On 28 April 2022, the Policy Learning Platform held the first of its two Renewable Energy Finance (RESFinance) webinars, on the topic of renewable energy financing for the public sector, examining RES finance in the public domain and looking in particular at how project bundling can bring down costs and raise third party finance.
Europe has ambitious energy targets, in line with meeting its Paris Agreement commitments. This will involve both improving the overall efficiency of energy use, but also a significant increase in the use of renewable energies.
Significant public finance is available but alone is not enough to see through the full-scale transition that is needed. Instead, public interventions need to trigger private sector involvement and leverage investments, but also tackle public sector emissions.
Public authorities across Europe are exploring how to best invest their own resources, as well as how to trigger widespread private investment and empower communities and individuals to act as prosumers and engage in the energy transition.
Navigate through the agenda below to the discussion topic of interest.
00:01:14 Introduction presentation by Katharina Krell to the topic of the webinar
00:29:31 Q&A: What type of investors are these 3rd party investors and what are their expectations on return and time frame?
00:31:15 Q&A: How large does a bundle need to be in EUR to attract 3rd party investors?
00:33:14 Q&A: What type of investors without public funding have financed these bundles i.e. banks, private investors ?
00:37:25 Case study presentation by Andrew Hunt on PV project financing for public buildings by citizens (COALESCCE)
00:47:15 Q&A: Who started the process? Was it the Council or some motivated citizens?
00:48:40 Q&A: Did you undertake any capacity-building activities for Local Authority staff as part of this project?
01:00:24 Q&A: Do you know if other regions in Spain use this instrument or are you a frontrunner?
01:04:30 Q&A: How important is bundling to bring down costs? And how important is building to create critical mass that attracts institutional investors?
01:10:17 Q&A: The key to third party financing is a viable business model. For PV, this is mostly a given. How about more complex projects made of energy efficiency and renewable energy measures?
01:18:29 Q&A: What is your take-away lesson and what is your recommendation for public bodies that want to start bundling to get access to third party financing?
Access the presentations of the webinar below.
From this webinar, we can highlight some key insights for local and regional policy-makers:
- Renewable energy projects have become cost-competitive and commercially viable as equipment costs have dropped and the cost of conventional energy generation from fossil fuels has gone up. Given a long-enough time-frame, most renewable energy projects have a positive return. However, the energy transition requires a faster and wider deployment of renewables to green our current energy generation mix;
- Soaring energy prices and new awareness about the EU’s energy import dependence are resulting in increased political will at all administrative levels to support renewables and energy efficiency, but public budgets are tight and strained by the economic impact of Covid-19;
- Public money should therefore be used in a smart way, to leverage private investment into renewables. Solutions should use public money to create enabling frameworks that can leverage private investment, including project bundling to bring down costs and create critical mass, and the use of third party finance;
- In public buildings, the local authorities own the buildings, but they do not pay the energy bills. There is, therefore, no business case and little incentive for investing in renewable energies for public buildings;
- The FIRESPOL project has explored financial instruments for renewable energy, finding mostly Energy Service Companies (ESCOs) and community initiatives, but few financial instruments. However, the project did not significant potential for new financial set-ups to tackle energy consumption in public buildings, particularly for installing PV on public building roofs, such as power purchase agreements, leasing, renting, solar communities and project bundling;
- Bundling small scale renewable projects together increases the overall investment volume and brings down the cost/kW installed, increasing the profitability of individual, smaller projects, and making investments more interesting for professional and institutional investors. One such example of bundling is the Ponto Energia Platform, created by the BundleUp Next Project, funded by Horizon 2020, which implemented 62 projects, raising 41 million EUR. You can find out more in their project publication;
- In Oldham, United Kingdom (COALESCCE), the local council has supported community financing for the installation of photovoltaics on public buildings. Community energy can secure benefits beyond just carbon emissions reductions, but also create employment, develop skills, and keep financial benefits in the community.
In public buildings, the local authority owns the buildings, but does not pay the energy bills, meaning there is no business case for the local authority to intervene in improving performance. Community energy can unlock this potential by installing RES and selling the generated electricity to the building occupier at a discount, with any surplus sold to the grid and the profits used to pay interest to the shareholders and fund other local projects;
- Extremadura has committed to the installation of RES in public buildings, but realised the significant level of finance required for implementation. Through FIRESPOL, the Extremadura Energy Agency identified practices for leveraging finance such as leasing and renting models.
The Agency has applied for support under the ELENA (European Local Energy Assistance) facility of the European Investment Bank which can provide technical assistance to regions, specifically technical studies, business plans, legal advice, tendering and project bundling. In Extremadura, the energy agency will use the support to implement ESCO contracts for bundles of public buildings, mainly hospitals and care centres;
- Public authorities should take advantage of opportunities to learn from other regions which have already begun the transition, through Interreg Europe projects and the Policy Learning Platform which can offer on-demand expert support through peer reviews and matchmakings.