Page 38 - European Energy Innovation - spring 2020 publication
P. 38
38 Spring 2020 European Energy Innovation
ENERGY EFFICIENCY FINANCING
Ensuring equal access to
energy efficiency through
innovative financing
By Caroline Milne (pictured), Senior Communications Manager, The Buildings Performance
Institute Europe - BPIE
access to finance means that viable and banks only offer low-interest
By 2020, we have the financing solutions are available loans to customers with good credit
numbers memorized: In for all types of projects, spanning ratings. Energy efficiency renovations
Europe, buildings are the different project sizes and ownership are therefore inaccessible for many
largest energy consumer,
responsible for 40% of total energy structures: residential (homeowners homeowners, and even further out
consumption, and 36% of CO2 and renters), commercial (business of reach for renters. Barriers remain
emissions. The European Commission owners, often Small to Medium- for financial institutions as well:
considers energy efficiency to be Sized Enterprises), and industrial perceived risk of these investments
the “first fuel” of Europe, with the (also business owners, usually larger is high, due to unfamiliarity with the
principle of efficiency first enshrined enterprises). technical aspects of energy savings
in the Clean Energy For All legislative solutions, the small average size of
package. However, uptake of energy While each category has its own individual projects (therefore low
efficiency measures in Europe’s pain points, common to all energy returns), credit risk of home owners,
building stock is happening too slow. efficiency projects is the key barrier: and due to difficulties in attributing
97% of our buildings are inefficient1, Energy efficiency is difficult to sell energy savings to their respective
yet the current deep renovation rate because of limited budgets and impact on cash flows.
is at only 0.2%2. Why? competing priorities. Individuals and
business owners alike do not want On-Bill Financing responds to this,
A large part of the reason is finance. (and in many cases are unable) to pay and provides both the homeowner
Finance, and access to finance, upfront capital in order to save money and financial institution with added
means the difference between later. The perceived cost and effort security and incentive to invest in
implementing and not implementing is often too high; tight budgets and energy efficiency. It helps alleviate the
energy efficiency projects. Equal balance sheets will always be a reality. financial burden of energy efficiency
upgrades to homeowners and renters
However, there is good news: Energy by allowing customers to repay loans
efficiency pays for itself. Lowered directly through their energy bills,
future energy bills can cover the rather than going through a bank loan,
costs of technology – in other words, using the utility bill as a repayment
future energy savings pay the initial vehicle. The solution has already been
cost of the technology, installation, in use in the US and Canada for more
and even maintenance. Combining than 30 years, where it has been a
innovative business models and key enabler for building renovation
third-party finance, where the upfront market growth.
capital is provided by an external
investor, is a key way to overcoming In this model, the energy utility is
the barrier “I can’t pay”, and getting the central player: utilities have
more projects off the ground, faster. the advantage of access to a large
existing client base, with the technical
On-Bill financing to upscale home capacities and information necessary
renovations to conduct a thorough evaluation of
Today, for the average middle or individual projects. They know the
working class individual, taking on energy consumption profile of their
a renovation project most often customers in detail, and are informed
means taking on personal debt, about customers’ default rates on
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