Ralf Goldmann, Deputy Technical Advisor, Energy Efficiency & Small Scale Energy Projects Division, Energy Department, European Investment Bank (EIB) , who will be presenting at the upcoming ESCO Europe conference , offers an insight into the Bank’s involvement in project aggregation and its support of energy efficiency programmes.
Following on from a public consultation in 2013, there has been a revision of the criteria determining the eligibilty of projects for funding by the European Investment Bank (EIB). Since then all energy efficiency investments are essentially eligible as long as they are commercially viable. In addition more stringent measures were introduced ensuring the application of a cost-optimal refurbishment level for buildings as well as introducing criteria for combined heat and power (CHP).
The EIB has made loans to fund projects of Energy Service Companies (ESCOs), such as thatin the province of Milan supported under the ELENA facility (Local European Energy Assistance). In addition the EIB has invested in the European Energy Efficiency Fund (EEEF), which has also provided funding for ESCO projects.
In December 2009 the EIB implemented the ELENA facility, which helps public authorities to aggregate small projects into larger investment programmes in the fields of energy efficiency and renewable energy sources (through covering costs for technical support).
The Bank is also involved in managing urban development funds through JESSICA (Joint European Support for Sustainable Investment in City Areas), under which energy efficiency plays a role (i.e. housing refurbishment) and projects are prepared. Besides this, the Bank gives credit lines to banks and other possible intermediaries who can be used to finance small projects.
When it comes to an ESCO’s role in attracting private funding to projects, there are two main features that Goldmann draws attention to.
In public sector buildings, ESCOs can raise the financing, thereby creating a fully commercially financed (off balance-sheet) project. If required, EIB resources can be channelled via intermediaries.
This third-party financing accessed by ESCOs is usually enabled by them guaranteeing the projected savings. The guarantee can also be enhanced via an appropriate insurance product. Munich Re in collaboration with HSB Engineering Insurance, has recently brought out an energy efficiency insurance, which “removes the technical uncertainty for the lender allowing them to concentrate purely on credit risk … This results in improved credit worthiness and may lower interest rates and funding costsˮ. Joule Assets has also launched on the European market financing solutions backed by performance insurance for energy efficiency projects.
One of the challenges facing ESCOs relates to a mistrust or the inappropriate assessment of the risk-profile of the underlying project. In response to this the EIB launched a new instrument in conjunction with the European Commission in 2014: the Private Finance for Energy Efficiency Instrument ( P4FEE). Intended to increase specialist investment, the initiative will provide EUR 80 million for credit risk protection of energy efficiency loan portfolios and support of technical experts funded from the LIFE programme.
P4FEE will help intermediary banks in European countries to develop and offer specific loan programmes for energy efficiency projects. It allows for the provision of long-term low-cost loans for energy efficiency projects and credit risk protection to financial intermediaries (to cover potential losses by partner banks that may be incurred from energy efficiency loans).
“(It) … could give confidence to banks by providing a partial risk-guarantee on their energy efficiency portfolio”, explains Goldmann.
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