Talk Community - with Toivo Miller, Principal Product Development Manager, EBRD

In your presentation in the Intelligent Buildings Europe Hub Session: Scaling up sustainable EE investments in buildings, what do you think will be the top 2 key take aways for the audience?

Scaling up energy efficiency investments in buildings is uncontroversial and there is a growing consensus amongst all stakeholders, including the public. This growing consensus reflects the increasing awareness of consumer and business benefits such as reduced operational expenditure, new business opportunities, increased comfort, as well as fighting climate change. Regarding this, EBRD has been an active player in the related areas.  EBRD plans to scale up investments in support of a Green Economy Transition to 40% by 2020 and EE investments in buildings will play an important part in this. In order to achieve this target, EBRD is providing finance in different ways. This will include approaches with a strong track record such as EBRD’s Sustainable Energy Finance Facilities (SEFFs, http://seff.ebrd.com/facilities.html) that financed more than EUR 3 billion EE investments since 2006. 

The first take away for scaling up EE investments in buildings is reducing risks of EE investments by aligning stakeholders’ risks and rewards. In other words transaction costs are lowered by aligning stakeholders interests and allocating their tasks to the area of their expertise. As a results EE investments are more optimal for the beneficiary. Once this alignment is agreed, the processes and documentation should not be changed but follow a standardized approach. 

The second take away is that public authorities play an important role and can facilitate the process and create incentives through policies, taxation, grants etc. EBRD is supporting public authorities with technical cooperation and policy dialogue and an example is its programme REEP in the Western Balkans (http://wb-reep.org/), where e.g. the Serbian Ministry of Mining and Energy is supporting EE investments in the public sector, in particular street lighting.  Another good example of public authority support is Latvia, where the Ministry of Economy supports EE investments for buildings with investment grants and Altum, the state finance development agency, provides related guarantees.

As Principal Product Development Manager for EBRD, what do you see as the main focus for developing sustainable energy financing products and how will this impact the market?

The focus will be on sustainable and scalable financing. Sustainable in that more private sector investors finance longer term EE investments and scalable in that a secondary financial market can support the scaling up.

The key impact will be gradually lower specific investment costs as a result of innovation. Once the risks and rewards of stakeholders are aligned, the companies implementing the EE investments are incentivized to work in the best interest of the beneficiary. This requires from implementing companies a more service minded approach, to understand beneficiaries and provide best solutions. Together with big market size, this should trigger innovation of companies, of the services they offer and the way they operate. EBRD is supporting such innovation with its FINTECC facility (http://fintecc.ebrd.com/index.html). 

Which Central and Eastern European countries are the most pro-active in developing the ESCO markets? How about the Non-EU markets?

There are a few examples of more established ESCO markets in central and Eastern Europe, including the Czech Republic, Slovenia and Croatia. Countries that pro-actively develop their markets are new-comers Latvia and Lithuania. Results are just emerging but seem promising. In both Latvia and Lithuania the government is supporting EE investments in ESCO projects with long term low interest loans and in Latvia also with investment grants. A widely accepted contract template facilitates the preparation of the project pipeline.

A positive example of a non-EU country is Serbia, where the Ministry of Mining and Energy is supporting ESCO projects with supportive legislation. Street lighting ESCO tenders are prepared, first projects have been contracted and I expect in 2017 about a dozen street lighting ESCO tenders being published, including larger projects such as in Belgrade. ESCO projects in public buildings will hopefully follow soon.

Are the new financing mechanisms for energy efficiency in Eastern Europe faster to implement? And why?

As mentioned, we should see more innovation around EE investments and financing mechanism. As financial institutions are risk averse and require thorough analysis and preparation, the term ‘faster’ is relative.

However, Eastern Europe has well-educated and experienced professional who understand the issues in their countries, who accept the reality of decreasing EU grants and who understand that public resources are not sufficient to e.g. grant finance all EE investments needs in buildings and infrastructure. This makes it possible to openly discuss new approaches and solutions and we should see new solutions. From the conference's programme I understand that we will hear from Latvian colleagues one example of a new financing mechanism.

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