Transcript Renewable Energy and Energy Efficiency Partnership

Innovative Mechanisms for Financing
Municipal Energy Efficiency
Programs and Projects
Center for Energy Efficiency
The experience of Bulgaria,
compared to EU and US
practices
Eupatoria, 9 June 2004
Dr Zdravko Genchev
EnEffect, Bulgaria
The need of municipal energy
planning in transition countries
Functions of municipalities change and their
influence on energy sector
The need of energy efficiency improvement
The need of investments in energy supply
and demand sector
The need of integrated planning of energy
resources
The lack of capacity and data for IRP
New functions of municipalities in
local energy management
Municipality as a consumer of energy
Municipality as an energy producer and
energy provider (distributer)
Municipality as a regulator and an investor in
the municipal energy sector
Municipality as a motivator to improve
energy efficiency
Prerequisites for an effective
municipal energy planning
Political will of local authorities to introduce
energy management on the local level
Local capacity to develop and implement a
municipal energy program, based on IRP
Municipal energy database
Instruments to manage, finance, monitor and
evaluate a municipal energy program
Municipal energy planning process
Selection of planning approach and
determination of the goals
Feed back
І political decision
Development
of the municipal energy program
ІІ political decision
Implementation of the municipal energy program
ІІІ political decision
Development
Building
of local capacity
Implementation
Municipal energy
information system (MEIS)
Preparation
Decision for
MEIS
Factors that lead to a decision to
invest in energy efficiency
Significant burden of energy expenses on
municipal budgets
Availability of cheap and easy to access credit
resources
Availability of cheap energy saving
technologies and equipment
Guarantees that achieved savings will be
secured in the municipal budget
What do specific financing
mechanisms offer?
Flexible schemes for financing of energy
efficiency projects
Financing investments under conditions
different from the regular banking
practices
Unification of multiple financing sources
thus distributing and reducing the
risk
Financing mechanisms, applicable in
Bulgaria during the transition
Financing by bonds
Leasing financing
Energy Service companies (ESCOs)
Vendor (commodity) credits
Public-private partnership (PPP)
Financing by bonds (1)
Relatively long period of bond emission
preparation
Emission prospect should be developed
and approved by the State Commission
on Securities
Investment agent should be selected
Successful completion of subscription
In case of failure bonds should be bought
back by the municipality together with
the respective interest
Financing by bonds (2)
General Obligation Bonds
The emission is recorded in the municipal
budget and the whole risk is taken by
the municipality
Revenue Bonds
Bonds are related to the project results
and depend on their profitability
Leasing financing (1)
Avoid budget restriction of investment
expenses
Leasing installments are equal and defined
at fixed interest rate
Leasing period may last 3-5 years
Leasing raises the purchase expences due to
the risk of final pay back denial
Leasing financing (2)
Financial leasing
Known as capital leasing, conditional
purchase contract or installment
purchase contract
Operational leasing
At the end of the leasing period the
lessee may obtain the equipment
ownership for its real market price
Leasing financing (3)
Municipal leasing
Financial leasing under benign
conditions – applied mainly in the US
Energy Service Companies (1)
The ESCO which implements the project
ensures the investment and takes the
whole investment risk
The owner of the project site (the
municipality) repays the capital
investments on the account of the
achieved savings
Energy Service Companies (2)
The owner of the project site (the
municipality) is not committed to the
implementation of the project
After the completion of the contract the
equipment ownership is transferred,
free of charge, to the owner of the
project site (the municipality)
Energy Service Companies (3)
Energy Performance Contract - 1
The owner of the project site (the
municipality) finances the energy
efficiency measures by a loan from a
third party (in most cases commercial
banks) or signs a leasing contract for
the project equipment
The ESCO guarantees the savings in result
of the project implementation
and takes all related risks
Energy Service Companies (4)
Energy Performance Contract - 2
In case of savings lower than contracted,
the ESCO refunds the difference to the
owner of the project site (the
municipality)
Energy Service Companies (5)
Pay off Savings Contract
Pay off is a subcathegory of energy
performance contract
The payment schedule depends on the
savings level
The higher the savings – the quicker the
pay off
Energy Service Companies (6)
Shared Savings Contract
The ESCO finances the project by its own
means or by a third party loan
The ESCO is responsible for the loan
borrowing and repay and takes all related
risks
The ESCO guarantees that the project
owner (the municipality) will never pay
more than the amount of the energy bills
agreed in the contract
Energy Service Companies (7)
Chauffage contract (heating contract)
Long-term (20-30 years) energy service
contract, under which heat supply is the
subject of the purchase
The ESCO ensures the necessary
modernization and maintenance of the
heating systems on its own account
The project owner (municipality) pays the
consumed energy in accordance with the
contracted price
Public-private partnership (1)
Joint Ventures with Private Enterprises
The municipality disengages itself from
the role of investor
The private sector ensures bank financing
and takes all corresponding risks
The private companies provide the
necessary capacity and qualified experts
Public-private partnership (2)
Joint Ventures with Private Enterprises
The municipality participates with long
term assets, which usually do not have
significant market value out of the
project
The municipality preserves its key role in
the management of the joint venture
Other financing mechanisms
Equity financing
Financing of power distribution
companies
Financing of WB Prototype Carbon Fund
Financing through JI (Joint
Implementation) projects (Kyoto
Protocol)
Room for cooperation in local
energy planning and financing
Results of the energy efficiency
demonstration zone project in Gabrovo
Experience of the Bulgarian Municipal Energy
Efficiency Network EcoEnergy
The role of the Regional Network for Efficient
Use of Energy and Water Resources
(RENEUER) in SE Europe
Cooperation within UNECE EE21 project
Thanks for your attention
Contacts:
Center for Energy Efficiency
Sofia, Bulgaria
[email protected]
www.eneffect.bg