Financing Energy Efficiency

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					                                                                   Financing Industrial Energy Efficiency
                  EEIPFin Discussion, Hannover Fair, 24 Apr 2012

                                                                   MOBILIZING PRIVATE CAPITAL
                                                                   Financing is often seen as the main barrier to achieve a more energy efficient industry in
                                                                   Europe. To address some of the challenges, the EEIP Finance Consortium (EEIPFin), part
                                                                   of the Energy Efficiency in Industrial Processes (EEIP), a neutral, not-for-profit platform
                                                                   for business and policy in Europe, is facilitating a dialogue between private investors,
                                                                   banks, companies and EU policymakers. The goal is to promote the “business case” for
                                                                   industrial energy efficiency investments.
                                                                   Following the EEIPFin roundtable in Brussels on 10 November 2011, the Hannover Fair
                                                                   2012 panel discussion was intended to broaden the debate with a specific focus on
                                                                   access to external financing for SMEs. The event was hosted by Hannover Fair Global
                                                                   Business & Markets and supported by Siemens Industry, Thomas Industrial Media,
                                                                   DENEFF, Finnfjord and Elkem.
                                                                   Building on the three insights from the November 2011 roundtable (Awareness,
                                                                   Customer Orientation, Financial Mechanism), the panel discussion highlighted a fourth
                                                                   – the “Expertise Layer”.

                                                                   Conclusions as summarized by Mr Rod Janssen, EEIPFin Chairman.

                                                                        Awareness => Education
                                                                        Customer Orientation
                                                                        Financial Mechanism
                                                                        Expertise Layer
Awareness => Education

•	   More than just awareness of energy
     efficiency benefits is needed. Further
     focus is welcome on education of tools,
     opportunities, technologies, costs and risk.

•	   EU and national policymakers should
     give more attention to communicate and
     educate businesses on benefits and financial
     solutions alike leveraging the broad range
     of financing options already in existence,
     from equity investments to leasing.

Customer Orientation                                                R

•	   SMEs need special attention when it comes
     to cross-regulations and more ‘horizontal’                       1. One third of SMEs

                                                                       have      difficulties  in
     policies that touch upon different aspects of                    accessing capital for
     business operation as this could negatively                     improving their energy
     affect energy efficiency receiving deserved
     attention. Their technical capacity is much
                                                     EVID           performance, and this has
                                                                   become more acute during
     more limited than large industry and their                   the current financial crisis
     focus has understandably been more on
     market growth than on cost and efficiency             2. Innovative financing tools and
                                                              effective interfaces between
     improvements.                                            financers    and    companies
                                                               are key – better financial
•	   Energy Management Systems (EnMS)                          engineering
     could drive energy efficiency awareness
     and have positive impact on financing by                3.      Banks often need to “fix”
     using standards and benchmarks. However,                       own issues / balance sheets
     regulators need to be aware on SME                              limiting credit availability
                                                                       for energy efficiency
     sensitivity to potential disproportionate
     administrative burden and therefore models
     with LEEN* need to be assessed.

Financial Mechanisms
•	   The EU should evaluate new risk mitigating
     models in addition to the current grant
     model, especially frameworks to initiate an
     energy efficiency bond market.

•	   EU, member states and the financial sector
     need to assess the impact of Basel III and
     Solvency II regulations on energy efficiency
     risk assessments and related credit

                                                       •	   EU and member states should deliver a long-
                                                            term vision on energy efficiency policies as
                                                            predictability is key for financial market and
                                                            business investment decisions alike.

                                                       •	   The European Commission should search
                                                            for “multiplier-solutions” to better leverage
                                                            their financing programs.

                                                       Expertise Layer
       R         20
                                                       •	   Private banks need to develop better energy
                                                            efficiency expertise to be able to evaluate
                   12                                       energy efficiency projects and to provide
                                                            customized financial solutions as businesses
                                                            being more and more concerned about the

                                                            impact of energy costs.

 4. The policy framework
    at both the EU and                                 •	   Publically supported initiatives such as the

    national levels needs to                                German local energy efficiency networks
    be more predictable and                                 (LEEN) need to be linked to financial

    stable                                                  institutions to combine energy efficiency
                                                            benefit assessments and project support
 5. There is a considerable                                 with financial solutions.
    amount of capital in the
    market place. What is needed
    are people to structure the                        •	   New approaches such as the UK’s Green
    financial arrangements                                  Investment Bank need to be explored to
                                                            bridge the gap between energy efficiency
 6. Even with the obstacles,                                projects and financing.
    energy efficiency is still the
    cheapest “energy” source                           •	   Investment funds and financial advisory
    and the most cost-effective                             service firms combining energy efficiency
    way to reduce greenhouse
    gas emissions                                           project evaluation expertise with access to
                                                            financial markets should be supported and
 7. There is a need for                                     potentially act as a good practice for public
    leadership    and                                       and private banks to build the expertise
    pro-activity.                                           layer.


                                       Discussion panelists were:
                                       Georgios Lemonidis, Deputy Head of Unit “Financing Innovation
                                       & SMEs”, DG Enterprise and Industry, The European Commission
                                       Roland W. Chalons-Browne, CEO, Siemens Financial Services
                                       Manuel Dueñas, Deputy Head of Division, Climate Change &
                                       Environment (NPST), European Investment Bank (EIB)
                                       Gil Levy, Partner, Sustainable Development Capital LLP
                                       Simone Loefgen, Business Development, Commerzbank
Energy Efficiency in Industrial Processes (EEIP) is a neutral
not-for-profit platform for business and policy in Europe. Any

                                                                 in Industrial Processes
views or opinions presented in these conclusions are sole re-
sponsibility of EEIP and do not necessarily represent those of
all the Participants. The discussion was conducted under the
Chatham House Rule. The Participants served in their person-
al capacities and their views do not necessarily concur with
the views of their organisation.                                                

There is much work for all stakeholders to do to address these financing concerns.
But there is a ray of hope at the end of the tunnel.

From governments at all levels, there is a need for a more stable policy framework
and better support mechanisms such as improving technical knowledge
(technologies and financial). There is also a need for clear leadership to explain
convincingly the importance of and the benefits from improved energy

From the financial community (public and private), there is a need to do more
financial engineering to find innovative ways to structure loans and equity
investments in order to increase investments in energy efficiency. Commercial
banks should develop in-house capacity to assess the quality of potential energy
efficiency investments. These financial packages should be better promoted.
This also includes better sharing of best practice examples.

Finally, there is a need for all relevant stakeholders to work together to create a
synergy affect that will convince SMEs and others of the importance of energy
efficiency investments.

EEIP brought together a wide range of these actors. The debate has only begun.

                                                                 Next Steps

                                                                 EEIP continues to discuss and engage on financing
                                                                 industrial efficiency via EEIP open social media
                                                                 channels. With a community of more than 10.000, and
                                                                 voices and opinions from private business and financial
                                                                 sector alike, the discussion is already making positive
   “Europe will never achieve its energy savings targets         impact in the EU policymaking circles. Join us on one
   until we come to grips with a better investment               of EEIP channels.
   approach. The discussion showed that there is a
   way – that it is less about the funds available than
   the financial engineering and the education that
   is needed for the full range of stakeholders. It also         Don’t forget to save the date for the next EEIP
   proved that we need a combination of public support           Financing roundtable which will take place in Brussels
   and private activity together with a consistent,              on 29 November 2012 (date to be confirmed).
   predictable policy framework if there is to be long-
   term investing.”

                          EEIPFin Chairman, Rod Janssen