Innovative products and schemes

As part of the Smart Finance for Smart Buildings initiative, the Commission and European Investment Bank (EIB) developed a flexible guarantee facility model.

It aims to make investments in energy efficiency for residential buildings more attractive for private investors by using EU grants as guarantees to de-risk investments. Such investments could also contribute to new jobs in the sector, help establish a renovation market for small businesses, and take many European families out of energy poverty.

The 'one-stop-shop' (OSS) business concept for buildings renovation has become a critical element of the 'Smart financing for smart buildings' policy initiative and the Renovation Wave strategy. The revised Energy Efficiency Directive calls for further actions that support market development and stimulate the role of market intermediaries such as OSS.

The OSS is a single supplier in charge of the entire renovation process, and oversees the liaising between the renovator/client and the entire supply chain. This includes financial and legal aspects and monitoring and delivery of the renovation. The OSS addresses an important challenge of effectively matching the financing supply with the fragmented demand side of building renovations.

Energy performance contracting is a form of innovative financing of energy efficiency investments, where the contractor gives a financial guarantee for the expected energy savings on a project. It is often used in the public sector, and is a practical way of making public infrastructure more energy efficient. An energy service company carries out the works and guarantees a certain level of energy savings. The initial investment is covered by the energy service company or by a private partner (usually a financial institution) and repaid with money saved via the guaranteed energy savings. 

Several provisions of the Energy Efficiency Directive have direct or indirect impact on the market uptake of the energy performance contracts (EPCs). The provisions on energy services directly contribute to EPCs services development. The provisions on the exemplary role of the public sector, as well as the provisions establishing energy savings obligations, also have an indirect triggering effect on the demand for EPCs.

A major barrier for use of EPCs in public sector resulted from the increase of public debt that the EPCs created in public accounts. To address this barrier, in 2017 Eurostat updated the guidance for accounting treatment of energy performance contracts in the public sector – and together with the European Investment Bank (EIB), they published a practitioner’s guide to the statistical treatment of EPCs in 2018.

Traditional financial instruments can get a 'green' twist and be adapted for energy efficiency investments. 

One example is the Energy Efficient Mortgages initiative, which aims to create a standardised 'energy efficient mortgage'. Building owners are incentivised, by way of preferential mortgage conditions, to improve the energy efficiency of their buildings or acquire an already energy efficient property.

The assumption is that energy efficiency has a risk mitigation effect for banks because of its impact on a borrower’s ability to re-pay their loan, as well as on the value of the property. 

This means that energy efficient mortgages represent a lower risk for banks and could therefore qualify for better conditions. 

The Property Assessed Clean Energy (PACE) mechanism is an innovative model where investments in renewable energy, energy efficiency and water saving upgrades to homes and buildings are repaid through property taxes. The EuroPACE is set to deploy private capital as up-front financing to homeowners and have the costs repaid over time as a  charge added to the existing property tax bill.

 Another example is ESI Europe,  an innovative financing mechanism specifically targeted at Small and Medium-sized Enterprises (SMEs). Technology providers who demonstrate that their product will result in energy savings can avail of this scheme, which monitors the energy efficiency of the product throughout its use. If energy savings are not reported at the end of the monitoring period, the insurance company steps in to cover the initially promised savings. This financing scheme will enhance trust between SMEs, suppliers of energy efficiency technologies and financial institutions.

• LIFE Clean Energy Transition - European Commission (europa.eu)
• EEMI – Funding the hope for a better … (energyefficientmortgages.eu)
• Energy Efficiency Directive
• Europace - GNE Finance 
• ESI Europe - Driving Investment in Energy Efficiency 
• Renovation wave 
• A Guide to the Statistical Treatment of Energy Performance Contracts