Periodic Reporting for period 2 - REFINE (Mainstreaming of refinancing schemes as enhancer for the implementation of energy efficiency service projects)
Periodo di rendicontazione: 2021-12-01 al 2023-05-31
The achievement of EU energy and climate goals by 2030 requires additional investment expenditures of approx. 167 billion EUR per year in the time frame 2021 till 2030 whereby 80% of the investment gap is related to residential and tertiary buildings. At the same time, many studies have been published that confirm the existence of huge amounts of economically attractive, yet untapped potential for energy efficiency (EE) projects. In this context, the access to attractive financing remains an important barrier for the expansion of EE investments.
Furthermore, there exist many financial institutions (FI) that have formulated strategic focus areas around sustainable financing and thus would also like to finance more EE projects, but – in contrast to investments in the renewable energy sector – they have difficulties to find the right channels to stimulate market growth. It seems that the peculiarities of EE investments do not fit well to the requirements of financial institutions. The increase of loan finance to EE investments is limited because it means that either the client or the EES provider (ESCO) have the investments in their balance sheets. Since EE projects compete with other investment options, clients frequently will have reservations in limiting the financial leeway, whereas EES providers will soon be confronted with a situation, where they will reach their own credit limits and will have to reject EE projects. Therefore, if remarkable market growth is intended, the major question is how the balance sheets could be cleaned up in order to gain financial leeway to expand business. Based on the experiences gained from selected EU markets the establishment of a solid refinancing cycle through the sale of receivables is a promising way to support the supply of financing for EE market growth.
Against the background as presented above, the ultimate goal of REFINE is reflected by two overarching objectives, which were pursued during the implementation of the REFINE project.
- Enhancing the refinanceability of EES projects
- Amplifying the actual use of refinancing schemes in EES business practice
The project identified key conclusions with both European-wide and country-specific implications. It was observed that while refinancing is successful in certain contexts, it remains a niche approach in the European EES market due to well-established financial services and existing financing options that suit prevailing market conditions. Market size, saturation, and the availability of alternative funding sources also influence the limited adoption of refinancing.
However, the significance of refinancing is expected to grow in the future, driven by challenges such as decarbonization goals and the need for deep renovation projects. Public guarantee schemes emerged as game changers, mitigating risks for financial institutions and promoting the adoption of innovative project types. Facilitation services were highlighted as vital for supporting refinancing efforts until they become mainstream in the EES market, and good practices provided in trainings were shown to enhance energy efficiency investment outcomes.
Furthermore, there exist many financial institutions (FI) that have formulated strategic focus areas around sustainable financing and thus would also like to finance more EE projects, but – in contrast to investments in the renewable energy sector – they have difficulties to find the right channels to stimulate market growth. It seems that the peculiarities of EE investments do not fit well to the requirements of financial institutions. The increase of loan finance to EE investments is limited because it means that either the client or the EES provider (ESCO) have the investments in their balance sheets. Since EE projects compete with other investment options, clients frequently will have reservations in limiting the financial leeway, whereas EES providers will soon be confronted with a situation, where they will reach their own credit limits and will have to reject EE projects. Therefore, if remarkable market growth is intended, the major question is how the balance sheets could be cleaned up in order to gain financial leeway to expand business. Based on the experiences gained from selected EU markets the establishment of a solid refinancing cycle through the sale of receivables is a promising way to support the supply of financing for EE market growth.
Against the background as presented above, the ultimate goal of REFINE is reflected by two overarching objectives, which were pursued during the implementation of the REFINE project.
- Enhancing the refinanceability of EES projects
- Amplifying the actual use of refinancing schemes in EES business practice
The project identified key conclusions with both European-wide and country-specific implications. It was observed that while refinancing is successful in certain contexts, it remains a niche approach in the European EES market due to well-established financial services and existing financing options that suit prevailing market conditions. Market size, saturation, and the availability of alternative funding sources also influence the limited adoption of refinancing.
However, the significance of refinancing is expected to grow in the future, driven by challenges such as decarbonization goals and the need for deep renovation projects. Public guarantee schemes emerged as game changers, mitigating risks for financial institutions and promoting the adoption of innovative project types. Facilitation services were highlighted as vital for supporting refinancing efforts until they become mainstream in the EES market, and good practices provided in trainings were shown to enhance energy efficiency investment outcomes.
Market assessment
In a first step, the refinancing schemes which are currently applied on the market were assessed in detail. This was achieved by analyzing case studies and by conducting a series of expert interviews with stakeholders. Furthermore, a literature and documents review and an assessment of the EES market was conducted.
Out of the 9 countries , only 4 have reported refinancing operations in place (Austria, Spain, Czech Republic, Latvia).
Conceptual development and structuring of instruments and services
Based on the results of the precedent market assessment, generic refinancing approaches have been derived and further developed. The generic refinancing approaches were grouped around similarities of main characteristic in current or possible applications. One of the main conclusions is that there is no one-fits-all approach, but rather a range of refinancing schemes with specific features that reflect the context of the application fields.
The generic refinancing approaches established the basis for the standardization of contract modules for refinanceable EES projects. A further step towards reduction of risk related to refinancing schemes was the development of guarantee instruments. The summary appraisal of refinanceability of EES projects was elaborated within a rating system.
Pilot applications
The project consortium focused on piloting and evaluating the developed instruments and tools for Energy Efficiency Services (EES) in real-life projects. The objectives were to assess their applicability, gather feedback, and make necessary adjustments. Exceeding set indicators, over 43 pilot processes were executed in collaboration with different stakeholders, most of which were either EES providers or financial institutions. The pilot applications underlined the potential of the refinancing approach and bridged gaps between EES providers and financial institutions, thus stimulating interest to drive growth in the EES business.
Capacity building and dissemination
In order to support a broad use of refinancing schemes in EES practice the project partners implemented a series of capacity building and dissemination activities. Stakeholder workshops allowed to consolidate the know-how among market players. The objectives were to increase knowledge and understanding of EES and refinancing procedures. Training materials, including presentations, e-learning modules, and videos, were developed and made available on a web portal. Physical training events and webinars were organized for target groups, and participant feedback was collected and used to adjust the training materials.
In a first step, the refinancing schemes which are currently applied on the market were assessed in detail. This was achieved by analyzing case studies and by conducting a series of expert interviews with stakeholders. Furthermore, a literature and documents review and an assessment of the EES market was conducted.
Out of the 9 countries , only 4 have reported refinancing operations in place (Austria, Spain, Czech Republic, Latvia).
Conceptual development and structuring of instruments and services
Based on the results of the precedent market assessment, generic refinancing approaches have been derived and further developed. The generic refinancing approaches were grouped around similarities of main characteristic in current or possible applications. One of the main conclusions is that there is no one-fits-all approach, but rather a range of refinancing schemes with specific features that reflect the context of the application fields.
The generic refinancing approaches established the basis for the standardization of contract modules for refinanceable EES projects. A further step towards reduction of risk related to refinancing schemes was the development of guarantee instruments. The summary appraisal of refinanceability of EES projects was elaborated within a rating system.
Pilot applications
The project consortium focused on piloting and evaluating the developed instruments and tools for Energy Efficiency Services (EES) in real-life projects. The objectives were to assess their applicability, gather feedback, and make necessary adjustments. Exceeding set indicators, over 43 pilot processes were executed in collaboration with different stakeholders, most of which were either EES providers or financial institutions. The pilot applications underlined the potential of the refinancing approach and bridged gaps between EES providers and financial institutions, thus stimulating interest to drive growth in the EES business.
Capacity building and dissemination
In order to support a broad use of refinancing schemes in EES practice the project partners implemented a series of capacity building and dissemination activities. Stakeholder workshops allowed to consolidate the know-how among market players. The objectives were to increase knowledge and understanding of EES and refinancing procedures. Training materials, including presentations, e-learning modules, and videos, were developed and made available on a web portal. Physical training events and webinars were organized for target groups, and participant feedback was collected and used to adjust the training materials.
Although widely used in other business sectors, the application of refinancing schemes through sale of receivables in EES projects is not common across Europe. In this context, the REFINE project has significantly advanced the understanding and application of refinancing schemes in the EES business. Through a comprehensive exploration of market dynamics, development of generic concepts, standardized contract stipulations, risk assessment systems, and facilitation services, the project has provided a roadmap for the market growth of EES. As the industry continues to evolve, stakeholders are encouraged to leverage the insights, tools, and resources generated by the project, fostering transformative progress in the EES sector.
Socio-economic impact and societal impact
The project led to a deeper understanding of existing refinancing schemes and how they can help to increase the volume of EES investments. The knowledge acquired, and even more importantly, the tools developed will foster the use of refinancing schemes to support the growth EES investments. This ultimately will contribute to the achievements of EU energy and climate goals for 2030.
Furthermore, the establishment of refinancing schemes offers new business opportunities for financial institutions (commercial banks, investment funds, etc.), allowing financial institutions to channel their resources towards EE investment and to extend their green financing portfolio.
Socio-economic impact and societal impact
The project led to a deeper understanding of existing refinancing schemes and how they can help to increase the volume of EES investments. The knowledge acquired, and even more importantly, the tools developed will foster the use of refinancing schemes to support the growth EES investments. This ultimately will contribute to the achievements of EU energy and climate goals for 2030.
Furthermore, the establishment of refinancing schemes offers new business opportunities for financial institutions (commercial banks, investment funds, etc.), allowing financial institutions to channel their resources towards EE investment and to extend their green financing portfolio.