7 – Energy efficiency obligations 1.5%
target for energy companies to be met
• Article 8 – Obligation for large companies to
carry out mandatory energy audits
• Article 19 – Removal of barriers to energy
efficiency in accounting rules
• Article 20 – Maximising the benefits of
multiple financing schemes
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Timetable for implementation


April 2013 : Member
states present their
national programmes for
the implementation of
the Energy Efficiency
Directive;
2014, 2016: European
Commission reviews the
Directive
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Cohesion Policy Proposals
2014 -2020
• Cohesion Policy provides the major EU level investment framework for
EE/RES, accompanying the EU regulatory framework;
• The ERDF, CF and EAFRD can contribute to accelerating the
implementation of EU legislation on renewable energy and energy
efficiency, in particular the Energy Performance of Buildings Directive,
the Energy Services Directive, the Renewable Energy Directive and the
Strategic Energy Technology Plan
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Cohesion Policy 2014 - 2020
• Adoption of Commission proposal in October 2011
• Negotiations ongoing in the Council
• Mission:
 Reduce disparities between Europe's regions strengthening economic, social
and territorial cohesion;
 Contribute to the Europe 2020 Strategy for smart, sustainable and inclusive
growth;
 Need to increase the performance and impact of the funds:
 Ex-ante conditionalities;
 Thematic concentration of funds: 11 thematic objectives linked to the Europe 2020
Strategy
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Cohesion Policy 2014 – 2020: Investments in
Sustainable Energy
Supporting the shift towards a low-carbon economy in all sectors – 5
investment priorities proposed:
• Promoting the production and distribution of RES;
• Promoting EE and RES use in SMEs;
• Supporting EE and RES use in public infrastructures and in the housing sector;
• Developing smart distribution systems at low voltage levels;
• Promoting low-carbon strategies for urban areas.
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Key actions for Investment
• Innovative renewable energy technologies, in particular technologies
mentioned in the SET-Plan and in the Energy Roadmap 2050, along with
2nd and 3rd generation biofuels;
• Supporting marine-based renewable energy production, including tidal
and wave energy;
• Investment in the wider use of Energy Performance Contracting in the
public buildings and housing sectors;
• Energy efficiency and renewable heating and cooling in public buildings,
in particular demonstration of zero-emission and positive-energy
buildings, and deep renovation of existing buildings to beyond costoptimal levels
• EE and RES in SMEs, including information campaigns;
• Integrated low-carbon strategies and sustainable energy action plans for
urban areas, including public lighting systems and smart grids;
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What will be available?
Classification of Regions for Classification of Regions for
the MFF 2007 - 2013
the MFF 2014-2020
Regional Competitiveness and
Employment
Minimum %
allocation to
EE/RE
More Developed Regions (GDP
per capita >90% of the EU27
average)
20%
Transition Regions (GDP per
capita between 75% and 90% of
EU27 average)
20%
Less Developed Regions (GDP per
capita <75% EU27 average)
6%
Convergence Phasing out
Regional Competitiveness and
Employment Phasing in
Convergence
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Cohesion Funds Principles
• Mainly private sector investment. MS/regions to ensure that public funding
complements private investment, leveraging it and not crowding it out;
• In EE sector, consider option of creating value for energy savings through
market mechanisms before public funding (ESCOS);
• Financial instruments to be used where potential for private revenue or cost
savings is large;
• For physical investment, grants to be used primarily:
 to address market failures;
 to support innovative technologies;
 to support investments beyond cost-optimal EE performance: ensure
energy savings and GHG emission reductions above "business as usual"!
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Instruments Available
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ELENA
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ELENA at a glance
Structure
ELENA stands for European Local Energy Assistance
Grant facility managed by the EIB and funded by the EU budget under the
Intelligent Energy Europe Programme, in operation since 01/2010
Role
To assist in the transition from preparing action plans to making
investments
To support local and regional authorities to reach the EU 20-20-20 targets
through technical assistance (TA)
Budget
For 2009 - 2011: € 49m (allocations can be made until end 2013)
Envisaged budget in 2012: € 22m
Track record
16 projects signed/approved for a total of EUR 28 million;
Supported investment programs around EUR 1.6bn
Further projects in the pipeline for EC approval
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Eligibility - investments
• Public and private
buildings, including
social housing
• Street lighting and
traffic light systems
• RE in buildings
• Heating or cooling
systems based on
combined heat and
power (CHP)
production or
renewables
• Small CHP systems for
buildings
EE and RES
investment in Public
and Private Buildings
• Goal – to Increase EE
or integrate RE in
urban transport
• High-EE buses,
including hybrids
• Electrically powered or
low-carbon-emission
cars, related
infrastructure
• More energy efficient
designs for goods
transport logistics in
urban areas
Urban transport
• Goal - to improve EE or
use renewable energy
• Smart power grids
• Information and
communications
technologies
• District Heating
• Intermodal transport
• Infrastructure for more
energy efficient
vehicles
Local Energy
Infrastructure
The prior identification of an investment programme is a prerequisite for submission of
an ELENA application
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Eligibility – entities and activities
Eligible entities
• Local and regional authorities or other public entities, or groupings of such entities,
including those subscribing to the Covenant of Mayors;
• All or part of the investment programme may be implemented by bodies other than
the abovementioned entities, including private firms
Eligible activities – ELENA covers at most 90% of the cost of TA
•
•
•
•
Cost of additional personnel/technical staff hired by beneficiary;
Energy audits; market surveys and refinement of technical/ feasibility studies;
Preparation of public calls for procurement/ tendering (i.e. ESCO projects);
Other TA, excluding physical investments (hardware)
Conditions for the investment programmes
•
•
•
•
Above € 50m (smaller projects eligible when integrated into larger programmes);
Must be implemented within a 3-year timeframe;
Minimum investment leverage factor of 20;
4% of the investment volume as cap for technical assistance (TA)
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Examples
• Province of Milan
 Context - the Province is a supporting structure under the Covenant of mayors
 Objective - assistance for small or medium-sized municipalities in the refurbishment of
public buildings
 Investment scale: ELENA contribution: EUR 1,95 m / expected investment: EUR 90 m
 Support provided under ELENA
 Setting up a support unit
 Procedure selection for implementation of investments, via ESCO’s, building lots
 Preparation of calls for tender and negotiations with bidders
 State of advancement - tender under EPC for ESCOs published for 100 schools
• Other supported projects
 Cities: Paris, Greater London Authority, Villa Nova de Gaia
 Provinces and municipalities : Milan, Chieti; Barcelona, Modena (part of program)
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JESSICA
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JESSICA at a glance
JESSICA: Joint European Support for Sustainable Investment in City Areas
Objective: invest Structural Funds in a revolving way to urban projects, including EE
• Initiative of the EC (DG REGIO) launched in 2006 together with EIB and CEB to establish a
common approach for financing urban development and strengthening the urban dimension
in cohesion policy through repayable assistance
• Investments in sustainable urban transformation (brownfields/city regeneration, renewable
energy, energy efficiency, clusters’ development, transport, tourism/public service
infrastructure)
Overall JESSICA objectives
• To increase Structural Funds’
efficiency and productivity
Use of innovative financial instruments allowing for the
reutilization of resources invested in the urban sector
• To increase leverage
Mobilize public/private resources for investments in projects
being part of an integrated urban development scheme
• To exploit new partnerships
and synergies
EPEC and Energy Efficiency
Use of managerial, financial and implementation
competencies of the private sector and IFIs such as EIB
30
The structure of JESSICA
EUROPEAN COMMISSION
Structural Funds
OTHER INVESTORS
OTHER
INVESTORS
(Public
& Private)
(Public & Private)
CITIES
MEMBER STATE
MEMBER
STATE
Via a designated
Managing Authority
Via a designated Managing Authority
Holding Fund (HF)
Holding Fund (HF)
optional
URBAN DEVELOPMENT FUND (UDF)
Investment
(equity, loan or
guarantee)
IFIs/Public
Agencies/
Banks
Projects forming part of an Integrated Plan for
Sustainable Urban Development
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JESSICA: EU state of play and EIB role within
EIB role in JESSICA:
• Acting as a Holding Fund (HF) manager on behalf of Managing Authorities (i.e. managing OP
contributions, arranging selection/establishment/investments into UDFs etc.)
• Advising and assisting national, regional and local authorities in JESSICA implementation (e.g.
Evaluation studies, Technical Assistance services)
• Promoting the use of UDFs and best practice across Europe
State of play of existing JESSICA mandates:
• EUR 1.9 bn of Structural Funds committed to 23
1
2
3 5
1 5
2
5 7
1 2
1 2
1 3
2
2
3 6
1 5
18 HFs managed by EIB
37 UDFs set up under EIB-managed HFs
1 HF set up with national FIs
operations in 11 Member States
• 18 (out of 19) HFs are managed by EIB (EUR 1.8bn)
under which 37 UDFs created so far;
• Several projects financed by UDFs “on the ground”
• Energy efficiency UDFs established in London and
Lithuania; energy focused HF established in Spain;
energy components constitute also part of traditional
UDFs elsewhere
4 UDFs established directly without HF
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JESSICA energy projects: Possible types and added value
Renewable Energy
•
Solar, biomass, wind
Clean Transport
•
•
Electric vehicles, including automobiles, motorcycles
and bicycles
Fleet management (improvement of energy efficiency)
Energy Efficiency, Co-generation and Energy Management
•
•
Renovation or extension of existing district heating or
cooling networks; high-efficiency combined heat and
power
Energy savings/energy efficiency in buildings
JESSICA has:
• Financial resources and products, structure and experience in working with
urban/city areas to provide energy solutions for sustainable urban development
• Network to share information and best practice experiences
• Close relationship with other EIB initiatives, e.g. ELENA and JASPERS
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Example : JESSICA scheme in Lithuania
Ministries of Finance and Environment
contribution of EUR 227m from Operational Programme:
«Promotion of Cohesion 2007-2013»
JESSICA Holding Fund managed by EIB
Contingent
loans
Investment Committee
Urban Development Fund
Lithuanian banks:
Modernisation Loans
Repayments
PROJECTS:
Eligible energy efficiency projects in multiapartment buildings
BORROWERS:
Individual owners of apartments in multi-apartment
buildings / administrators of commonly used premises of
multi-apartment buildings
Housing and Urban
Development
Agency
Technical
assistance
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Example : JESSICA HF London
(London Green Fund):
Greater London
Authority
£18 m
£32m
£50m
London Green Fund
£100m
Managed by EIB
£35m
Waste
UDF
Private finance
Equity type
investment
In procurement phase
£50m
£12m
Energy Efficiency
UDF
Greener housing
UDF
Loan type
investment
£400m loan for high
energy efficiency new
build and retrofit of
existing social housing
(expected to be signed in
Dec 2012)
Urban Projects in Greater London area and forming part of the
Low risk/low return
London Plan
High risk/high return
•
EPEC and Energy Efficiency
Aiming to deliver outputs/impacts of job creation, carbon
reduction, and energy usage savings
35
EEEF
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EEEF at a glance
•Stands for European Energy Efficiency Fund
•EEE F is dedicated to mitigating climate change
through market-based financing in the EU
Member States
• Its aim is to support all EU Member States to
achieve the ambitious EU climate targets
(20/20/20)
• How: Financing Energy Efficiency (EE) and
Renewable Energy (RE) projects in the public
sector at the local level
• Beneficiaries: Municipalities, local or regional
authorities; public and private entities acting on
their behalf (i.e. utilities, public transportation
providers, social housing associations)
• What: Investment in EE (70%), RE (20%), Clean
Urban Transport (10%)
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Structure of the Fund
•Initial capital of euro 265 M
—European Commission: 125 M
—European Investment Bank: 75 M
—Cassa Depositi e Prestiti: 60 M
—Deutsche Bank: 5 M
•Target size: euro 500/600 M
•Form: SICAV, investment in forms of
loans, guarantees or equity. Bankable
projects. No grants.
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Eligible Investment
•Energy Efficiency (EE) and Renewable Energy (RE)
—Buildings
—CHP (including micro-cogeneration) and
district heating/cooling, in particular from RE
sources, with full usage of ICT
—Street-lighting, electricity storage solutions,
smart meters, smart grids
—Decentralized energy sources and their
integration in local grids
—Energy storage
•Clean Urban Transport
—EE/RE technologies, with an emphasis on
electric and hydrogen vehicles
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Advantages of EEEF compared to other
market instruments
• Innovative financing according to needs: junior
loan, convertible debt, equity participation, tailormade senior loan (longer duration or grace
periods), EPC as collateral to secure a loan,
forfeiting scheme. Fund can also operate as sole
investor
• Long maturity: flexible, up to 20 years for debt
• Technical Assistance (TA): euro 20 M in total
grant for project development phase, up to 90% of
eligible costs. Linked with EEEF funding. Based on
ELENA model.
• Fast & flexible procedures : no more than 6
months from pre-screening until financing
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Eligibility Criteria
• Municipal link
• Public authorities should have concrete objectives to
mitigate climate change
• At least 20 % primary energy savings for EE projects
(higher for buildings, increase of 2 categories)
• Min. 20 % reduction of CO2 equiv. for RE and transport
• Compliance with EU legislation (RE directive, CHP…)
• Only proven technologies (and specific criteria for
technology may apply)
•Size: 5-25 M€, case-by-case basis
•Strong support for ESCOs providing guaranteed energy
savings
•Eligibility check available on EEEF website :
http://eeef.eu/eligibility-check.html
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Case Study: Jewish Museum Berlin
Project Description
Partners
Jewish Museum Berlin, Johnson
Controls, EEEF
Measures
• Installations of innovative LEDtechnology
• Installation of new ventilation
system
• Optimization of air management
• Heat recovery and installation of
electrical expansion valves and
others
Results
• Reduction of CO2 emissions
1,812 t p.a., approximately 55%
compared to baseline
• Guaranteed energy savings of
€294,327 p.a. (43.2%)
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Case Study: Jewish Museum Berlin
Financing Structure
EEEF
(Purchaser)
2. Forfaiting
agreement: purchase
of 70% of
receivables/energy
savings (limited
recourse)
4. Forwards sold part of
the receivables/energy
savings to EEEF
3. Pays receivable with
savings
ESCO
(Seller)
JMB
(Employer)
1. Implementation of EE
measures according to the
Energy Performance
Contract (EPC)
Savings Guarantee
Source: EEEF
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Case Study: Jewish Museum Berlin
Investment Characteristics
• Key data:
— Financing volume: approx. €1.7 m
— Duration of financing: 10 years
— Quarterly interest and principal payments
• Highlights:
— Pilot project with the forfeiting structure
— Attractive investment instrument to support advanced
projects
— Winner of European Energy Service Initiative’s Award
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Stuart Broom
s.broom@eib.org
Telephone: +352 4379 86835
European PPP Expertise Centre
epec@eib.org
www.eib.org/epec
Twitter: EpecNews
Telephone: +352 4379 22022
Fax: +352 4379 65499
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