Industry, street lighting and district energy: Launch of new project to “unlock” access to financing

Finance

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28 June 2017

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Rod Janssen

We need your technical knowledge: Help us “unlock” access to financing for industry, street lighting and district energy

The Investor Confidence Project was brought to Europe to develop a system to give confidence to all active stakeholders. There are still concerns that investing in energy efficiency is risky. ICP Europe is designed to change that. Starting with investments in buildings, ICP Europe is now broadening the scope to include industry (large and small), district energy and street lighting.  

The context is important  

The European Union is giving a high priority to sustainable energy through what is called the Energy Union. Improved energy efficiency is one of the pillars of the overall approach and it is well documented that we are not achieving our cost-effective potential for energy efficiency improvements.  

There is a comprehensive policy framework that includes initiatives in all end-use sectors. Concerning the new expansion of ICP, the policy framework includes mandatory audits for large companies, promotion of energy efficiency in small and medium-sized enterprises, promotion of energy management (such as ISO 50001), encouraging the use of waste heat and support for cogeneration. The overall framework is currently going through a revision to increase the overall level of ambition.  

The Commission realises that it needs to get the energy efficiency market working more effectively in all sectors. Since the oil crises of the 1970s, there has been regular discussion about market barriers – why the potential for cost-effective energy efficiency improvements are not taking place. Policies that are put in place are now by and large designed to address one or more of those persistent barriers.  

The Commission is also working through an open dialogue and work platform, the Energy Efficiency Financial Institutions Group (Energy Efficiency in Industrial Processes is a member), to identify the barriers to the long-term financing for energy efficiency and propose policy and market solutions to them. The purpose of that group is to get the financial institutions and other relevant stakeholders to help find ways to overcome the financing blockage. There is financing available, banks have poor capacity and interest to finance energy efficiency and consumers (in this case industry or businesses or institutions) are reluctant to decide to undertake such measures. While there are some investments, for sure, they are not at a scale that will have a real impact that is needed to meet our long-term objectives. One of the problems is that there is a lack of standardisation in project development and documentation and that is seen as one of the major barriers to increasing investment into energy efficiency.  

For this reason, ICP plays an important role, as will be explained below.  

Understanding the overall concept  

The concept of the Investor Confidence Project is relatively simple to understand. A potential project in a factory or a district energy system, for example, is identified. Someone has to do the necessary calculations to determine the viability. Someone has to be identified to install it (often the same organisation). And some organisation needs to fund it. What this project does is standardise the procedures so that all players gain confidence in the system. The factory owner is happy. The developer/auditor/installer is happy. The financial institution is happy. There are protocols in place and third party monitoring to ensure everything is done correctly. The protocols are developed by interested experts and not by commercial interests.  

This approach, first brought out in the United States, was used for buildings, mainly multi-family and commercial buildings.  This approach was then brought to Europe for buildings, funded through the European Commission’s Horizon 2020 programme. The final stages of the first phase on buildings are now being completed.  

The Commission is now supporting a further evolution of the concept into industry, street lighting and district energy. This two-year project is just starting.  It benefits from lessons learned in the buildings component because much of the methodology is similar.   There are many elements in the process, but what is key now is the development of protocols that are used to establish a relationship between the client and the project developer (an ESCO, for example).  

The protocol is quite technical but relates to the process, obviously with a good understanding of the technologies. This is why we need experts to help develop new protocols for industry, district energy and street lighting. The Energy Performance Protocols defines a standardised road map of best practices for originating energy retrofits following the ICP Project Lifecycle.  ICP Protocols are an industry best practice assembly of existing standards, practices, and documentation in order to create the data necessary to enable underwriting or managing of energy performance risk.  ICP Europe works with the European Technical Forum to develop protocols that are designed to address the range of typical industry (large and small), district energy and street lighting projects found in the European market.  

These protocols reference international, European and national standards and best practices to provide all market actors across the European energy efficiency development and investment community with tools to improve the bankability of relevant energy efficiency projects projects. ?  

For that reason, ICP Europe needs technical experts who understand the European context in those areas.  

Each defined protocol creates a standard set of documentation that will help standardise project performance underwriting, leading to better data on performance, and a more efficient marketplace with less duplicative engineering and lower transaction costs.  The result should be an increase in deal flow and a more transparent and efficient market.  

Joining the Technical Forum  

The Forum will ensure that ICP Europe staff is producing relevant and needed products and services for the European renovation markets. The Forum shall do this through:

  1. Providing insight and feedback on draft products in webinar based Forum meetings and informally;
  2. Providing local, national and European knowledge on relevant standards, best practices and initiatives that may be relevant to, or interact with, ICP Europe products and tools and
  3. Identifying projects and programmes for piloting of ICP Europe products and services.  

For further information on joining one of our technical forums, please go to our project website here [http://europe.eeperformance.org/technical-forum.html].    

Join and shape the future of energy efficiency markets

One of the first steps is to create awareness and bring in experts on industry, street lighting and district energy to help develop protocols. This will get the process in motion. An introductory webinar was held on Tuesday, June 27th. Recordings of this 30min webinar are available via http://europe.eeperformance.org/call-recordings.html.

About the Author

Rod Janssen is the President of Energy Efficiency in Industrial Processes (EEIP).