presentatie justine prain
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Energy Saving Trust:Options and opportunities for local authorities
Justine Prain – Associate Consultant
7th December 2011, Utrecht
Why act now?
Investing in a time of cuts•Reducing council costs and improving efficiency •Economic benefits derived from local scheme set up and delivery•Protecting consumers against rising energy prices•Security of supply•Carbon benefits•Opportunity to lever in funds from the private sector
Localism •Building more sustainable and resilient communities •Generation and maintenance of local jobs•Improving housing to tackle fuel poverty, promote health and well-being •Big Society – supporting local solutions
Local authorities enabling of finance
Aligned Incentives De-risking
• Jobs• Fuel Poverty• CO2 reduction
targets• Landfill reduction
• Own estate contracts
• Social housing• Marketing support• Planning• Waste contracts
Convening power
• Project initiation• Procurement• Local initiatives (LEPs etc)• Community leadership• Project pipeline• Scale
Local Authority
• Revenue accounts• Grants – UK and EU• Prudential
borrowing• Credit
enhancements
Finance provision
Changes to the housing retrofit Sector
2011 2012 2013
Economic Activity
Warm front
CERT
CESP
Green Deal & ECOFeed in tariff
Renewable Heat Incentive
Warm zones
Renewables Grants Tariffs
What is Green Deal?
• A regulatory framework enabling companies to offer householders and SMEs:
• accredited advice and energy assessment of homes
• home energy efficiency improvements at no up-front cost
• reassurance that work is of a high standard
• the ability to pay via energy bills over the long term (for example, 25 years), making use of the money saved on fuel
• only to pay whilst they remain in that property
• backed up by a new Energy Company Obligation
• a number of consumer protections including requirements on warranty, guarantee, disclosure and redress
Gre
en D
eal
EC
OPrinciples of the Green Deal
Previously proposed returns for RHI6% solar thermal12% other
Whole house 5-7%
What are we trying to finance?
Return on investment over 25 year period with householder as the investor investing their own money
Returns for energy efficiencyLoft ~45%Cavity wall ~30%Solid wall, internal; 4-9%Solid wall, external; 0-3%
Returns for solar PV FIT4.5% index linked
Note; assume 3% growth in energy pricesSource; Camco, EST; Marksman Consulting Analys
LA Finance options
Leave to central government and
the market
In house Work with private sector
Provide marketing
support
Outsource finance and
delivery
In-house model
Partnership with private sector
(finance/ delivery)
Marketing/ Facilitation role
Retrofit Guarantee Fund
Public Private finance model
Public Sector model
Concept
Going live
Minimalist
Carbon proactive
Local authority
Utility
Installer
Bank/ FinancePension schemePrivate equity etc.
Local authority housing
LA appoints and leases air space above their own properties in return for rent
Utility pays FiT to installer OR bank
Installer finances workTenants receive free electricity from installed technology
Outsourced ‘rent a roof’ model
Bank finance
Guarantee fundInstaller
Installer receives Finance from bank at lower rate
Central Govt/Grant/
Other funding
Local authority/ Property owner
Local authority
Contracts created for retrofit works
Guarantee contract providedto the banks
Finance for guarantee fund from LA and other sources
Contract about the management and operation of guarantee fund
Retrofit Guarantee Fund
Local authority
Property owner
Green Deal provider
Referral team
LA promotesbenefits of retrofit work
Property owner seeks advice/ shows interestReferral made to
provider
Provider completes assessment and works
Local authority may receive finders fee from Provider
LA facilitator/ Marketeer
LA trade co.
UtilityProperty owners
OpCo agrees works where necessary with occupier
PWLB provides financeto LA through prudential borrowing
LA finances OpCo through loans
Utility pays FiT OR Green Deal payment to OpCo
Local authorityPublic Works Loan Board
LA forms a wholly owned trading company that undertakes the operational role of the project
LA finance and delivery model
Banks
Finance vehicleDelivery partner
PWLB
Property owner
Local authority
Utility
LA lends to FV
SPV contracts with OpCO for works
Delivery partner carries out retrofit works
Bank(s) lend to FV
PWLB provides financeto LA through prudential borrowing
Utility pays FiT OR Green Deal payment OR Eco obligation to SPV
Occupier pays for works through utility bill
LA public/private model
Strengths and Issues
Rent-a-roof
Retrofit guarantee fund
LA facilitator
LA finance and deliver
LA public/private model
Option
• No LA finance required
• Low amount of LA finance
• No LA finance required
• In control of desired outcomes
• In control of desired outcomes
• Ability to scale
• Solar PV only
• Need retail banks on board• Long term fixed rates
difficult to obtain
• Reliant on private sector GDP for all outcomes
• Financial and operational exposure
• Costs to revenue account• Difficult to scale
• Financial exposure• Need LA partnerships to
get scale• Reliant on delivery partner
Strengths Issues
LA Green Finance options
LA Options Review
Business case process
LA data gathering
Adjust model
Stakeholder engagement
Write up findings
Cab
inet
de
cisi
on
Aim: To support LAs understand the different finance models available to them to support the delivery of large scale eco-retrofit
Includes: Features and benefits/ Risk and Issues/ LA examples
EST Green Finance Procurement Framework
• March 2011 - EST issue OJEU contract for finance consultancy support:– to Local Authorities and Housing Associations to assess their finance needs and objectives, as well as
structuring finance and operational solutions for them.
• April 2011 – EST appoint OJEU contractors to:– deliver support on a project by project basis.– respond to requests with proposals and costs within 5 working days.
• EST appointed contractors switched on depending on LAs preferences:– Marksman Consulting– CAMCO– Grant Thornton– KPMG– ARUP
• EST currently working with following LAs using specific contractors:• Birmingham & Newcastle (using Marksman Consulting)• Nottingham (using CAMCO)• Greater London Authority (Marksman)
17
EST case studies (Birmingham)
• Birmingham Energy Savers Phase 3 Pathfinders’ programme:– Business case to establish large scale retrofitting of 15k homes cost of ~ £100m
• Cabinet decision (April 2011), OJEU (Sept 2011):
1. Commitment to establish a public private partnership programme to improve the energy efficiency of 200,000 properties in Birmingham by 2026 in line with Green Deal
2. Approves the plans for an initial Pathfinder Programme for 15,000 properties with an initial scheme value of £250m.
- 250m 3. Commencement of a procurement process to select a delivery partner, includes the option
to extend the scheme value up to £1.5b by 2020 with 20 WM orgs includes the option to extend the scheme value up to £1.5b by 2020.
4. Approves the deployment of financial, legal, procurement and technical resources
• EST and Marksman Consulting commissioned by Birmingham City Council to:
– develop business case for green finance modelling – undertake housing stock modelling to underpin finance model– write, review and provide feedback on EIB and ELENA applications
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EST case studies (Newcastle)• Newcastle Investment in Housing Retrofit:
– 10,000-15,000 house programme (option to extend to 45,000)
• Cabinet decision (July 2011):
1. Commitment to fund initial project costs of £100,000
2. Agreed consultation with neighbouring authorities regarding contributions/ partnerships commission
3. Procurement of legal, financial and technical advice
4. Further Cabinet report in Jan ‘12 to run a competitive process to select a Delivery Partner
Aug 2011 – secured €1.6m IEE funding for technical assistance to develop &launch programme
• EST and Marksman Consulting commissioned by Newcastle City Council to:
– developing business case for green finance modelling – undertake in depth housing stock modelling to underpin finance model and delivery– write, review and provide feedback on IEE applications– disseminate information to national and European partners within IEE application
• Review of Local Authority finance models
– Assess options for 15,000 house eco refurbishment programme
– Select model for financing and implementation
• Key differences with other LA retrofit schemes
– Ambition to create a common energy tariff for businesses and households
– Reviewing potential for an overarching framework for delivering all aspects of the Energy Strategy (including district heating)
• EST commissioned by Nottingham City Council to:
– develop business case for green finance modelling with CAMCO
– undertake in depth housing stock modelling to underpin finance model and delivery
– Provide links to local, regional, national and European programmes/ stakeholders
– Share insight and Best practice
EST case studies (Nottingham)
EST Finance Innovators Group (FIG)
• National Finance Innovators Group
- Launched September 2010
- 18 member organisations (including UK Government – DECC, WAG, LGG)
- Meetings held every 2 months in London
• Aims
- Forum for structured discussion on design and implementation issues for delivering finance models
- Assess common issues to develop common solutions
- Share the detail of LA finance models (i.e. legal templates to reduce costs)
- Group to disseminate learning and showcase schemes as they develop
- Contribute to the negotiations between local government and central government
Energy Saving Trust Key Contacts:
Andy Deacon - Director of Local Delivery
+44 (0)207 654 2601
Vicky East – Green Finance Manager
+44 (0)207 654 2477