Observations and recommendations on getting the framework right for energy efficient investments in multi-apartment buildings - based on the achievements and lessons learned of the ClearSupport project Conference and Workshop: COHESION POLICY INVESTING IN ENERGY EFFICIENCY IN BUILDINGS Brussels, November 2011 Nils Daugaard

Content Part I: What did Clear Support do and what can be learned Review of Clear Support achievements Case study of the multi-apartment sector in Lithuania Part II: Enabling of a sound investment framework Observations and recommendations on the design of future Cohesion funds based on the Clear Support experience, incl. ownership/decision making aspects 2 Cohesion Policy Investing in Energy Efficiency in Buildings, Brussels, Nov 2011

PART I Introduction to ClearSupport: 3 Cohesion Policy Investing in Energy Efficiency in Buildings, Brussels, Nov 2011

ClearSupport – introduction Can be considered a pilot initiative on a systematic approach on enabling energy efficient building investments – public, residential and (to less extent) private sector This was done in the form of operating 5 Project Service Facilities/PSFs in – Latvia – Lithuania – Poland – Czech Republic – Crete ClearSupport was running from 2007 to the end of 2009 involving thirteen partners 4 Focus on making financing schemes work and activating energy services Cohesion Policy Investing in Energy Efficiency in Buildings, Brussels, Nov 2011

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Services to bridge the gap Local and national Government/policy Financing institutions ESCOs etc. Public house owners Residential house owners Support Information Project preparation Preparation of applications Consulting Education Analyses Heart of the action: PSFs delivering multi-disciplinary services The ambitious goal was to support the initiation of specific building renovations in the 5 target regions 6 Cohesion Policy Investing in Energy Efficiency in Buildings, Brussels, Nov 2011 The IEE support helped to create the multi-disciplinary skills required

ClearSupport: Achievements 7 Cohesion Policy Investing in Energy Efficiency in Buildings, Brussels, Nov 2011

8 The PSFs initiated 230 investments 8 Cohesion Policy Investing in Energy Efficiency in Buildings, Brussels, Nov 2011

9 Supported projects divided on sectors 9 Cohesion Policy Investing in Energy Efficiency in Buildings, Brussels, Nov 2011

ClearSupport: Financing instruments/schemes 10 Cohesion Policy Investing in Energy Efficiency in Buildings, Brussels, Nov 2011

11 Public-private partnership approaches (innovative) Energy Supply Contracting with guarantee elements -> Residential sector Energy Performance Contracting -> Municipal / Public sector Financing instruments Credit / Loans Grants Interest subsidies Forfeiting Leasing (Operate & Finance) Long-term strategy for financing building renovation: Revolving Funds Scope of the work on financing schemes Cohesion Policy Investing in Energy Efficiency in Buildings, Brussels, Nov 2011

12 Financing Schemes – Reports and Tools Two analysis reports: Lessons learned: Overview of existing financing schemes and experience from previous projects Financial instrument/scheme report, including recommendations on suitable schemes for the target regions A number of tools, including: Procedure and checklist for PSF operations Guide: Main points for contracts from a financing viewpoint (for bankers) Subsidy guidelines (how to define an appropriate level of subsidies) Easy-to-use tools for project evaluation Putting in place revolving fund stands out as a key recommendation The reports and tools are available at Cohesion Policy Investing in Energy Efficiency in Buildings, Brussels, Nov 2011

Adoption of financing instruments in PSF regions - Examples Latvia Participation in Green Investment Scheme Latvia Participation in Green Investment Scheme Lithuania Development of Revolving Fund Lithuania Development of Revolving Fund Poland Awareness raising and training Poland Awareness raising and training Czech Republic Development of the ESCO Market Czech Republic Development of the ESCO Market Crete Efforts to create local ESCO market Crete Efforts to create local ESCO market 13 Cohesion Policy Investing in Energy Efficiency in Buildings, Brussels, Nov 2011

ClearSupport: Evaluation – Lessons learned 14 Cohesion Policy Investing in Energy Efficiency in Buildings, Brussels, Nov 2011

PSF Achievements – Project Investment Support Drivers behind supported projects: Availability of PSF Services Availability of financing schemes The PSF activities has ensured that the number of applications to the available financing programmes has accelerated and that financing applications are of sufficient quality thereby reducing front-up costs, as well as the time needed to consider applications 15 Cohesion Policy Investing in Energy Efficiency in Buildings, Brussels, Nov 2011

16 Helping to overcome barriers such as: Shortage of funds Inappropriate legal frameworks Unclear ownership structures Lack of awareness of financing options In the form of: Helping the building owners in developing proper investments Developing new financing schemes Improving legal framework conditions Awareness raising Training PSF Achievements 16 Cohesion Policy Investing in Energy Efficiency in Buildings, Brussels, Nov 2011

Impact from the PSF Action 17 Cohesion Policy Investing in Energy Efficiency in Buildings, Brussels, Nov 2011

18 Case study: Situation of the multi-apartment sector in Lithuania Technical aspects There are about 45,000 multi-apartment blocks in Lithuania. 11% of them were built before 1961, 80% in the period 1961 – 1990 and the remaining 9% after % of the Lithuanian population live in apartment blocks that were built in The thermal characteristics of the apartment blocks built before 1993 are poor. Typical thermal resistance of outside walls is 0.9 [m 2 K / W], which is 4 times less than Lithuanian current standard requirement and corresponding values in Scandinavian countries Cohesion Policy Investing in Energy Efficiency in Buildings, Brussels, Nov 2011

19 Case study (contd): Situation of the multi-apartment sector in Lithuania Organisation, ownership and decision-making Lithuanian apartment blocks suffer from the lack of a proper house management system. More than 80% of apartment blocks have not created a housing association and led to a partial standstill of improving building management and undertaking renovations. There is lack of motivation among the flat owners; e.g. due to state subsidies of the heat bill. To this can be added that information about merits of renovation is often not available for the apartment owners This is accompanied with improper organisation of finance; the majority of houses do not accumulate funds for more significant repair or renovation. Further the bank sector is reluctant to enter the market due to risk concerns Cohesion Policy Investing in Energy Efficiency in Buildings, Brussels, Nov 2011

20 Case study (contd): Situation of the multi-apartment sector in Lithuania Government policies A key instrument concerns the Programme for the Modernisation of Multi-family Buildings introduced in 2005 with the principal aim is to help the owners of flats in multi- family buildings to modernise their housing stock and to increase efficiency of energy use The financial crisis has forced the Government to reduce the incentives for the building owners associated with the programme; e.g. the grant levels have been lowered and the speed of renovation has slowed down. Cohesion Policy Investing in Energy Efficiency in Buildings, Brussels, Nov 2011

21 Case study (contd): Situation of the multi-apartment sector in Lithuania It is possible ! Since 1996 around 700 apartment blocks were renovated and modernised. But: The renovation so far makes up only 1.5-2% of the whole building stock. No effective solution suitable for large scale renovation has been found yet and the financial crisis has worthened the situation considerably Cohesion Policy Investing in Energy Efficiency in Buildings, Brussels, Nov 2011

22 Case study (contd): Barriers yet to be overcome Lack of proper ownership and management structure of multi-family houses. House owners association model proved to be suitable for 20% of the multifamily house stock only; Lack of ownership was replaced by administrators nominated by municipalities. In many cases these administrating companies are monopolies and abuse their monopoly power against passive inhabitants; Prices and tariffs of house management services in these cases are still regulated and free market is non-existent. This has led to poor quality of services; Government does not pay sufficient attention to progressive innovations to increase energy efficiency in buildings. Government support programme deals mostly with thermal insulation of the building envelope, which is an important, but expensive and not the sole measure for energy efficiency. Cohesion Policy Investing in Energy Efficiency in Buildings, Brussels, Nov 2011

23 PART II Enabling of a sound investment framework observations and recommendations based on the ClearSupport experience ClearSupport has shown that a proactive effort on helping building owners in identifying and documenting investments is essential in optimising financing schemes To apply a multi-disciplinary approach is a key means to overcome the various barriers in the implementation The following slides will present some observations and recommendations as how to increase the level of EE investments in the multi-apartment sector as inspiration for the design of future Cohesion funds and related financing instruments Cohesion Policy Investing in Energy Efficiency in Buildings, Brussels, Nov 2011

24 How to create awareness and competences of managing authorities Observations Generally the programming of ERDF does not take into proper account the long term impact in the form of reduced energy bills and better environment that channelling support to EE in multi-apartment buildings bring about Recommendations Introduce in the procedures for the programming of ERDF a stronger set-up for addressing the potential merits of supporting investments EE in multi-apartment buildings (including a long term horizon for the impact assessment) as well as guidance on how to handle the management of the support in an adequate manner Cohesion Policy Investing in Energy Efficiency in Buildings, Brussels, Nov 2011

25 Regulatory framework Observations Despite active policies the general observation is that there are yet big gabs in order to provide a strong framework in order that the big energy saving potentials can be exploited Recommendations An essential point is that Member States are encouraged to put in place consistent policies to go hand in hand with the investment process, including creating good linkage between the policies at EU, national, regional and local level. Part of this is to obtain best possible interaction with the NEEAPs and NREAPs and the process around the CoM Cohesion Policy Investing in Energy Efficiency in Buildings, Brussels, Nov 2011

26 Financing instruments Observations There is found to be many good initiatives around Europe to provide better financing options for the multi-apartment building sector, including developing the revolving fund concept in conjunction with ERDF. Recommendations The recommendation is to continue and accelerate this development, but doing this in understanding of the holistic approach needed to make it work properly; not least taking into account that the building owners in general need good support in order to become aware of the energy saving potentials and to turn the awareness into action in form of appropriate design of EE measures. Cohesion Policy Investing in Energy Efficiency in Buildings, Brussels, Nov 2011

27 Ownership structures and decision-making Observations Finding adequate ways for renovation of the multi-apartment building stock is to high degree a democratic process, in which the flat owners are to find appropriate ways for the building management, investment decisions etc. Unfortunately, as the case study from Lithuania shows, various barriers in this process hinders/slows down a positive development Recommendations The key issue is that the relevant authorities find the right approaches in coherence with the policy formulation and programming and administration of the financing instruments, including EU funds. There is a need for sober and direct dialogue with the housing associations/flat owners to provide them with relevant knowledge on issues like handling of investments (dissemination in form of e.g. posters is not enough) Cohesion Policy Investing in Energy Efficiency in Buildings, Brussels, Nov 2011

How to enable the investments to happen Good financing instrument(s) is not sufficient in itself ! Targeted and coordinated assistance to energy efficiency projects can significantly accelerate the identification and the implementation of these Local support combined with exchange of know-how and experience incl. an European Network can contribute to improve the quality of project documentation and implementation Experience from the PSF process can contribute to develop framework conditions in EE building projects at the local level as well at the EU level (pro-active efforts from the PSFs) 28 You need a Delevery mechanism to make it all happen !! Cohesion Policy Investing in Energy Efficiency in Buildings, Brussels, Nov 2011

Recommended structure on promoting investments Potential European Supporting Structure Project service providers Project owners Financing Institutions 29 See more in the ClearSupport Guidebook: 3.4%20Tool%202_Guidebook_FINAL.pdf Cohesion Policy Investing in Energy Efficiency in Buildings, Brussels, f ov 2011

30 Find out more at: Cohesion Policy Investing in Energy Efficiency in Buildings, Brussels, Nov 2011

Partners Thank you for attention ! On behalf of the ClearSupport consortium Nils Daugaard More information on ClearSupport partners: In partnership with: Cohesion Policy Investing in Energy Efficiency in Buildings, Brussels, Nov 2011