Financial instruments for efficiency in buildings

Published on 05 November 2015

Financial instruments for efficiency in buildingsAs part of our dialogue with financial instrument stakeholders, fi-compass asked Oliver Rapf, Executive Director of the Buildings Performance Institute Europe (BPIE), a Brussels based think tank with a focus on energy and the built environment, what he thought financial instruments could help achieve in this area.

In Mr Rapf’s opinion: “Financial instruments can either support individual measures targeted at building upgrades or incentivise entire buildings through deep energy renovation (DER). However, DER is known to have a higher impact. A successful example in this field are Energy Saving Companies (ESCOs), whose aim is to minimise long-term building costs while providing incentives linked to energy efficiency. In addition to those, a combination of financial and/or fiscal measures such as subsidies and energy prices, and soft measures that reduce costs for investors by creating more favourable market conditions, would both help to stimulate DER. These findings have been verified by BPIE’s latest study, to be published later this year.”

He believes that: “In order to reach the EU’s 2020 targets, a five-fold increase in energy efficiency investments in buildings will be needed. All EU Member States currently have on-going programmes to support the energy performance of buildings, in the form of conventional or innovative funding or with the help of external funding. Most financial instruments so far have targeted existing buildings, mainly in the residential sector. With regards to commercial buildings there are considerably fewer instruments. Besides, many of the new Member States are highly reliant on external funding (e.g. ESIF or support from international financial institutions such as the European Investment Bank).”

Referring to resource matters, the BPIE boss said: “Europe-wide and international funding streams (ESIF, European Investment Bank) are increasingly important and can play an even greater role in the future. Comprehensive retrofit strategies will be required to maximise benefits. Coordination of different financial instrument options can also be useful here because of the high overall costs that DER often incurs. There is certainly a need to understand better the effectiveness of existing programmes in order to learn how to improve both implementation and impact, and to identify so-called best practices. A good initiative would be to establish well-defined and harmonised parameters allowing for a clear evaluation of effectiveness.”

He continues: “Investments will become even more strategically important to create a more competitive, secure and sustainable energy system. A good example of an innovative instrument is the ’crowd building‘ platform Hexagon-e. It was created to tackle a construction deficit in France and the fact that social housing support is not assigned in a transparent manner. The platform helps to finance small business projects over a relatively short period of time (two to fifteen months). This creates employment, return for investors and housing.”

Mr Rapf notes that: “A report by the Energy Efficiency Financial Institution Group (EEFIG), to which BPIE contributed, has identified a range of actions necessary to stimulate more energy efficiency investments. Future instruments should: focus on reducing the risk of investments; encourage business model innovation in the DER sector; and aim to address specific barriers to investments, such as an ageing society in Europe.”