1 European Investment Bank EIB's support for Energy Efficiency & Renewable Energy Investment in cities and regions - European Local Energy Assistance (ELENA) Ralf Goldmann Luxembourg/Genova 16 December 2009

2 European Investment Bank European Investment Bank Profile EIB has been created by the Treaty of Rome in 1958 EIB is a policy driven institution EIB is owned by the 27 EU member states EIB has subscribed capital of EUR bn EIB funds itself on the capital markets (2008: EUR 58 bn) EIB signed loans amounting to EUR 57 bn in 2008 The European Investment Bank is the European Union‘s long-term financing institution. The Bank acts as an autonomous body set up to finance capital investment furthering European integration by promoting EU policies.

3 European Investment Bank Urban areas account for about 70% of the total primary energy demand of the EU Under the IEA reference scenario, urban energy consumption projected to increase twice the rate of the EU as a whole Cities consume a higher share of gas, electricity and heat than the EU average and a lower share of coal, oil and biomass Background: Energy consumption in cities

4 European Investment Bank The main ways to achieve EU energy and CC objectives is by developing the Energy Efficiency (EE) and Renewable Energy (RES) potential A substantial part of this potential is in cities, notably buildings and urban transport Substantial investments to achieve the EU objectives: bn EUR in in RES Investments in EE probably higher than in RES How to finance these investments, notably during the crisis? Background: EU energy and climate change policy

5 European Investment Bank Often very small projects, thus high transaction costs: need to regroup projects in packages Difficulties related to the measurement of the energy efficiency “revenues”: Energy performance contracts Generation of a flow of bankable projects, notably related to buildings and SMEs: public support for project generation Municipalities often have limited possibilities to invest: private sector involvement Often subsidies plays a role in developing the EE potential: efficient use of subsidies as most projects are profitable Energy Service Companies (ESCOs) can play a substantial role to implement EE projects Financing low-carbon projects in cities: Energy efficiency

6 European Investment Bank Actions Plans should make: Realistic assessment of the investment requirements Identify potential financial aggregation or intermediation structures Assess needs and possibilities to obtain subsidies To achieve the ambitious CC objective it is necessary to develop new ways of developing EE/RES projects in cities: creation of large investment packages of EE/ RES, standard contracts and involvement of private sector as appropriate Covenant of Mayors initiative: Issues for the financial sector

7 European Investment Bank Four priority areas: Renewable energy Energy efficiency Diversification and security of internal supply (including TEN- E) External energy security and economic development Individual loans of EUR 8.6bn in 2008: EUR 1.7bn for renewable energy projects (1) EUR 2.7bn for TEN-E projects Total loans of EUR 23.7bn EUR 4.7bn for renewable energy projects (1) EUR 6.6bn for TEN-E projects (1)Figures based on the business sector EIB energy strategy

8 European Investment Bank Individual loans to finance large projects Instruments to finance small investments: Global loans or framework loans Broad mix of products: from senior loans to quasi-equity finance Jaspers (in the NMS) and Jessica can support the development of specific initiatives using Structural and Cohesion funds EIB instruments to support climate change initiatives by cities

9 European Investment Bank CC goals require cities to invest in large-scale EE/RES programmes; Key is to find scaleable and replicable investment models. Opportunities: Large investment potential at local level (buildings; transport; local energy) Significant subset of investments have positive NPV; ie grants not needed. Hurdles: cities often constrained by lack of: fiscal space; technical expertise, administrative barriers. European Local ENergy Assistance -- ELENA

10 European Investment Bank European Local ENergy Assistance -- ELENA EC-EIB cooperation to support local and regional authorities to reach targets. Technical Assistance facility: managed by EIB; funded by EU budget (CIP/IEE programme). Application to Energy Efficiency; local renewables; clean transport. Market replication focus. Investment leverage required (ratio 25) 90% funding rate (grant)

11 European Investment Bank European Local ENergy Assistance -- ELENA Specific features: Identification and grouping of EE/RE investments Support for the development of contractual structures (performance contracts, ESCOs) Financing the preparation of bankable investment programmes Aiming to ensure the eligibility of the supported investment programmes for further EIB funding

12 European Investment Bank INVESTMENT PROGRAMMES/PROJECT EE and RES investment in public and private buildings, including social housing and street and traffic lighting; Urban transport to support increased energy efficiency and integration of renewable energy sources; Local energy infrastructure to support developments in previous sectors including smart grids, ICT, etc. OVERVIEW ELENA (Project Development Services) Support to Final Beneficiaries with: Feasibility studies Additional technical staff Technical studies Procurement/tendering Financial structuring

13 European Investment Bank Project Development Services can be provided to a local or regional authority or other Public Body from a Participating Country, including those under the Covenant of Mayors Initiative, or a grouping of such bodies, The Investment Programme or part of it can be implemented through entities other than the Public Body, e.g. the holder or operator of a concession or an ESCO Eligible promoters/Final Beneficiaries

14 European Investment Bank There are substantial investment opportunities in the urban environment to tackle climate change. To develop this potential it is necessary to face substantial barriers (such as limited information) and reduce transaction costs) thus the importance of stimulating the generation of bankable projects Access to adapted equity and credit markets is usually an important barrier EIB supports cities initiatives with adapted financial instruments The EU Commission and the EIB have developed ELENA to support cities tackling climate change, also in support of the Covenant of Mayors. Conclusions

15 European Investment Bank For more information… EIB information desk: Tel: (+352) Fax: (+352)