residential buildings - challenges and opportunities for energy efficiency budapest, 28 june 2010...

Residential Buildings - Residential Buildings - challenges challenges and opportunities for energy and opportunities for energy

efficiencyefficiency

Budapest, 28 June 2010Budapest, 28 June 2010

Gabor KissAlexander Hadzhiivanov

European Bank for Reconstruction and Development

2 |

Buildings – the global hidden culprit of Climate Change

SOURCE: 1- EU EEAP, 2006; 2- IEA, WEO 2007 & ETP 2008

• The largest end-use energy consumer: 41 % of all energy use in EU1

(even larger, i.e. 50% < in some countries in the region);

• The largest energy saving potential: 41 % of all the potential in EU1 up to 2020 (even larger, i.e. 50% < in some countries in the region - Russia);

• Buildings are among the major contributors to CO2 emissions globally: 20% of direct global CO2 emissions;

• If nothing done the direct and up-stream carbon footprint of buildings will grow from 8.7 G t to 20.1 G t CO2 globally2 , and

• Political commitment (i.e. EU 20% EE target 2020) can not be met without addressing the building sector;

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Buildings – largest and most cost effective carbon abatement opportunities

SOURCE: 1- McKinsey Global Institute, 2007

4 |

Buildings – where to go?

SOURCE: 1- World Business Council for Sustainable Development

• EU building sector need to be at least 4 energy classes better than today by 20501 ;

• Aggressive regulatory is introduced: EPBD, ISO EN standards, timeframe for zero-carbon buildings, energy certification, certificates of sustainability (BREEAM, LEED);

Sustainable development

“Business as usual”

5 |

Buildings – how the Bank responds?

• Building EE as one of new priority areas under SEI, Phase 2;

• Support of Projects with the best energy performance;

Low carbon costs (<EUR 20/t) annual capital demands, EUR billion

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• Technical assistance: professional consultants, development of corporate policies, training and capacity building TCs;

• Maintaining Policy Dialogue (policy&regulatory barriers);

• Low energy properties – a driver toward capacity building and expanding market for EE techniques in the building sector;

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Barriers to sustainable energy financing for banksBarriers to sustainable energy financing for banks

The same in all the countries in the region:

▪ Uncertainties about market demand for EE financing

▪ High transaction costs due to fragmentation of the residential sector (variety

of stakeholders and their lack of organisation)

▪ Liability of stakeholders

▪ Legal enforcement in the property and residential sector

▪ Lack of technical expertise for appraisal and risk assessment

▪ Information asymmetries and misconceptions about the technical risks and

financial benefits of energy efficiency

▪ Lack of specific structures for implementation

▪ No specific marketing tools or budget allocated for such activities

▪ Tenors needed longer than those of commercial business lending

7 |

Institutional and regulatory barriersInstitutional and regulatory barriers

• Insufficiencies of housing legislation:

▪ Legal statute of associations of apartment owners;

▪ Responsibilities and legal liabilities of Associations;

▪ Management of Associations

▪ Decision making procedures

▪ Relationship with management companies and utilities

• Insufficiencies of building regulatory

▪ Lack of energy performance classification

▪ Lack of energy certification scheme

▪ Structure and complexity of energy efficiency requirements

▪ Lack of institutionalised energy assessment procedures

▪ Insufficient institutional framework supporting energy performance

assessment

8 |

EBRD integrated approach EBRD integrated approach

• Tailor made financing vehicles reflecting country and market specifics:

▪ REECL-type (Bulgaria);

▪ SlovSEFF type (Slovakia)

• Capacity building: local banks, technical consultants & engineers, local authorities

• Awareness raising: general public, project stakeholders, authorities

• Corporate sector: technology and service providers, utilities, project developers;

• Policy dialogue: assistance on development/upgrade of supportive legal and regulatory

framework:

▪ Law on Energy efficiency of buildings (Moldova, Kyrgyzstan)

▪ Secondary legislations: technical reglaments, ministerial decree/ordinances (Russia,

Ukraine, Moldova, Kyrgyzstan);

▪ Tertiary legislation: technical rules and standards (Moldova, Kyrgyzstan);

• High leverage of national (Donor funded) support programs;

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Financing mechanisms (1)Financing mechanisms (1)

REECL – type: addressing dwelling level EE (apartments, family houses)

EBRD

Participating Banks

Sub-Borrower

Project Consultant

€Credit Line

€Loan AgreementConfirmsSub-Project compliance;Verifies implementation

Support ProgramFunded Contract

TrainingAnd Marketing

Support

• Financing disbursed: € 43 million (Oct. ‘05–Jan.’10) • Leverage of technical assistance to total investments is 31.6

• Leverage of incentives to total investments is 5.9

• Number of projects: 28,125 (ab. 7,000 per year)

• Number of residents affected with improved housing conditions: 69,100

• Financial revenues from energy savings: € 10.6 million per year

•Energy savings: 124.3 GWh per year

• Energy generation capacity substituted: 19.1 MW

• Carbon reductions: 170,530 tons CO2 per year

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Financing mechanisms (3): REECL market penetration rate Financing mechanisms (3): REECL market penetration rate

High performing (eligible) technologies 2004 2010

Share funded by REECL

EE Windows; Close to zero => 4%  30%

High grade insulation (roof, wall, floor); Close to zero => 3%  18%

Efficient Gas boilers and associated heating systems; Close to 45% => 78%  13%

Biomass Boilers and Stoves Close to 30% =>40%  6%

Solar Water Heaters Close to 8% => 14%  34%

Heat Pump Heating (air-to-air) Close to 5% => 25%  18%

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Financing mechanisms (4)Financing mechanisms (4)

REECL 2 – type: addressing both dwelling as well as building level EE (groups of residents, informal associations, associations as legal entities, ESCOs, management companies, construction companies)

• Accent on promotion and support of Housing Associations:▪ Legal advise;▪ Standard set of institutional/management documentations▪ Conceptual design for complex building refurbishment;▪ Attendance on General Meetings when decisions on refurbishment made;

• Wider spectre of eligible techniques (gasification, photovoltaics, heat recovery mechanical ventilation in addition);

• No incentives for participating banks;

• High performance requirements of eligible techniques;

• Variable incentives for different categories of Borrowers and per type of projects

12 |

Financing mechanisms (5)Financing mechanisms (5)

SlovSEFF – type: addressing complex building refurbishment through financing housing associations (adequate housing legislation required)

EBRD

Participating Bank

Sub-Borrower

Independent Energy ExpertConsultant

€Credit Line

€Loan AgreementTechnical AssistanceEnergy Audits

Implementation Verification

TrainingAnd Marketing

Support

EBRD

Participating Bank

Sub-Borrower

Independent Energy ExpertConsultant

€Credit Line

€Loan AgreementTechnical AssistanceEnergy Audits

Implementation Verification

TrainingAnd Marketing

Support

Support ProgramFunded Contract

Support ProgramFunded Contract

13 |

SlovSEFF resultsSlovSEFF results

• Financing disbursed: € 38 million (2008-2009) • Leverage of technical assistance to total investments is 32

• Leverage of incentives to total investments is 7.4

• Number of projects: 218 apartment buildings (12,000 apartments)

• Number of residents affected with improved housing conditions: 25,000

• Financial revenues from energy savings: ab. € 3.2 million per year

•Energy savings: 55 GWh per year

• Carbon reductions: 28,400 tons CO2 per year

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Conclusions▪ High level support on financing EE is present at EBRD;

▪ Policy dialogue between EBRD and the national Governments needs to result in concrete outputs;

▪ Resources, experience and mechanisms of financing EE available at EBRD;

Thank you!