Core Theme Series Report: Concerted Action Energy Services Directive

Funds and financing for energy efficiency

Dorottya Hujber, ÉMI, Hungary

May 2014

5

Content

1 2 3 4 5

Introduction and context Improving the effective use of EU Structural Funds and Technical Assistance Public Private Partnerships for energy efficiency How to make better use of European financial sources in combination with national schemes for energy efficiency Concluding remarks

1

3 4 7 11 15

Introduction and context

The Concerted Action for the Energy Services Directive II (CA ESD II) supported Member States and Norway in the effective implementation of the Directive on Energy Services 2006/32/EC by fostering the exchange of information and experiences among Member States with regards of the implementation of the Directive. The Energy Services Directive was repealed by the Energy Efficiency Directive (EED - 2012/27/EU) in October 2012. This report summarises the work carried out during the Concerted Action for the Energy Services Directive (CA ESD II) between June 2011 and December 2012 covering three topics on funds and financing for energy efficiency. It focuses on analysing financial measures used for energy efficiency (EE) and finding successful examples of funding and financial mechanisms within the CA ESD. The Energy Services Directive (2006/32/EC) (ESD) requires that barriers, other than those of a clearly fiscal nature, which unnecessarily or disproportionately impede or restrict the use of financial instruments for energy savings, are removed (Article 9) and that the market for EE improvement measures is encouraged. In addition, according to Article 11 of the ESD, Member States (MS) may establish funds to subsidise the delivery of EE improvement programmes and to promote the development of a market for implementing these measures. Barriers to EE implementation are frequently related to funding issues and tariffs that hinder EE improvements.

Information was collected from countries through interviews and questionnaires. This approach gathered knowledge of overall circumstances within the countries and found national examples of successful methods, which can be shared among participants. This can foster the adaptation of well-established financial solutions into national circumstances.

Within this area, three main aspects were addressed during the CA ESD II. The first investigated the use of funds (Structural and Cohesion Funds) coming from the European Union’s budget to support energy efficient investments, including through the use of Technical Assistance facilities. The second was discovering how private financing can be leveraged to provide capital for public use through public and private partnership schemes. Finally, the possibility of combining European financial sources and national schemes was discussed more in depth.

2

Core Theme Series Report 5

Core Theme Series Report 5

3

2

Improving the effective use of EU Structural Funds and Technical Assistance

Good practice example

London Energy Efficiency Fund (JESSICA) in the UK

The purpose of the work carried out under this topic was to share experiences and to learn about good examples of EU Structural and Cohesion Funds and Technical Assistance. These are part-financing regional and horizontal operations in the Member States to increase the cohesion of the regions, focusing on economic growth and employment. Energy efficiency measures are often financed using these resources.

Earlier CA ESD reports showed that the main source of funding for EE improvements is the national budget; however, the majority of countries (74%) also use Structural and Cohesion Funds (SCF) to finance EE programmes. The reports also show that the funds are used most successfully for non-residential buildings in the public sector. Structural and Cohesion Funds (SCF) SCF are mainly directed to beneficiaries through the National Strategic Reference Frameworks that list all national and regional Operational Programmes (OP). There are differences between CA ESD participating countries as to whether they have specific OP focusing primarily on EE or whether they have EE measures integrated in different OPs. A study1 showed that EE and renewable energy commitments represent 11 billion EUR within the SCF, out of which 44% is allocated to renewables (4,8bn EUR) and 40% to efficiency (4.2bn EUR). Another analysis of OP from the 2007-2013 programming period detected that new MS allocated on average 2.4% of their SCF budget (4.3bn EUR) to renewable energy and EE2. The PromoSCene project3 found that there is only a low share of renewable energy and EE in the 20072013 SCF budgets, despite the fact that sustainable energy was mentioned in the European Commission’s Community Strategic Guidelines. Ten selected CA ESD participating countries were interviewed about using SCF to support EE

improvements. It was difficult for representatives to say exactly the amount of funding that was used for EE purposes, but it is assumed to be between 1 and 3% of the overall budget, which can be still a quite significant amount. New MS seem to have specific OPs focusing on EE or renewable energy while old MS include EE considerations as part of different OPs. MS also have different views on the absorption rate of the allocated available EU funding, ranging from 9 to 100%. The overall opinion, shared by 7 out of 10 countries, is that the available SF/CF allocated for EE are used effectively; however, the absorption rate of available funds is sometimes not high enough in MS. Respondents believe that the most important factors in the successful use of SCF in their own countries, which should be considered by others, are:

refurbishment projects together. The fund has an interactive application process supported by consultants, who can provide detailed technical assistance. This is designed to streamline proposals and to help them meet the investment criteria set out below. There is project screening at pre-application phase, and a requirement to establish a monitoring and verification plan before the application can proceed. As with many projects of this type, detailed due diligence is undertaken before a decision to invest is made.

The project is the first use of JESSICA funds in the UK and has successfully raised private sector match funding for the JESSICA investment since 2009. The application process and support available are also geared towards ensuring high levels of success. The £100 million London Energy Efficiency Fund (LEEF), will focus on investing in EE retrofit to public sector buildings, including:

LEEF is a sustainable investor, targeting a socioeconomic return as well as a financial return on investment. Projects supported by LEEF should help deliver the fund’s overall carbon reduction targets. Each project should therefore aim to deliver:

a The adaptation and/or refurbishment of existing public and/or voluntary sector buildings (e.g. Local Authorities, universities, hospitals, schools) to make them more energy efficient, sustainable and environmentally friendly

a Energy Savings Ratio of at least 20% compared to conditions prior to investment

b Improvements to existing social housing properties to make them more energy efficient (with a cap of c. £11m)

b Each £1,500 LEEF Investment should achieve a reduction of at least one tonne CO2

The fund provides repayable investment finance; loans must therefore be repaid in full, plus an interest element. The fund will target investments of between £3-10m and will encourage project sponsors to consider how best to achieve economies of scale, for example, by grouping buildings or eligible parts of broader

There is no set payback period required, but the fund will focus on short term development loans and medium term 5-10 year loans in line with the anticipated payback period. Longer investment periods will be considered on a case by case basis.

A new source of finance for Energy Efficiency Retrofit projects in public sector buildings across London, established under the JESSICA initiative.

• Well-designed and carefully prepared programme setup. Set rules and procedures must be clear and comprehensive right from the beginning. • Finding the right allocation of funds sends signals to the market and to specific sectors highlighting the importance of EE. SCF provides good opportunities for companies to initiate further investments and also to overcome lack of investment capital for the implementation of EE measures. • Consistent information for potential applicants in cities and regions should also be available to secure a high uptake of funds.

£50m London Green Fund

£100m London Energy Efficiancy Fund (LEEF)

£50M RBS Repayments of interest & principal

Loans or Equity

Public sector body eg.Local Authority /University Energy savings

Private sector eg. ESCO/Contractor

Joint Venture/SPV PPP/ PFI/LEP LEEF monies

fund works

Energy Efficiency Retrofit Project in Public Sector buildings 1 Directorate General for internal policies policy department A- Economic and scientific policy EU: Subsidies for polluting and unsustainable practices (2011) (ip/a/envi/st/2010-17) 2 Greening the economy with structural and cohesion funds, result of the IEE „PromoSCene” project, August 2009 3 www.promoscene-database.eu

4

Core Theme Series Report 5

www.leef.co.uk/

Core Theme Series Report 5

5

Technical Assistance The development of Technical Assistance (TA) schemes facilitates a more efficient and effective use of the limited funding available under SCF. When talking about programmes, it is important to distinguish between two kinds of TA, as they are managed and financed differently. In general, TA, which is part of the OPs, is established to support the implementation, management, coordination, monitoring and control of the OPs themselves, rather than financing investments directly. Depending on national circumstances, TA budget is either allocated as a priority axis within the OPs or, in some countries, specific OPs are established for TA. TA represents around 3% of the overall SCF budget within the OPs in the 2007-2013 programme period, however, it is difficult to tell how much is used specifically for the support of EE programmes. TA is available in all of the interviewed countries; in most cases, they are financed through a combination of SCF and national funds but in some cases funding comes solely from SF. Both the beneficiaries and the fund managers of this type of TA are governmental authorities and institutions involved in the implementation of OPs. Another approach to TA, developed by the European Commission to help MS through their national or regional Managing Authorities, is to either use part of their SCF or, by providing technical support, to prepare projects which will be financed by EU Structural Funds. The main facilities that are used by MS are JESSICAJoint European Support for Sustainable Investments for City Areas4; JASPERS - Joint Assistance to Support Projects in European Regions5; and ELENA - European Local Energy Assistance6, European Energy Efficiency Fund7; and Mobilising Local Energy Investments8. The experience and the involvement of MS in this type of TA facilities is varied. The beneficiaries of TA are mainly local authorities. The funds are managed by the European Investment Bank, the European Commission, energy agencies or by local authorities. TA facilities are successfully implemented in several countries and the reason for this is their well-designed communication and awareness raising campaigns. Continuous information and support is given throughout project implementation in those countries where these facilities are used effectively. One stop shop is the main success factor in the Netherlands. Potential applicants

need clear explanations and the right information about the possibilities and benefits. In the UK, the Energy Saving Trust provides information to local authorities through its Local Authority Finance Innovation Group. At the same time, control, audit and monitoring of project implementation should also be in place. The available fund is used only if it is spent in a cost effective way. This principle is expected to be followed. However, not all countries have in-built methods for measuring the effective use of funds. The most common indicators used to measure the effectiveness of a scheme or an OP are the number of projects financed and the depletion (absorption) of funds. In Lithuania two specific indicators are used in EE projects. The result indicator e.g. requires energy efficiency improvement no less than 20% in renovated Multi-apartment Buildings and no less than 20% in renovated Student Dormitories. The product indicators are the number of Multi-apartment Buildings and the number of Student Dormitories renovated by 2015. Sharing experience between MS about the effective use of TA is not common. Eight out of ten countries declared that they have not studied this issue in other MS. Recommendations The common finding is that national, regional and local integration of funds is needed to foster local actions. CA ESD II representatives agreed that funds are available and fundable projects are ready to be prepared, but still there is a disparity. This situation could be improved by an increased level of information, increased transparency and clarity in the application processes, faster application management and improved monitoring. A general conclusion is that it is easier to measure the effective use of funds when there is a dedicated credit line or programme. Nonetheless, EE improvements should be part of all investment projects. This duality characterises the planning and implementation of TA schemes and allocation of funding. There is also a demand for the establishment of a knowledge sharing platform at the EU level where detailed and sectorspecific case examples are presented.

3

Public Private Partnerships for energy efficiency

The aim was to investigate the major challenges and opportunities of the use of Public Private Partnerships (PPP) for EE in the MS. A questionnaire was developed to collect information about the general background of PPP, the barriers to PPP and possible solutions and improvement opportunities in CA ESD participating countries.

PPP is a cooperation between a public entity and a private organisation for the purpose of delivering public services. The conceptual difference between a ‘traditional’ PPP and EE PPP is that the design usually refers to the optimisation of the EE of an existing public building or a pool of buildings rather than new construction. The build phase of the project normally refers to retrofitting and the implementation of EE measures. In this form of cooperation, risks are shared between partners and increased financing for EE is mobilised within the private sector. The public partner benefits from the involvement of a private company who brings the necessary expertise and flexibility to carry out EE services, and the public partner pays for the delivered services over the long term, usually from the achieved savings.

General background to PPP

Using PPP for EE is a relatively new concept. The most widespread type of it is Energy Performance Contracting. With this type of contracting - between the public sector and a private energy service company - even with limited financial resources, public services can be improved and EE targets achieved. In less mature markets, governments can facilitate the availability of financing for EE in local financing institutions (e.g. banks) by establishing Dedicated Credit Lines or Risk-Sharing Facilities, which - in the case of public involvement - can also be considered types of PPP. In PPP processes, EE considerations mostly occurs in the building sector and in street/road lighting.

• 57% of respondents also have national internet sites where information about PPP is displayed

PPPs in general exist in almost every country or favourable environment, even if PPP is not used specifically to support EE. Questionnaires completed by CA ESD participants showed: • 54% of the respondents declared that they have a national definition for PPP • 57% of respondents have a specific ministerial PPP department • 32% indicated their countries have a specific agency dealing with PPP

Most PPP were found to be at local level. National and regional PPPs are the second most common levels followed by federal level. International implementation is rare. In 63% of the responding countries, sustainability is included in PPP processes. This shows that traditional PPP do exist in many countries and conditions are adequate for the establishment of PPP specifically for EE; however, some challenges and problems are still present.

4 For further information please visit: www.jessica.europa.eu 5 For further information please visit: www.jaspers-europa-info.org/ 6 For further information please visit: www.eib.org/elena 7 For further information please visit: www.eeef.eu/ 8 For further information please visit: ec.europa.eu/energy/intelligent/index_en.htm

6

Core Theme Series Report 5

Core Theme Series Report 5

7

Barriers on the public side 37% of CA ESD participants indicated that provision of PPP for EE is indicated in their National Energy Efficiency Action Plans. Barriers were found on both sides (public and private) which prevent countries from using PPP for EE improvements • PPP is not a traditional way of funding and is often overlooked (86% of respondents agreed this as a barrier).

Barriers on the private side • In CA ESD participating countries without experience of EE in PPP, 67% agreed that there is an immature market to deliver the whole set of services (design, implementation, operation, financing). • Lacking private financial resources (38% agreed). • There is no clear definition of the roles and responsibilities of the partners (50% agreed). • Private partners have too much dependence (43%).

• More funding is available through EU or national funds in a traditional way (43% of respondents agreed). Possible solutions and improvement opportunities • Lack of expertise and knowledge (60% agreed). • Existing legislative framework: difficult to fit PPP for EE into public procurement rules (57% agreed).

74% of respondents believe that PPP is a cost-effective way to support EE services. Some stated that PPP for EE is more useful than necessary, with the necessity of it doubted where other tools and measures can be used to finance EE. The importance and the cost effectiveness of PPP depend on the circumstances. Negative experiences were reported only by a few MS.

Figure 1: Do you think PPP is a cost-effective way for project development and implementation to support EE services?

The majority of respondents agreed that more extensive and clearer information is needed to increase the use of PPP. The most agreed improvement opportunities are listed below:

In respondents’ opinion, the best communication strategies to deliver support would be:

• Advice for the public partner on contracting and negotiation and on how to set EE requirements (88%)

• Handbook of PPP (89%), training courses (81%),

• Need for model contracts (83%)

• Bilateral exchange of experiences between MS (77%).

• Information on how to structure PPP for EE (83%) • Information dissemination of good case examples from other countries (96%) • Establishment of pilot projects to demonstrate processes (83%)

• Exchange of experience in CA ESD II (92%),

• Website with a database about examples by sectors

The European PPP Expert Centre has recently produced a summary of existing guidelines with the title “Guidance on Energy Efficiency in Public Buildings”. The document is available on EPEC’s website (www.eib.org/epec/resources/epec_guidance_ ee_public_buildings_en.pdf)

• Providing updated guidelines for both parties (83%)

Figure 2: When are you planning to introduce PPP for EE?

Within 1 year 17% No 4%

Between 1 and 3 years 18%

More than 3 years 12% Yes 74%

Other 22% Don’t know 53%

8

Core Theme Series Report 5

Never 0%

Core Theme Series Report 5

9

Shared experiences

Future plans

11 case studies were provided by respondents on the use of PPP for EE improvements in the public sector to share their experiences. EE considerations are relatively new in PPPs, so respondents tended to provide examples of Energy Performance Contracting, because it is a fairly well-established method in some countries. The up-front investment costs are most commonly financed entirely by the private partner. In half of the case studies, the private partner was responsible for designing, building, financing and operating the projects and mostly used private bank loans to cover the costs. Equity participation played a role in 25% of the case studies.

In the future, almost all of the 16 CA ESD participating countries with no experience plan to use PPP for EE, most of them in the buildings sector (50%) and in the transport sector (38%). Other sectors under consideration are: industry, energy utility, healthcare, waste management and municipal works.

The most popular type of PPP used was DesignBuild-Finance-Operate, which was used by half of the respondents. In most cases, the private partner was procured by competitive dialogue (40%) followed by open procedure (30%), restricted procedure (20%) and negotiated procedure (10%). The duration of a procurement process ranged from 3 months up to 15 months and the average contract period is between 10 to 20 years. Key factors for achieving successful partnerships and therefore reaching project targets were identified by respondents: • Good preparation and strong competences of the public partner; • Well defined baseline; • Clear definition and objectives for project profitability and guarantee of return; • Fruitful dialogue between the different stakeholders; • Selection of a suitable private entity for project implementation; • Good leadership; • Willingness to work together;

Good practice example

The objective of the project was to improve the EE of 14 Secondary Schools (190 000 m2) in the Region Alsace through measures such as the insulation of buildings, the installation of wood boilers or heat pumps or connection to a heat network, the installation of PV panels etc. The expectations of the project were at least a 35% reduction in primary energy consumption, 65% reduction in CO2 emissions and 38% savings on the school energy bills. It also aimed at providing the schools with 40% renewable energy. The project was run at regional level and had four key partners involved: the Region Alsace as the public partner, COFELY (an ESCO) as the private partner, local SMEs as the implementers of measures and an association for the awareness/ education part of the project. The total amount of the contract was about 60M€, of which the private partner invested 30M€ thanks to a bank loan. The selection process started in March 2009 and all the measures were implemented by October 2011. It is hard to evaluate the actual savings resulting from the project because it was finished a short time ago, but the ESCO is optimistic and thinks that savings will probably by higher than expected.

• Reliable legal framework with a confirmed model contract and clear tender procedures, contributing to time and cost effectiveness for implementation; • Regional competence and professional process management to foster trust in the technical and economic knowledge.

Further information please visit Good Practice Factsheet: www.ca-eed.eu/good-practices/goodpractice-factsheets/financing

Core Theme Series Report 5

How to make better use of European financial sources in combination with national schemes for energy efficiency

There was strong willingness and specific interest among the CA ESD II participants in discussing how national and EU sources of funding can be combined to support national energy efficiency schemes. This is because measures and targets in the new Energy Efficiency Directive could be more successfully reached by optimally using the financial sources and mechanisms available through the Multiannual Financial Framework 2014-2020 (MFF).

EPC of secondary schools in the Region Alsace (France)

This project was the first Energy Performance Contract in France relying on a PPP and it has proven that this type of programme is efficient and well adapted for financing the refurbishment of public buildings. The project becomes a good practice example because of its ambitious objectives and the fast implementation of measures.

• Decision makers are the driving force and take on responsibility;

10

There is a high probability that in the next three years, 6 MS (35%) will have introduced PPP in the above mentioned sectors. The European Commission supports the development of PPP for EE, realising the benefits of it and providing technical and financial support (ELENA, JASPERS, JESSICA and the European Energy Efficiency Fund).

4

In-depth topic method As an in-depth topic within CA ESD II, five specific sessions were devoted to this during the 3rd Plenary Meeting in Cyprus, to highlight issues under this topic. This approach aimed to attract relevant experts from Member States to enhance and deepen knowledge and good practice. Participants were provided with insight into how the use of SCF for EE can be further improved in combination with national schemes and with practical examples of how the allocation of funds for EE programmes has been successfully implemented in different MS. The aim of the in-depth session was to: • Gain insights from the representatives of the European Commission and the European Investment Bank (EIB) about existing EU financing sources for energy efficiency programmes and their possible use • Learn about good practice through six case studies from the MFF 2007-2013 presented by Member States • Learn about EU financing opportunities and priorities in the next programming period (2014-2020) • Discuss how existing successful examples could be adapted to other national circumstances

The main achievement of the in-depth approach was that energy efficiency policy development experts were able to freely and openly discuss difficulties and opportunities of energy efficiency programme/project financing. Experts travelled home with new ideas. The

relevance of the discussion topics was supported by two major activities that have been ongoing at EU level that have to be dealt with by the Member States. These are: • The preparatory work for the Multiannual Financial Framework 2014-2020 (MFF) has already started in the Member States after the proposal of the European Commission on the 29th June 2011 • The measures and targets of the new Energy Efficiency Directive have already been discussed in the Member States and the final document adopted by the European Union on 25th October 2012

EU financing sources to support national schemes A variety of funding and financing options are available to different organisations in MS in the form of grants, loans and other financial instruments, for technical assistance as well as project and programme funding for EE. Structural Funds have a key role to play in greening national and regional spending programmes and serve as leverage for the release of additional private and public funds. The European Union’s cohesion policy aims to reduce the gap of different regions’ levels of development in order to strengthen economic and social cohesion. The European Structural and Cohesion Funds are the key instruments of the EU to reduce social and economic disparities (€10 billion in 20072013). Other European sources are also available.

Core Theme Series Report 5

11

The main sources of financing used and well known in the Member States are: • JESSICA - Joint European Support for Sustainable Investment in City Areas (www.ec.europa.eu/regional_policy/thefunds/ instruments/jessica_en.cfm) • JASPERS – Joint Assistance to Support Projects in European Regions (www.jaspers-europa-info.org/) • Intelligent Energy Europe (IEE) (www.ec.europa.eu/energy/intelligent/) • MLEI-PDA - Mobilising Local Energy Investments, Project Development Assistance (www.ec.europa.eu/energy/intelligent/gettingfunds/pda/index_en.htm) • ELENA - European Local ENergy Assistance • FP7 - Framework Programme 7 (www.cordis.europa.eu/home_en.html) • EEE-F - European Energy Efficiency Fund (www.eeef.eu/home.html) • GGF - Green for Growth Fund (www.ggf.lu/) • Norwegian Fund (www.eeagrants.org/)

European Investment Bank (EIB) as a possible financing agent EIB plays a key role inter alia in providing financing for EE investments and technical assistance to the Member States. Between 2009 and 2011, the EIB lent €4.1 billion to projects involving EE investments. 48% was related to EE investment carried out by industrial companies (including electricity generation) and around 42% was invested in EE measures in buildings or housing. EIB considered that in particular the public sector should contribute funds to kickstart the EE market by providing: • Grants to EE promoters (e.g. homeowners) to reduce payback periods and to increase financial return on investments • Risk capital to reduce credit risk of financing structures to allow senior long-term financiers to enter the market. The EIB representative noted that there is a need for an increase in number and an “aggregation” of EE projects from the public sector, to reach a critical size to attract financing. In terms of energy performance contracting approaches, it was noted that promoting the standardisation of the assessment and verification of energy savings is key to ensure a “homogeneous” asset class. Involving ESCOs right from the project concept phase would contribute towards this outcome.

Main outcomes of the in-depth discussions There are a variety of project and programme financing instruments available, from grants for research and development, through technical assistance funding to programme loans. Participants noted that a guide to identify the most appropriate sources early within a project’s life cycle would be useful. • Structural and Cohesion Funds have been an important source of financing to support national EE programme implementation. Between 2014 and 2020, the amount of funding allocated to low carbon economy (EE and RES) is expected to grow, reaching €17 billion with minimum set allocations. This will encourage MS to set up EE programmes and to finance more projects in this field. • Country representatives shared that, where the main funding source was the national budget, expenditure had to be cut as a result of the economic downturn. National funding sources are therefore shrinking. This, and the adoption of the new Energy Efficiency Directive, will lead to a need for better and more intense use of EU financing sources in the future.

• The EIB noted that aggregation was important – minimum size/scale of projects should be considered and perhaps a clearing-house mechanism established to link projects of a similar nature together • The case studies used were mostly concentrated in the buildings sector. It was noted that transport and cogeneration projects were also relevant and should also be considered within the frameworks for future funding • Using JESSICA Holding Funds has proved to be a good way to finance EE programmes and projects in many MS. However, it seems complicated and not very popular in others. In the MFF 2014-2020, it is forecast that at least 5% of the ERDF resources will be allocated to integrated actions for sustainable urban development. National governments and Managing Authorities should look for further information and help from the JESSICA Networking platform and the EIB. Bilateral consultation with countries where the scheme is already established is also important to avoid future problems.

• Participants at the in-depth session agreed that the key actor to influence the realisation of more EE projects is the national government from the offer side and the industry (SMEs) from the demand side. Most in-depth experts came from central government and energy agencies, so the right people were present to make a difference.

Stakeholders involved in energy efficiency programme financing The vast majority of in-depth session experts were representing central government. Many came from energy agencies and a few from regional government, banks, research institutes or fund manager companies. It was clearly agreed that the main actor who could influence EE financing is central government as it has the ability and power to foster more and better quality investments. Other important stakeholders on the funding provider side were: fund managers, banks, research institutes. On the beneficiaries’ side, the industry (SMEs) was the key actor in influencing EE financing and is able to realise projects on large scale. Other important beneficiaries were: transport companies, consumers, operators/utilities. The media, energy auditors and consultants can close the gap between the two sides and facilitate the funding processes.

12

Core Theme Series Report 5

Core Theme Series Report 5

13

5

Good practice example

Bulgarian Energy Efficiency for Competitive Industry Financing Facility (BEECIFF)

MEET as the Managing Authority from the OP “Competitiveness”. The loan component is managed by the EBRD and provided to local commercial banks to on-lend to SMEs.

The Programme is a joint initiative between the Ministry of Economy, Energy and Tourism (MEET) and the European Bank of Reconstruction and Development (EBRD) to promote sustainable energy solutions for SMEs. The objective of the Programme is to improve the (energy) efficiency and productivity of environmentally friendly technologies utilised by SMEs.

Structure of the scheme: The programme is still at an early phase of implementation and no results are available. However a similar programme operating since 2004 indicates high interest among SMEs, a low administrative burden, and overall spending efficiency.

This Programme is innovative because it combines EU Structural Funds grants (up to 50%) with commercial bank lending in one process. The grant component is provided by

Further information is available at: www.beeciff.org

Ministry of Economy, Energy and Tourism

EBRD

Participating Banks

Loan Funding

Project Assistant

Verification Assistant

Grant Application

EU Grant Funding

SMEs (Applicants)

Energy Auditor

14

Core Theme Series Report 5

Investment Project

Verification

Concluding remarks

If EE improvements are to happen, there is a need for financing from a wide range of resources. The European Union and national funds, as well as private capital, are available to start an investment; however, there is still a mismatch between the demand and offer sides. Examples and experiences of the CA ESD II participating countries provided by the studies gives the opportunity for MS representatives to gather information and find possible solutions to the existing financial gaps. Share information. The three topics covered highlighted the fact that financial sources are available but sometimes it is difficult to make good use of them. Success stories exist, but they must be made more publicly available because the best learning opportunity is to share experiences. More bilateral consultations are needed between MS. Combine 1. – additionality. When planning a policy or a programme, it is beneficial to combine funding sources with other instruments (e.g. regulations, tax schemes, white certificates, enhancing private capital, etc.). Public finance is often needed to kickstart the EE market; however, the goal is to shift more towards market based financing solutions. Combine 2. – more is better than one. Clustering small projects and using “building pools” of public buildings in PPP renovation projects are financially more efficient. This was demonstrated by the Energy Saving Partnership programme in Berlin. Make use of professional help. It was agreed by the vast majority of participants that an exchange of experiences within the CA ESD II is one of the best communication forums. One participant from a new MS even shared that ‘I was delighted to learn from the representative of the European Investment Bank (EIB) that JASPERS Technical Assistance facility is available for my country’. European PPP Expertise Centre is also available to clarify PPP related issues, especially when talking about EE . It is time to plan. Countries should start analysing the results of current OPs and learn from the experiences; the new OPs should be more accurately planned. Recommendations from other projects (SF Energy Invest, PromoSCeme, RUSE, Energy4cohesion, etc.) can provide useful inputs. Measuring and monitoring the effectiveness of funding spent for EE should be built in. EIB offered its help for MS to plan OP for the 20142020 financial period.

Make use of available facilities. The European Energy Efficiency Fund is open for municipalities to provide the necessary technical assistance to initiate bankable projects and also offers innovative financial solutions for PPP. Involve experts in programme formulation. This is very beneficial and more than welcome, because they can influence the scope of future financing on behalf of the demand (beneficiary) side. National governments should always make sure that all relevant stakeholders from the funding, beneficiary and facilitator sides are invited to the EE programme development process. The use of available financing resources has to be matched with the demand of beneficiaries. Building strong partnerships (on national, regional and local levels) is an essential success factor Build capacity. In the MFF 2014-2020, the increased amount of EU financing for EE and the possibility of combining sources (eg. ERDF and ESF) will require MS to pay more attention to planning. Decision makers in the MS on a national, regional and local level should be supported by the EC, its institutions and EU financed projects to build capacity in the countries on the use of different sources together. Presentations and support materials usually focus on one specific source, but the ability to combine them is missing. Support programmes for energy efficiency investment are already present in MS, but their financing from national sources is often unreliable and fluctuating. National governments have the possibility to channel these programmes under Structural and Cohesion Fund financing (e.g. the JESSICA case study in Estonia). The in-depth experts of CA ESD representing government should approach decision makers and develop EE programmes financing using EU funds.

Core Theme Series Report 5

15

Legal Disclaimer The sole responsibility for the content of this report lies with the authors. It does not necessarily reflect the opinion of the European Union. Neither EASME nor the European Commission are responsible for any use that may be made of the information contained therein. The Concerted Action for the Energy Services Directive II (CA ESD II) was launched by Intelligent Energy Europe (IEE) in May 2011 to provide a structured framework for the exchange of information between the 28 Member States and Norway during their implementation of the Energy Services Directive (ESD). For further information please visit www.ca-eed.eu or email [email protected]

Co-funded by the Intelligent Energy Europe Programme of the European Union

Core Theme Series Reports