Observations and recommendations on getting the framework right for energy efficient investments in...

Observations and recommendations ongetting the framework right for energy efficient

investments in multi-apartment buildings- based on the achievements and lessons learned

of the ClearSupport project

Conference and Workshop: COHESION POLICY INVESTING IN ENERGY EFFICIENCY IN BUILDINGS

Brussels, 29-30 November 2011

Nils Daugaard

Content

Part I: What did Clear Support do and what can be learned Review of Clear Support achievements

Case study of the multi-apartment sector in Lithuania

Part II: Enabling of a sound investment framework Observations and recommendations on the design of

future Cohesion funds based on the Clear Support experience, incl. ownership/decision making aspects

2“Cohesion Policy Investing in Energy Efficiency in Buildings”, Brussels, 29-30 Nov 2011

PART IIntroduction to ClearSupport:


ClearSupport – introduction Can be considered a pilot initiative on a systematic approach on enabling

energy efficient building investments – public, residential and (to less extent) private sector

This was done in the form of operating 5 Project Service Facilities/PSFs in

– Latvia – Lithuania – Poland– Czech Republic– Crete

ClearSupport was running from 2007 to the end of 2009 involving thirteen partners

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Focus on making financing schemes work and activating energy services

“Cohesion Policy Investing in Energy Efficiency in Buildings”, Brussels, 29-30 Nov 2011

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ClearSupport

ClearSupport - intervention at local level

RUE in building framework

- Regulatory framework

- Technology suppliers

- Socio-economic aspects

Project owners

Municipalities

Residential

Financing sources

National funds/programmes

EU funds – ERDF and Cohesion

National bank system

International Financing Institutions

Financing concepts

RUE in building design

- Project development tools

- Project standard solutions

Financing schemes

- Mix of financing sources

- Integrating financial concepts

- Defining adequate criteria

Project Service

Project ID

Project document.

Objective 1Bridging gab

between project Owner & Financing

Objective 2a-eFacilitating a

Sound frameworkfor RUE in

building projects


Services to bridge the gap

Local and nationalGovernment/policy

Financing institutions

ESCOs etc.

Public house owners

Residential house owners

SupportInformationProject preparationPreparation of applicationsConsultingEducationAnalyses

Heart of the action:PSFs delivering multi-disciplinary services

The ambitious goal was to support the initiation of 100-200 specific building renovations in the 5 target regions


The IEE support helped to create the multi-disciplinary skills required

ClearSupport:Achievements


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The PSFs initiated 230 investments

8

36

72

64

58

0

50

100

150

200

250

Number of Projects

Projects supported by PSFs

Others

Financing application submitted

Financing approved

Implemented

Total = 230


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Supported projects divided on sectors

9

36%

7%

92%78%

25%

39%

14%

88%

8%22%

75%53%

50%

5%0% 0% 0%

7%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Crete Czech Republic Latvia Lithuania Poland Total

Private Service Sector Public Sector Residential Sector


ClearSupport:Financing instruments/schemes


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Public-private partnership approaches (“innovative”) Energy Supply Contracting with guarantee elements

-> Residential sector Energy Performance Contracting

-> Municipal / Public sector Financing instruments

Credit / Loans Grants Interest subsidies Forfeiting Leasing (Operate & Finance)

Long-term strategy for financing building renovation: Revolving Funds

Scope of the work on financing schemes


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Financing Schemes – Reports and ToolsTwo analysis reports: Lessons learned: Overview of existing financing schemes and

experience from previous projects Financial instrument/scheme report, including recommendations on

suitable schemes for the target regions

A number of tools, including: Procedure and checklist for PSF operations Guide: Main points for contracts from a financing viewpoint (for

bankers) Subsidy guidelines (how to define an appropriate level of subsidies) Easy-to-use tools for project evaluation

Putting in place revolving fund stands out as a key recommendation

The reports and tools are available at www.clearsupport.eu/Downloads.htm


Adoption of financing instruments in PSF regions - Examples

LatviaParticipation in Green Investment Scheme

LatviaParticipation in Green Investment Scheme

LithuaniaDevelopment of Revolving Fund

LithuaniaDevelopment of Revolving Fund

PolandAwareness raising and

training

PolandAwareness raising and

training

Czech RepublicDevelopment of the

ESCO Market

Czech RepublicDevelopment of the

ESCO Market

CreteEfforts to create local

ESCO market

CreteEfforts to create local

ESCO market


ClearSupport:Evaluation – Lessons learned


PSF Achievements – Project Investment Support Drivers behind supported projects:

Availability of PSF Services Availability of financing schemes

The PSF activities has ensured that the number of applications to the available financing programmes has accelerated and that financing applications are of sufficient quality thereby reducing front-up costs, as well as the time needed to consider applications


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Helping to overcome barriers such as:• Shortage of funds • Inappropriate legal frameworks • Unclear ownership structures • Lack of awareness of financing options

In the form of:• Helping the building owners in developing proper investments• Developing new financing schemes • Improving legal framework conditions• Awareness raising• Training

PSF Achievements


Impact from the PSF Action


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Case study: Situation of the multi-apartment sector in Lithuania

Technical aspects• There are about 45,000 multi-apartment blocks in Lithuania. 11% of

them were built before 1961, 80% in the period 1961 – 1990 and the remaining 9% after 1990.

• 66% of the Lithuanian population live in apartment blocks that were built in 1961-1990.

• The thermal characteristics of the apartment blocks built before 1993 are poor. Typical thermal resistance of outside walls is 0.9 [m2 K / W], which is 4 times less than Lithuanian current standard requirement and corresponding values in Scandinavian countries


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Case study (cont’d):Situation of the multi-apartment sector in Lithuania

Organisation, ownership and decision-making• Lithuanian apartment blocks suffer from the lack of a proper house

management system. More than 80% of apartment blocks have not created a housing association and led to a partial standstill of improving building management and undertaking renovations.

• There is lack of motivation among the flat owners; e.g. due to state subsidies of the heat bill. To this can be added that information about merits of renovation is often not available for the apartment owners

• This is accompanied with improper organisation of finance; the majority of houses do not accumulate funds for more significant repair or renovation. Further the bank sector is reluctant to enter the market due to risk concerns


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Case study (cont’d): Situation of the multi-apartment sector in Lithuania

Government policies• A key instrument concerns the Programme for the

Modernisation of Multi-family Buildings introduced in 2005 with the principal aim is to help the owners of flats in multi-family buildings to modernise their housing stock and to increase efficiency of energy use

• The financial crisis has forced the Government to reduce the incentives for the building owners associated with the programme; e.g. the grant levels have been lowered and the speed of renovation has slowed down.


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Case study (cont’d): Situation of the multi-apartment sector in Lithuania

It is possible !• Since 1996 around 700 apartment blocks were renovated and modernised.

But:

• The renovation so far makes up only 1.5-2% of the whole building stock.

• No effective solution suitable for large scale renovation has been found yet and the financial crisis has worthened the situation considerably

““Cohesion Policy Investing in Energy Efficiency in Buildings”, Brussels, 29-30 Nov 2011

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Case study (cont’d): Barriers yet to be overcome

• Lack of proper ownership and management structure of multi-family houses. House owners association model proved to be suitable for 20% of the multifamily house stock only;

• Lack of ownership was replaced by administrators nominated by municipalities. In many cases these administrating companies are monopolies and abuse their monopoly power against passive inhabitants;

• Prices and tariffs of house management services in these cases are still regulated and free market is non-existent. This has led to poor quality of services;

• Government does not pay sufficient attention to progressive innovations to increase energy efficiency in buildings. Government support programme deals mostly with thermal insulation of the building envelope, which is an important, but expensive and not the sole measure for energy efficiency.

““Cohesion Policy Investing in Energy Efficiency in Buildings”, Brussels, 29-30 Nov 2011

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PART II Enabling of a sound investment framework

observations and recommendations based on the ClearSupport experience

• ClearSupport has shown that a proactive effort on helping building owners in identifying and documenting investments is essential in optimising financing schemes

• To apply a multi-disciplinary approach is a key means to overcome the various barriers in the implementation

• The following slides will present some observations and recommendations as how to increase the level of EE investments in the multi-apartment sector as inspiration for the design of future Cohesion funds and related financing instruments


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How to create awareness and competences of managing authorities

• Observations • Generally the programming of ERDF does not take into proper account

the long term impact in the form of reduced energy bills and better environment that channelling support to EE in multi-apartment buildings bring about

• Recommendations • Introduce in the procedures for the programming of ERDF a stronger

set-up for addressing the potential merits of supporting investments EE in multi-apartment buildings (including a long term horizon for the impact assessment) as well as guidance on how to handle the management of the support in an adequate manner


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Regulatory framework• Observations

• Despite active policies the general observation is that there are yet big gabs in order to provide a strong framework in order that the big energy saving potentials can be exploited

• Recommendations • An essential point is that Member States are encouraged to put in

place consistent policies to go hand in hand with the investment process, including creating good linkage between the policies at EU, national, regional and local level.

• Part of this is to obtain best possible interaction with the NEEAPs and NREAPs and the process around the CoM


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Financing instruments• Observations

• There is found to be many good initiatives around Europe to provide better financing options for the multi-apartment building sector, including developing the revolving fund concept in conjunction with ERDF.

• Recommendations • The recommendation is to continue and accelerate this development,

but doing this in understanding of the holistic approach needed to make it work properly; not least taking into account that the building owners in general need good support in order to become aware of the energy saving potentials and to turn the awareness into action in form of appropriate design of EE measures.


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Ownership structures and decision-making• Observations

• Finding adequate ways for renovation of the multi-apartment building stock is to high degree a democratic process, in which the flat owners are to find appropriate ways for the building management, investment decisions etc. Unfortunately, as the case study from Lithuania shows, various barriers in this process hinders/slows down a positive development

• Recommendations • The key issue is that the relevant authorities find the right approaches in

coherence with the policy formulation and programming and administration of the financing instruments, including EU funds.

• There is a need for sober and direct dialogue with the housing associations/flat owners to provide them with relevant knowledge on issues like handling of investments (dissemination in form of e.g. posters is not enough)


How to enable the investments to happen Good financing instrument(s) is not sufficient in itself ! Targeted and coordinated assistance to energy efficiency projects

can significantly accelerate the identification and the implementation of these

Local support combined with exchange of know-how and experience incl. an European Network can contribute to improve the quality of project documentation and implementation

Experience from the PSF process can contribute to develop framework conditions in EE building projects at the local level as well at the EU level (pro-active efforts from the PSFs)

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You need a ’Delevery mechanism’ to make it all happen !!


Recommended structure on promoting investments

Regional PSF Structure Regional PSF Structure

Potential European Supporting StructurePotential European Supporting Structure

Project service providersProject service providers

Project owners

Financing Institutions

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See more in the ClearSupport Guidebook: www.ecnetwork.info/ClearSupport/Deliverables/D-

3.4%20Tool%202_Guidebook_FINAL.pdf

“Cohesion Policy Investing in Energy Efficiency in Buildings”, Brussels, 29-30 f ov 2011

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Find out more at: www.clearsupport.eu


Partners

Thank you for attention !

On behalf of the ClearSupport consortium

Nils Daugaard ([email protected])

More information on http://www.clearsupport.eu

ClearSupport partners:

In partnership with:


Observations and recommendations on getting the framework right for energy efficient investments in...

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