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  • Periodic Reporting for period 1 - ICPEU (Developing Protocols to standardize the development and documentation of energy efficiency projects in the built environment and accelerate their financing.)

ICPEU Report Summary

Project ID: 649836
Funded under: H2020-EU.3.3.7.

Periodic Reporting for period 1 - ICPEU (Developing Protocols to standardize the development and documentation of energy efficiency projects in the built environment and accelerate their financing.)

Reporting period: 2015-02-01 to 2016-07-31

Summary of the context and overall objectives of the project

The importance of increasing investor confidence in energy efficiency as an asset class was stressed in the 2015 EU chartered Energy Efficiency Financial Institutions Group (EEFIG) report which also highlighted the US based Investor Confidence Project as “a relevant model” and recommended “an EU Investor Confidence Project”. This project is delivering the Investor Confidence Project (ICP) within the EU. Several studies document the potential energy savings for efficiency investments as well as the scale of the investment needed. BPIE estimated EUR937bn investment would be necessary in their Deep Scenario to achieve 78% energy savings and 90% CO2 savings. Despite evidence of the potential attractiveness of investments, the flow of finance into energy efficiency remains much lower than required. Analysis reveals several barriers that hold private capital back but especially a lack of standardised processes and documentation, analogous to those used in the oil & gas and renewables industries. All financial markets are enabled by buyers and sellers agreeing standards. Scaling up investment in efficiency will require standardisation and greatly increased capacity in the financing market – ICP Europe addresses these issues. The project works with key stakeholders from the finance industry, the energy efficiency industry and building owners, to develop open source Protocols and apply them to real projects. The aim is to get commitment from investors that they will specify the use of the Protocols, and from project developers to use the Protocols, thereby driving both demand and supply. The Protocols are incorporated into a certification scheme, Investor Ready Energy Efficiency™ (IREE™), which can be applied to projects developed using the Protocols by accredited project developers and which has now been launched in the EU. Use of IREE™ reduces due diligence costs and risks for investors.

Work performed from the beginning of the project to the end of the period covered by the report and main results achieved so far

Since February 2015, the ICP team has been working on two main fronts: the technical activities and the dissemination and deployment activities.
The technical activities, summarised in a Technical Plan established early in the project, first consisted of writing the Protocols, the main tools developed to standardize the building energy efficiency project market. While four Protocols were foreseen and agreed in the Grant Agreement, ICPEU has written and published six Protocols which are available for the market to use. These were developed with significant input from the ICP Technical Forum and other stakeholders. In addition to the Protocols, ICPEU has developed other tools to help the market use the Protocols in the correct way including: a Project Development Specification (PDS), project Templates, and a List of National Resources (Annex A) to refer to. All these materials are open source and are available on the ICPEU website for free.

A second stage in the technical activities consisted of developing the ICP System end ‘product’ beyond Protocols and launching the Investor Ready Energy Efficiency™ (IREE™) Certification into Europe. The IREE™ Certification has been introduced by ICP to certify projects that have been developed following the ICP system. To qualify as an IREE™ project a project developer must be a credentialed ICP Project Developer, follow the ICP Protocols in developing, documenting and measuring a project, and have it reviewed by an ICP Quality Assurance (QA) Provider. The QA provider will deliver the IREE™ Certification to a project if it has been developed according to the Protocols. The first European IREE™ project was certified on July 1st, 2016. It is a £13m project to improve the energy and carbon performance of three NHS hospitals, in Liverpool UK, through the installation of a number of energy efficiency and low carbon measures, and used the ICP Standard Tertiary Protocol. As of July 2016, 10 projects and programmes are currently using the Protocols in project development versus 10 planned in the Grant Agreement at the end of the project, or month 36. A further 9 projects and programmes are moving towards implementation of ICP. In order for ICP to foster adoption of its system, a number of market players need to be trained. Consequently, ICPEU has also started to carry out Trainings for Project Developers and Quality Assurance Providers.
Professionals can register for an online training, delivered for free by the ICPEU technical team, and if all required documentation required is validated by ICPEU, they receive ICP Project Developer Credentials or ICP Quality Assurance Provider Credentials. Another set of market players which can receive credentials are ICP software providers, who can work with Project Developers and Quality Assurance Providers to develop software that helps Project Developers develop and assess a project more efficiently following the ICP Protocols.

ICP has also been working to disseminate information about the project, in order to foster the adoption of its tools (the Protocols) in the market, and raise the awareness of the ICP and IREE™ Certification and amongst the financial industry, the energy efficiency industry and building owners. To do that, the ICP team has organised or presented ICP at more than 100 events throughout Europe. As part of its dissemination activities, ICP has recruited 153 organizations as Allies in its network (versus 50 targeted in the Grant Agreement by month 15 or April 2016 and 100 by the end of project or month 36), and 134 member organisations in its Technical Forum. Organizations who joined the network come from 22 different countries in Europe, plus Kenya, Singapore, Turkey, the United States and other countries outside the EU. Allies represent the energy efficiency industry, the financial industry and the real estate owners, as well as public programmes and non-governmental organizations. ICPEU has also focused effort on creating a group of investors with its Investor Network, which today has 16 members. The ICP Europe Investor Network is comprised of energy efficiency investors who recognise the benefit of industry best practice and standardised energy renovation project delivery. Members of the Network support the use of the ICP Protocols and Credentialing System because these systems increase confidence in project performance while reducing due diligence-related transaction costs. ICP recommends that project developers, building owners, and others seeking project financing contact members of the listed ICP
Investor Network, hence enabling the demand and supply sides of the market to start working together towards a more efficient building energy projects financing ecosystem. Towards that goal, ICP also organized the Investor Days in Brussels in February 2016, bringing together project developers, financial institutions, policy makers and other interested stakeholders to discuss how to increase deal flow in the building efficiency space and pitch funding to interested developers. This event is believed to be the first time in Europe when energy efficiency project developers were directly brought together with investors.

Progress beyond the state of the art and expected potential impact (including the socio-economic impact and the wider societal implications of the project so far)

The project has moved the state of the art in the development and documentation of energy efficiency projects in buildings. Prior to ICPEU there was some discussion of the lack of standardisation being a market barrier, for example in the EEFIG report and by the IEA, but ICPEU has a) significantly raised the awareness and understanding of the importance of this barrier to increasing the flow of capital into building energy efficiency projects and b) developed and begun the roll-out of a credible solution that has been co-created with the relevant stakeholders. In addition the bringing together of investors and project developers is a step forward in the energy efficiency market and this is now being repeated by ICPEU and we also understand that other entities are considering similar events.

Although it is still too early to measure the impact of ICPEU directly, it is recognised as a significant market development and supported by many major players including within the financial sector. It is likely to take several years to complete enough projects to measure the impact on the volume of energy efficiency investment, or the reduced transaction costs and risk reduction, but the adoption of ICP by leading stakeholders and its incorporation into other projects such as the standardised underwriting guide being developed by the EEFIG Derisking Project (supported by DG ENER), shows that the potential impact is high.

As well as the impact in Europe the project has been presented on and reported globally. The existence of ICPEU supports the ICP market development work in North America indirectly by helping the argument that ICP can become a global standard. It has also sparked interest in hosting linked initiatives in India, China, the Middle East and Australasia.

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