Energy Financing Energy Efficiency Looking towards 2020 Stefano Panighetti Directorate-General for Energy C3 Energy Efficiency

Energy A particular momentum 1/2 A new framework directive to be adopted: To complement sectorial directives and introduce binding measures for MS Art. 14 & 15a promotion of energy services, financial instruments and incentives  More Stable legislative framework: renewed efforts from MS & investment predictability for investors 2

Energy A particular momentum 2/2 A new Multiannual Financial Framework ( ) Cohesion funding to allocate some 17 billion € to energy efficiency and renewable energy (doubling current allocations) Horizon 2020: 6.5 billion € is to be allocated to research and innovation in "Secure, clean and efficient energy" Likely to include an IEE-type follow-up programme 3

Energy MFF : A new Paradigm for sustainable investments: MFF in line with EU 2020 strategy: "smart, sustainable & inclusive growth" Conditionality: implementation of relevant EU legislation Cohesion policy Thematic concentration: shift to a competitive low carbon economy Public authorities to pave the way (public building renovation, use of EPC…) 4

Energy EU funding should provide opportunity to attract & leverage funds from private investors However, the big bulk of EE/RES investments should come from private sector, EU and national funding to complement; Using market mechanism to avoid crowding out investors and increase leverage; Such as Financial Engineering Instrument and EPC; Grant to address primarilly market failures, innovative technologies and beyond cost-effective EE projects (deep renovation) 5

Energy What is the ‘investment’ need? Energy savings potential across sectors requires investment of around 850 billion € ( ) Around 85 billion € per year Buildings take the lion’s share of around 60 billion € per year 6

Energy What are the barriers to EE investments? Regulatory framework & market barriers: Procurement rules, public deficit accounting Split incentives Low level of awareness & capacity Access to Financing High perceived risk -unclear market valuation Unadapted financing products High upfront financing High transaction costs Grant dependency 7

Energy How can the EU support help? Cohesion policy funds ( ): 5,1 billion € for energy efficiency (up to 8 billion € if all MS re- allocate 4% for housing under ERDF) Intelligent Energy Europe Programme ( ): 735 million € for ‘soft’ energy efficiency/renewables projects Capacity building, awareness raising, best practices sharing ELENA Facility: 97 million € for technical assistance to mobilise investments To scale up projects and reduce transaction costs and support Project development phases European Energy Efficiency Fund (EEE-F): 265 million € for investments into mature, bankable efficiency/renewables projects 20 million € for technical assistance Role model projects, leverage effect, EPC support… 8

Energy Best Practices examples Refurbishment of social housing (FR) Investments of € 320 M of ERDF in whole country Average support by ERDF = € 2,886 per dwelling (14% of total needs) Impacts: generated over € 1 billion in investment in energy performance in social housing in FR helped to create and maintain 15,000 local jobs & potentially 31,000 with measures in the pipeline 50,000 households with modest incomes supported to fight energy poverty (heating costs reduced on average by 40%) 9

Energy Kredex Revolving Fund in Estonia Switch from grants to a revolving fund KredEx (Credit and Export Guarantee Fund of the State) supports this Why revolving fund? Opportunity for re-usage of the funds Funds stay in state Loan is needed for reconstruction anyway Easier to administer, lower administrative costs End-beneficiary is used to take loan Innovative scheme, help from kfW Started 06/2009 March 2010: 70 contracts with multi-apartment buildings, total 5,1 mn € (average €, 2035 apartments, saving 33%) 10

Energy 11 JESSICA Holding Fund amounts to € 227 million: € 127 million ERDF € 100 million National co-financing Expected later: some funds by commercial bank Implementation started June 2010 To date, circa 100 projects have been approved for funding. Planned to modernize houses, by the year 2020 This example: 45 apartment multi family building Insulated external walls and roof Windows replaced Glazing of balconies Modernization of heating substation & heating systems Energy efficiency improvement of 60 % JESSICA fund in Lithuania

Energy Energy Performance Contracting (EPC) Campaign Directorate-General for Energy Energy Efficiency

Energy 13 The EPC Opportunity New Regulatory Frameworks provide an opportunity to develop the EPC market Multi-annual Financial Framework -Use of Structural and Cohesion Funds to provide financing for EPCs -Potential to develop MS policy to reflect the EPC opportunity Energy Efficiency Directive -Article 3 – required renovation of 3% of central government buildings -Article 7 – energy efficiency obligations 1.5% target to be met -Article 19 – removal of barrier to energy efficiency in accounting rules - Article 20 – Maximising the benefits of multiple financing schemes

Energy Aims of the EPC Campaign To highlight awareness of EPC at national, regional and local levels To hold a series of practical workshops to - Increase knowledge - Build confidence - Share experience - Create dialogue among all stakeholders (public, private, regional and national level) Three pillars working to complement each other: EPEC, ManagEnergy and Covenant of Mayors 14

Energy EPC Campaign Structure National EPEC Regional ManagEnergy Local Covenant of Mayors – series of national events planned Targeting key policymakers at national level Focus on implementation of EPC frameworks, use of cohesion policy funds, and practical examples of EPC benefits – 42 events planned Aimed at regional authorities and energy agencies Focus on forthcoming changes to regulatory framework and potential replication of EPC projects Webinar events Capacity building events for local stakeholders Focus on barriers encountered, solutions, and practical ways to roll- out more EPC projects locally

Energy Key Stakeholders National Administrations, including Ministries of Finance, Energy, Environment, Public Works National Energy Agencies Financial Community Municipalities ESCo's Energy Services Industry (products, technology, energy management systems) 16

Energy Accounting for EPCs in the Public Sector There is significant potential for energy savings in the public sector, which could be facilitated by the uptake of EPCs  EAS 95 – when “most project risk” is transferred to the private partner to a government in a PPP (public private partnership), then the assets involved in the PPP should not be reported on the government balance sheet.  'Off-balance sheet' financing to could be an incentive to encourage public sector organisations to consider energy efficiency investment  May require changes to the reporting structures on PPPs to Eurostat in some MS How do you account for EPCs? 17

Energy Thank you for your attention 18