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Leadership for Energy Action and Planning the leap project Financing sources and mechanisms for sustainable energy action planning and implementation Kate Henderson TCPA Chief Executive LEAP Thematic Seminar Part 2 Introduction • Successful SEAP implementation requires sufficient financial resources. It’s important to identify available resources. • Decisions must be compatible with public budgeting rules. • A successful SEAP will reduce long-term energy costs of the LA, residents, companies and all stakeholders. • Co-benefits – health, quality of life, employment, attractiveness of city etc. Considerations The ‘Energy Hierarchy’ and financial pay-back 1. Energy Conservation (do not use as much energy) 2. Energy Efficiency (find more efficient ways of supplying/using energy) 3. Renewable, Sustainable Energy Supplies (least environmental impact) 4. Other Low GHG Energy Supplies (other Greenhouse-Gas- reducing supply sources) 5. Conventional Energy Supplies (the way we currently do it) Creating bankable projects • Options – Assess options that make a project economically attractive. Examining a project’s key components. • Financial risk – When a financing project is studied by a bank, the objective is to know the level of risk through an assessment procedure. • Technical skills – Aspects such as the engineering skills (of an ESCO or the municipal energy agency for instance) or the level of commitment of each part are crucial. • Proven technologies – Some general requirements may be that the technology is well-proven, well adapted to the region and to produce an Internal Interest Rate greater than 10 %. Funding opportunities • Community local regional national and European funding opportunities 1. 2. 3. 4. 5. • Local authority resources and revolving funds Public-private partnerships ESCOs National funds and programmes European funds and programme Information about these programmes can be found on Covenant of Mayors website www.eumayors.eu 1. Local authority resources and revolving funds • Local authorities can fund schemes directly using their own resources and by partnering with public utilities. Municipalities can also develop financial schemes aimed at establishing sustainable financing for a set of investment projects, through a revolving fund: • – – – Objective is to invest in profitable projects with short payback time and use the same fund to finance new projects. Can be established as a bank account or as a separate legal entity. Financiers provide contributions to the fund in the form of grants, subsidies or loans Case study: Hannover (Germany) “Proklima – Enercity Fund” Objective: Dedicated fund for climate projection measures that go beyond minimum requirements or usual practice Project overview: • Annual fund of around € 5 million to support climate protection measures in households, business and public institutions. Local partners contribute to the fund as follows: – – – Stadwerke Hannover AG – public utilities company – 77% of funds assets City of Hannover – 20% Towns of Hemmingen, Laatzen, Langenhagen, Ronnenberg and Seelze – 3% Results • • Approved funding in 1998-2010 – more than €45 million Proklima funding policy is forward looking and promotes innovation More info: www.proklima-hannover.de Case study: Stuttgart (Germany) “Intracting” – city internal contracting Objective: Creating a financing system for short term implementation of cost effective energy conservation measures Project overview: • • • • Stuttgart Environmental Department, working with the Financial Department, developed an “internal contracting” method for financing energy saving projects The Environment Department grants an interest free loan to the host department or city-owned enterprise The amount of loan depends on the energy and cost saving potential of the measures The costs saved through these measures flow back into a revolving fund until the investments have been paid off Results • • • Fund value € 8.8 million 273 contracts awarded Average payback time 7.2 year More info: www.energy-cities/db/stuggart_136_en.pdf 2. Public-private partnerships • Public–private partnership (PPP) describes a government service or private business venture which is funded and operated through a partnership of government and one or more private sector companies. • PPP involves a contract between a public sector authority and a private party, in which the private party provides a public service or project and assumes substantial financial, technical and operational risk in the project. Case study: Pardubice Region (Czech Republic) Energy performance contracting Objective: Reducing energy consumption in 51 public buildings – schools, hospitals and health centres Project overview: • • • Selection criteria included – reconstruction of heating systems – improving thermal comfort in public buildings – no investment from the region’s own financial resources – long-term energy management The contract was for 13 years (1 year installation in 2007 and 12 years of return on investment). Investment costs of €5.4 million with guaranteed annual savings (operational costs) of €714,000. Results • • • Energy savings: 24% CO2 reduction: 23% Operational cost savings: €766,000 More info: www.enviros.cz/epc/energy-performance-contracting.html Case study: Berlin (Germany) Solar energy generation from third party financing Objective: Renting municipal building roofs to private investors and increasing local renewable energy production within the city Project overview: • • • • In 2002 the Solardachbörse (Solar Roof Exchange) was launched to encourage private investors to constructor solar power plants By 2009, 5,000 roofs (sports buildings, schools and offices) were rented by the city to 25 investors Using a third party financing scheme, the municipality was able to transfer the financing of solar installations and technical knowledge to private investors. Since 2004 Germany has raised feed-in tarrifs for renewable energy which has improved the economic viability of solar energy and in turn there has been increased private sector interest. Rental fee is 3-7% of the total feed-in tariff income arising from the solar power production Results • • 64 installations – total capacity of 4MW deployed in 10 districts by 2009 Self-financing project – entirely relying on private investors which benefit from feed-in tariffs More info: http://www.berlin.de/sen/umwelt/klimaschutz/solardachboerse/# 3. ESCOs • There is not a single definition of an Energy Services Companies (ESCo) • ESCos provide a broad range of energy and carbon management solutions, including design and implementation of energy saving projects, energy conservation, power generation and energy supply • Key features of an ESCo is that is has a separate budget and business plan from the host organisation and it provides a focused management of the energy project Types of ESCO • Private ESCo Companies – private company invests and carries the financial risk • Public ESCo Companies – Example of Thamesway Energy, owned by Woking Council (England) • Hybrid public/ private arrangements – sharing the risk, establishing a joint venture • Stakeholder-owned special purpose vehicle – Ownership may be communities or cooperatives as well as consumers or the municipality 4. National funds and programmes • National financial institutions and financial incentive mechanisms can help support the deployment of energy efficiency schemes and renewal energy deployment • UK Green Investment Bank (slide on GIB) • Feed-in tariffs and the Renewables Obligation • Czech Republic ‘Green Savings Programmes’ Case study: Czech Republic Green savings programme Objective: Triggering investment from the public sector and citizens in energy efficiency and renewable energy Project overview: • • • • • • Budget of €1 billion gained from emissions trading with Japan Fund distributed in the form of direct subsidies to households, housing associations and cooperatives, municipalities and businesses Citizens apply to regional offices and/or in local branches of 9 associated commercial banks Fast procurement with 10 weeks between application and contract Support for project development up to €800 Certified list of companies Results • • Quality insulation of homes and replacement of heating systems with low emission alternatives New houses build to passive energy standards More info: www.zelenausporam.cz/sekce/582/about-the-green-savings-programme/ 5. European funds and programme • The European Commission adapts and develops specific funding tools and programmes financed from the European budgets to support local authorities in mainstreaming EU energy and climate policy at the local level, these include: – Structural funds & cohesion fund – JESSICA • European funds managed by the European Commission include – INTERREG IVC – INTELLIGENT ENERGY EUROPE – ELANA JESSICA Joint European Support for Sustainable Investment in City Areas ELENA technical assistance facility (European Local ENergy Assistance) • Financed through the Intelligent Energy-Europe programme • ELENA support covers a share of the cost for technical support that is necessary to prepare, implement and finance the investment programme, such as feasibility and market studies, structuring of programmes, business plans, energy audits, preparation for tendering procedures - in short, everything necessary to make cities' and regions' sustainable energy projects ready for European Investment Bank funding • In 2011, the Commission plans to extend the scope of the ELENA Facility, providing technical assistance grants for projects below € 50 million. Two new ELENA compartments are planned for medium-sized investment projects managed by cities and regions seeking financial support. These new mechanisms will aim at combining sustainable energy measures with carbon crediting and investments in the social housing field. • http://www.eib.org/products/technical_assistance/elena/index.htm Funding opportunities • • • Identify the financial solutions which works best for your SEAP Funding is available at a variety of scales - community local regional national and European funding opportunities Information about these programmes can be found on Covenant of Mayors website www.eumayors.eu For further information: • • • • Covenant of Mayors www.eumayors.eu European Portal http://ec.europa.eu/energy/intelligent/about/portals/index_en.htm ELENA financing initiatives http://ec.europa.eu/energy/intelligent/gettingfunds/elena-financing-facilities/index_en.htm TCPA community energy guides http://www.tcpa.org.uk/pages/community-energy-urban-planning-for-a-lowcarbon-future-.html Kate Henderson Chief Executive, TCPA E: [email protected]