The EU has increased the amount of public funds available for energy efficiency. However, to meet the objectives of the Energy Union and support the transition to a clean energy system, there is a need to further unlock private financing, in particular for energy efficiency investments. It is estimated that an additional €177 billion per year will be necessary over the period 2021-2030 to reach the EU's energy and climate objectives for 2030.
The Smart Finance for Smart Buildings Initiative
The Commission has launched the Smart Finance for Smart Buildings (SFSB) initiative, as part of the 'Clean Energy for All Europeans' package. Building on the Investment Plan for Europe, it includes practical solutions to mobilise private financing for energy efficiency and renewables in buildings in three main areas:
More effective use of public funds
At the EU level, the European Structural and Investment Funds (ESIF) will allocate €18 billion to energy efficiency in the period 2014-2020. Boosting investment in sustainable energy projects is also one of the strategic priorities of the European Fund for Strategic Investments (EFSI). In addition, the EU has developed a number of other support schemes and funding programmes aiming to help businesses, regions, and countries successfully implement energy efficiency projects.
As public finance alone is not enough to make the clean energy transition happen, the SFSB initiative aims to facilitate the deployment of financial instruments across Europe and better target subsidies towards vulnerable consumers or specific market failures. Financial instruments are key to further mobilise private financing for energy efficiency and renewables in buildings.
As part of the SFSB initiative, the Commission is developing with the European Investment Bank (EIB) a flexible model of guarantee facility to be deployed primarily at national level. This instrument aims to encourage the combination of different public financing strands, with a special attention being given to the EFSI and ESIF, to get the best possible results. It will allow financial intermediaries such as commercial banks to develop and deploy attractive financial products for the energy renovation of buildings, in particular home renovations.
The SFSB initiative also supports the use of Energy Performance Contracts (EPCs) in the public sector. These are a practical way of making public buildings and other public infrastructures more energy efficient: the initial investment is covered by a private partner and repaid by guaranteed energy savings.
As part of the SFSB initiative, in cooperation with the Executive Agency for Small and Medium Enterprises (EASME) the Commission is organising a series of Sustainable Energy Investment (SEI) Forums.
More assistance to create project pipelines
Many project promoters, who may be cities, individuals, or businesses, need assistance to take their energy efficiency projects from idea to implementation. The Commission aims to guide projects through the financing process and to encourage the development of regional or local one-stop-shops covering the whole customer journey, and has set up Project Development Assistance (PDA) facilities to help promoters:
- ELENA, managed by the EIB, supports private and public promoters to develop and launch large-scale bankable sustainable energy investments (above €30 million), including in sustainable transport. ELENA covers up to 90% of project development costs.
- PDA H2020, which helps public and private promoters develop model sustainable energy projects, focusing on small and medium-sized energy investments of at least €7.5 million and up to €50 million, covering up to 100% of eligible project development costs.
Changing the risk perception of financiers and investors
There is growing evidence that the risks associated with energy efficiency investments are lower than the level perceived by the market and that the associated probability of default is lower than other types of investment. However, it is still difficult for banks and investors to assess the risks associated with energy efficiency investments. The Commission, in collaboration with the Energy Efficiency Financial Institutions Group (EEFIG), has developed two products that aim to inform financial institutions, investors and project promoters about the real benefits and risks of energy efficiency investments.
The De-risking Energy Efficiency Platform (DEEP) is a pan-EU open-source database containing detailed information and analysis of over 10,000 industrial and buildings-related energy efficiency projects. It builds performance track records and helps project developers, financiers, and investors better assess the risks and benefits of energy efficiency investments across Europe. The Commission encourages all market players to support this initiative by sharing available data and performance track records.
The Energy Efficiency Financial Institutions Group (EEFIG) Underwriting Toolkit, a guide to value and risk appraisal for energy efficiency financing, was launched in June 2017. It aims to help financial institutions scale up the deployment of capital into energy efficiency. It also helps promoters develop bankable projects, and can be used by public authorities to better assess energy efficiency projects that receive public funding.