In February 2015, the Energy Efficiency Financial Institutions Group (EEFIG) published the landmark report 'Energy Efficiency – the first fuel of the EU Economy' which provided a significant advance in the understanding and knowledge about the issues of energy efficiency financing.
The findings of the EEFIG Report has contributed to actions such as G20 commitments and the European Commission has taken the report in full consideration for the implementation and development of energy efficiency related policies over the past five years. It contains recommendations on a range of actions that could help overcome the current challenges to scaling-up long-term financing towards energy efficiency. Recommendations are directed towards government at the national and EU level and towards the financial community, in particular.
The EEFIG Report highlights that:
- Energy efficiency investments are strategically important for the European Union
- Historic levels of public-private collaboration are required
- Lack of evidence on the performance of some energy efficiency investments make the benefits and the financial risk more difficult to assess
- Lack of commonly agreed procedures and standards for energy efficiency investment underwriting increases transaction costs
Many of its recommendations are still valid today. Furthermore, the current working group focused on the evolution of financing practices is working on an update to this report findings.
Main report recommendations
Energy performance certificates of buildings should be improved and funds for energy efficient investments at EU and national level should be streamlined, according to a new report on boosting finance in energy efficiency investments in buildings, industry and SMEs.
EEFIG, an expert group set-up by the European Commission and United Nations Environment Programme Finance Initiative identifies a "very strong economic, social and competitive rationale for the up-scaling of energy efficiency investments in buildings and industry in the EU". It points out that investment in energy efficiency is of strategic importance for the EU since it is a "cost effective manner to reduce the EU's reliance, and expenditure, on energy imports over €400 billion a year."
The report by EEFIG Group, which was published on 26 February 2015, contains recommendations on a range of actions that could help overcome the current challenges to obtaining long-term financing for energy efficiency.
Click on the categories below to see EEFIG report recommendations:
- Improvement of buildings certification methodologies and Energy Performance Certificate standards and the implementation of minimum performance standards upon building upgrade, sale or rental to help build a vibrant and comparable pan-European market for buildings energy efficiency investments;
- Improvement of information flows by developing an open-source energy and cost database for buildings and effective systems for sharing information and technical experience within industry sectors;
- Facilitate innovation such as on-bill repayment and on-tax finance mechanisms by creating pilots to help grow energy efficiency investments in commercial and residential buildings;
- Develop a project rating system to provide a transparent assessment of the technical and financial risks of buildings energy renovation projects and their contracting structure.
- Streamlining, blending and optimizing the use of European Structural and Investment Funds, Horizon 2020 and EU ETS revenues for energy efficiency investments through ensuring their better linkage to National Building Renovation Strategies together with National Energy Efficiency Funds and energy market reforms;
- Increase the use of targeted fiscal instruments to motivate both building owners and companies to prioritize energy efficiency during their natural replacement cycle;
- Review of public and private accounting treatment of Energy Performance Contracts;
- Further expert examination of the discount rates used in energy modeling, policy-making and investment decision-making, to adequately balance the benefits and risks of energy efficiency.
- Development of a common set of procedures and standards for energy efficiency and buildings renovation underwriting for both debt and equity investments;
- Adjustment to financial regulatory frameworks to better support capital market innovation, ensure that risk assessment and related capital requirements for long-term energy efficiency investments correctly reflect their risks and develop market potential for green bonds, citizen financing, factoring funds for Energy Performance Contracts and other more innovative sources of financing for energy efficiency;
- Address barriers to expanding the green mortgage market, including by examining how to include energy costs and energy efficiency potential in mortgage affordability calculations;
- Ensure that new regulatory frameworks for financial institutions (Solvency II and Basel III) do not prejudice energy efficiency investments;
- Ensure that public technical assistance and project development assistance facilities are compatible and can be easily combined with market-based and concessional funding by qualified and experienced financial institutions;
- Ensure that public refinancing facilities, like those operated by the European Central Bank, confirm eligibility for financial instruments relating to energy efficiency.
- Increase the capacity to facilitate ongoing project development assistance to all relevant actors and technical assistance to relevant public sector bodies and entities for development and aggregation of energy efficiency investments in SMEs and households;
- Review of the public authority procurement rules to better value lower operational costs as a part of their tender assessment processes;
- Institutional capacity to implement National Buildings Renovation Roadmaps that enable long-term planning and supply chain scale-up to deliver and finance ambitious buildings renovation programs;
- Increased focus on regulatory frameworks which support strong corporate energy efficiency investment choices at key points in their investment cycle (connecting with energy audits);
- Review to ensure that current State Aid rules do not unnecessarily burden accelerated energy efficiency investing and the up-scaling of public-private financial instruments.