Periodic Reporting for period 2 - SUNShINE (Save your bUildiNg by SavINg Energy – towards 202020m2 of deeply renovated multifamily residential buildings)
Periodo di rendicontazione: 2016-09-01 al 2020-02-29
Latvia faces significant social and economic challenges regarding the structural deterioration of its stock of residential buildings. Multifamily buildings in Latvia consume 50%-60% more energy than necessary. At the same time, often residents still receive unsatisfactory services: low temperatures in rooms, cold walls, draft and bad air quality. All of this is because of poor building energy efficiency and deferred maintenance.
It is estimated that over 120 million families live today in these dilapidated buildings constructed between 1954 and the late ‘80s in Eastern Europe. In Latvia alone, there are more than 30 million square meters of multifamily buildings made in this period.
Deep renovation is the idea of capturing the full economic energy efficiency potential of a building with focus on the building fabric. It leads to remarkable energy savings. As nearly all of Latvia’s stock of multifamily residential buildings continues to rapidly deteriorate due to harsh weather conditions and lack of proper maintenance, this idea is attractive.
Realizing this potential requires designing, financing and implementing complex energy efficiency investments. However, nearly all apartments in Latvia are privately owned. Practice showed that individual owners are inadequately organized to manage their collective property. Adding to the mix a lack of awareness and of technical knowledge, limited availability of funding and reluctance for debt financing, the barriers toward renovation are too high for most people.
A concept that addresses these constraints is long-terms energy performance contracting (EPC) for deep renovations. A key feature of this type of EPC is that the ESCO guarantees the energy savings, the indoor comfort of the apartments and the quality of the works. However, most ESCOs have limited balance sheet capacity and are not able to support much long-term debt.
How to turn this weakness and problems into an opportunity is the key to the SUNShINE project. SUNShINE delivered a process approach to the deep renovation of multifamily buildings by standardizing each step, from the technical, financial and legal standpoint of view; allocating risks to the stakeholders best suited to manage them and setting guarantees for apartment owners and tenants. The project established the Latvian Baltic Energy Efficiency Fund, which buys future receivables from energy performance contracts, enabling ESCOs to focus on developing new projects.
The proposed approach was tested in the markets, delivering a pipeline of deep renovation projects worth €25.5m and with the first forfating transaction executed in the sector.
It is estimated that over 120 million families live today in these dilapidated buildings constructed between 1954 and the late ‘80s in Eastern Europe. In Latvia alone, there are more than 30 million square meters of multifamily buildings made in this period.
Deep renovation is the idea of capturing the full economic energy efficiency potential of a building with focus on the building fabric. It leads to remarkable energy savings. As nearly all of Latvia’s stock of multifamily residential buildings continues to rapidly deteriorate due to harsh weather conditions and lack of proper maintenance, this idea is attractive.
Realizing this potential requires designing, financing and implementing complex energy efficiency investments. However, nearly all apartments in Latvia are privately owned. Practice showed that individual owners are inadequately organized to manage their collective property. Adding to the mix a lack of awareness and of technical knowledge, limited availability of funding and reluctance for debt financing, the barriers toward renovation are too high for most people.
A concept that addresses these constraints is long-terms energy performance contracting (EPC) for deep renovations. A key feature of this type of EPC is that the ESCO guarantees the energy savings, the indoor comfort of the apartments and the quality of the works. However, most ESCOs have limited balance sheet capacity and are not able to support much long-term debt.
How to turn this weakness and problems into an opportunity is the key to the SUNShINE project. SUNShINE delivered a process approach to the deep renovation of multifamily buildings by standardizing each step, from the technical, financial and legal standpoint of view; allocating risks to the stakeholders best suited to manage them and setting guarantees for apartment owners and tenants. The project established the Latvian Baltic Energy Efficiency Fund, which buys future receivables from energy performance contracts, enabling ESCOs to focus on developing new projects.
The proposed approach was tested in the markets, delivering a pipeline of deep renovation projects worth €25.5m and with the first forfating transaction executed in the sector.
The project and its stakeholders have faced many challenges along the way. Privately owned multifamily buildings are a particular opportunity. The sector has a huge potential for energy efficiency, but a complex stakeholder set-up and decision-making process. Proposing new models is disruptive to existing and well-established businesses, which react as soon as they feel threatened.
The most relevant lesson learned for solving a problem of this size is to have long term policies and programmes, with consistent regulatory frameworks for energy efficiency projects and energy performance contracting.
Despite the challenges, the project has delivered outstanding results:
• a financial instrument, specifically designed for market upscale for the renovation of multifamily buildings, which is supported by large financial institutions;
• a solution that brings in private finance,
• a solution that sets high quality standards in renovation, with energy performance and comfort guarantees;
• a solution that creates jobs and a more stable flow of work for the construction sector and SMEs;
• a solution that support national energy efficiency objectives and can preserve the existing housing for the next 30 years;
• a scheme that can substantially support the objectives of the European Green Deal and the renovation wave.
Over the time, these results will help the renovation of multifamily buildings and support communities all over Europe.
SUNShINE managed to test the financial instrument in the market. The Latvian Baltic Energy Efficiency Facility was established at the beginning of the project, and initial debt capitals ensures with a loan from the European Bank for Reconstruction and Development. The first transactions were delivered supporting ESCOs and market development.
During SUNShINE a project pipeline worth €25.5m was developed, of which the deep renovation of five buildings was fully completed. The other projects are in the final process of development and expected to be finalized within the next two years.
The most relevant lesson learned for solving a problem of this size is to have long term policies and programmes, with consistent regulatory frameworks for energy efficiency projects and energy performance contracting.
Despite the challenges, the project has delivered outstanding results:
• a financial instrument, specifically designed for market upscale for the renovation of multifamily buildings, which is supported by large financial institutions;
• a solution that brings in private finance,
• a solution that sets high quality standards in renovation, with energy performance and comfort guarantees;
• a solution that creates jobs and a more stable flow of work for the construction sector and SMEs;
• a solution that support national energy efficiency objectives and can preserve the existing housing for the next 30 years;
• a scheme that can substantially support the objectives of the European Green Deal and the renovation wave.
Over the time, these results will help the renovation of multifamily buildings and support communities all over Europe.
SUNShINE managed to test the financial instrument in the market. The Latvian Baltic Energy Efficiency Facility was established at the beginning of the project, and initial debt capitals ensures with a loan from the European Bank for Reconstruction and Development. The first transactions were delivered supporting ESCOs and market development.
During SUNShINE a project pipeline worth €25.5m was developed, of which the deep renovation of five buildings was fully completed. The other projects are in the final process of development and expected to be finalized within the next two years.
SUNShINE has achieved important progress beyond the state of the art:
• When the SUNShINE project started, ESCOs in Latvia were not fully recognized as a relevant stakeholder in the energy efficiency industry. Now a specific regulation for ESCOs is development and Ministries in Latvia are convinced on the potential benefits of the concept.
• SUNShINE, through a wide set of dissemination and communication activities, has contributed to promote Energy Performance Contracting; and more than seven companies, informed and trained by SUNShINE, intends to use energy performance contracting for deep renovation of multifamily buildings.
• SUNShINE is not only about energy efficiency, most of all it is about housing. To provide safe, healthy and comfortable long term housing is the primary societal challenge of the project. SUNShINE has contributed to address this challenge by acknowledging the need of long term financing for deep renovation of multifamily buildings. It has also convinced the Ministry of Economics, which indeed has designed the support programme, based on European Regional Development Funds, with a 30 years economic model.
• Municipalities have an important role in addressing and helping their inhabitants to renovate their buildings. SUNShINE has successfully committed four municipalities to develop a support programme, where they will act as EPC facilitators. An application for technical assistance has been prepared.
• The concepts developed and tested in Latvia by SUNShINE had important follow-ups. The scheme developed in Latvia with LABEEF is under replication in other countries. Other projects were inspired and aimed to replicate SUNShINE. The scope is also extended from multifamily buildings to public buildings. SUNShINE had a major impact in Poland, Bulgaria, Romania, and Slokakia. The network build by SUNShINE partners and the persistence of the messages given by SUNShINE was followed up by the preparation of the FinEERGo-Dom (www.fineergodom.eu) H2020 project application, which then was granted. Similar entities like LABEEF are under development in these countries.
• When the SUNShINE project started, ESCOs in Latvia were not fully recognized as a relevant stakeholder in the energy efficiency industry. Now a specific regulation for ESCOs is development and Ministries in Latvia are convinced on the potential benefits of the concept.
• SUNShINE, through a wide set of dissemination and communication activities, has contributed to promote Energy Performance Contracting; and more than seven companies, informed and trained by SUNShINE, intends to use energy performance contracting for deep renovation of multifamily buildings.
• SUNShINE is not only about energy efficiency, most of all it is about housing. To provide safe, healthy and comfortable long term housing is the primary societal challenge of the project. SUNShINE has contributed to address this challenge by acknowledging the need of long term financing for deep renovation of multifamily buildings. It has also convinced the Ministry of Economics, which indeed has designed the support programme, based on European Regional Development Funds, with a 30 years economic model.
• Municipalities have an important role in addressing and helping their inhabitants to renovate their buildings. SUNShINE has successfully committed four municipalities to develop a support programme, where they will act as EPC facilitators. An application for technical assistance has been prepared.
• The concepts developed and tested in Latvia by SUNShINE had important follow-ups. The scheme developed in Latvia with LABEEF is under replication in other countries. Other projects were inspired and aimed to replicate SUNShINE. The scope is also extended from multifamily buildings to public buildings. SUNShINE had a major impact in Poland, Bulgaria, Romania, and Slokakia. The network build by SUNShINE partners and the persistence of the messages given by SUNShINE was followed up by the preparation of the FinEERGo-Dom (www.fineergodom.eu) H2020 project application, which then was granted. Similar entities like LABEEF are under development in these countries.