Financing EE Measures
in the Residential Building Stock
Bernd Kalkum
International Residential EE expert, World Bank Consultant
Vienna
M 15
May
15-16,
16 2014
1
Outline
• Significance of heat consumption in the
residential sector
• Particular characteristics and conclusions for EE
programs
g
• Typical barriers for EE
• Mechanisms for supporting EE
• Approaches
• Significance of market-based approaches
• Roadmap
2
Significance of heating
Share of the residential sector in total final energy
consumption
3
Significance of electricity
consumption
Share of residential sector in electricity consumption
4
Energy Subsidies
Energ subsidies
Energy
s bsidies per GDP
5
Single-family houses and apartment
b ildi
buildings
Single family houses represent the majority of dwellings
6
Saving potentials
Saving potential of single family houses is significantly
larger than for apartment buildings
7
EE targets in NEEAPs
• Saving
g targets
g
for the residential sector are about 9%
• Serbia expects much higher savings in the public building
stock
• Implementation is lagging behind
8
Characteristics for heating
g
• High
Hi h share
h
off single-family
i l f il h
houses (54
(54-74%)
74%)
• Low share of common heating systems (highest in
Serbia with 28% and lowest in Albania with 8%)
• High consumption of wood, mostly in stoves with
efficiency < 50%
• High share of electric heating
• DH iis concentrated
t t d iin llarger cities,
iti
where
h
it serves up tto
60%
• Often low overall efficiency of DH systems
9
Conclusions for EE Programs
• Importance of single family houses (larger space, higher
specific
p
heat demand))
• Most buildings without central/common heating systems
• Use of EE programs to foster HOAs
• Improve efficiency of wood utilization
• Reduce electric heating
• Improve
p
efficiency
y of DH systems
y
10
Barriers
Pricing barriers
Technical barriers
Legal & regulatory
barriers
Energy subsidies/cross‐
subsidies
Lack of metering in central Insufficient building heating systems
heating systems
standards
No consumption‐based billing
Building maintenance & EE
Privatization and ownership
Affordability
Under‐heating
Information
A
Access to financing t fi
i
LLack of centralized space k f
t li d
heating
LLack of awareness on k f
EE
No compensation for No
compensation for
external benefits of RES
Lack of centralized DHW Lack
of centralized DHW
supply systems
Insufficient Insufficient
knowledge about energy flows
11
Mechanisms
Financial Mechanisms
Subsidies
Grants
P f
Preferential
ti l loans
l
Credit lines
Loan guarantee schemes
Pricing reforms
Delivery Mechanisms
Technical assistance
Audits
ESCO TPF,
ESCOs,
TPF performance
f
contracting
t ti
On-bill financing
Bulk purchasing
Utility obligations
Levies
Minimum requirements
EE fund (including revolving fund)
Voluntary agreements
Other non-financial incentives
Fiscal Mechanisms
Carbon, energy,
environmental taxes
Tax rebate
Institutional Mechanisms
Energy Efficiency agency
Energy regulator
12
Mechanisms
13
Approaches
• Different
Diff
t EU countries
t i adopted
d t d diff
differentt approaches
h
• Typically different mechanisms and instruments are
combined
• There is no “right” approach; approaches have to be
tailored according to needs and targets
targets, but also in
accordance with financial resources
• Providing financial incentives is difficult for governments
in the region
pp
is needed
• More reliance on market approaches
14
ESCO
• Ideally,
Id ll ESCO
ESCOs d
don’t
’t b
burden
d th
the governmental
t lb
budgets
d t
• ESCOs in the residential sector are rare due to high
fi
financial
i l risks
i k and
d llack
k off HOA
HOAs
• ESCO development needs strong support
• Existing ESCOs utilize typically a mix of tax money
(subsidies/grants) and some own funds
• Examples: Croatia (focus on construction companies)
and Lithuania
15
On-bill
On
bill financing
Approach:
A
h EE measures are pre-financed
fi
db
by service
i
providers; customers repay the costs through fixed
instalments over a certain p
period of time;; the instalments
should be smaller than the energy savings achieved
– Approach
pp
faces similar p
problems as ESCOs
– Successful when individual owners are addressed
(e.g. installation of heat cost allocators through DH
companies or service providers)
– Examples: Utility programs (USA)
16
Bulk purchasing
• Approach: A group of households bundle
procurement of EE equipment/devices
– Advantages: consumers can achieve tangible cost
reductions
– Disadvantage:
Di d
t
consumers h
have tto conclude
l d bi
binding
di
agreements on purchase (which would likely require
deposits equal to the value of the purchase)
– Examples: US organization Transition Linlithgow (e.g.
solar water heaters), DH cooperatives in Denmark
17
Utility obligations
• A
Approach:
h Utilities
Utiliti are obliged
bli d tto achieve
hi
certain
t i energy
saving targets on the demand side by financing EE
measures
– Advantage: highly attractive for customers
– Disadvantage: most utilities are in difficult financial
position; however, such obligations could be
requested when the utilities use grants or soft-loans
– Examples: France, UK, Poland
18
Guarantees
• Approach: A fund provides guarantees for commercial
bank loans to reduce the repayment risks
– Advantage: a small guarantee fund can mobilize a
much larger credit volume
– Disadvantage: government or other sponsor have to
provide the capital for the fund taking the repayment
risk
– Example: Bulgarian EE Fund
19
Main EE and RE financing facilities in the
W t
Western
Balkans
B lk
(2013)
20
Roadmap
21
Roadmap part 1
• Recommendation 1 – Implement financing, incentive
schemes for single family homes
– Largest heat/energy consumers group in the residential sector
– Individual
I di id l agreements/contracts
t /
t t (no
( HOA)
• Recommendation 2 – Conduct information outreach
Awareness campaigns and public education can help to overcome
or at least mitigate challenges related to insufficient information
• Recommendation
eco
e dat o 3 – Enact
act new
e bu
building
d g codes
• Recommendation 4 – Install/ expand building level
g for DH
heat metering
– Analyse the energy flows in the system
– Detect wear points and actual losses
22
Roadmap part 2
• Recommendation
R
d ti
5 – Revise
R i HOA llegislation
i l ti
– Allow majority decisions on EE measures
– Ensure that low income households can participate
• Recommendation 6 – Rehabilitate DH systems
– Convert from a supply
pp y driven to a demand driven system
y
– Consider effects of existing over-sizing and future energy
savings
• Recommendation 7 – Transition to building-level
building level
metering and consumption-based billing
– Start with DH and extend it later to all common/central heating
systems
– Do not abuse implementation of consumption-based billing for
significant
g
tariff increases
23
Roadmap part 3
• Recommendation 8 – Building certificates, appliances
standards/labels
• Recommendation 9 – Implement financial incentives for
multi-family
lti f il (apartment)
(
t
t) buildings
b ildi
• Recommendation 10 – EE incentives to regularize
illegal housing.
housing
– Provide favourable loans or grants for EE measures to home
owners; savings should be sufficient to repay the loans and legalize
the buildings and guarantee property rights
• Recommendation 11 – Heat cost allocators and
individual consumption-based billing
– Promote this idea once building level consumption-based billing has
been implemented
– Support private companies to pre-finance the equipment and to
provide
id reading
di services
i
24
Thank you!
Bernd Kalkum
[email protected]
25