As energy efficiency gains importance, public and private players seek new ways of bridging the funding gap generated by the significant need to refurbish and modernize the existing building stock. Central and Eastern Europe is characterized by a large percentage of outdated buildings, either built in or before the Communist period or as a result of industrial technology which paid little attention to preserving energy. Around 4 billion square meters of buildings in the CEE are in need of refurbishment, generating a large market for various service providers.
8.7 billion Euro of funding for energy projects
As Governments struggle to find sufficient funding to cover the existing need, especially in the light of the obligation to refurbish public buildings at a rate of 3% annually imposed by European legislation, the EU-structural and investment funds remain the largest source of public funding dedicated to energy efficiency. During the 2014 – 2020 period, no less than 8.7 billion EUR have been, and are being, made available to various types of retrofitting projects developed either by public players or by private entities. There are around 50 operational programs which are open to projects concerned with energy efficiency and renewable energy.
Additional national grants and tax incentives for energy efficiency
Complementing the European funds, some Governments have developed national programs offering grants, preferential rate loans or tax incentives for projects concerning energy efficiency. The Czech Republic and Austria stand out as experienced countries in developing such programs. At the other end, Romania and Slovakia are still taking their first steps in developing state-funded energy efficiency programs.
Financial instruments for achieving energy efficiency targets
International Financial Institutions, such as the European Investment Bank (EIB) or the European Bank for Reconstruction and Development (EBRD) offer their assistance in introducing financial instruments dedicated to energy efficiency, as a means of leveraging existing funding and increasing the pace of achieving each country’s individual energy efficiency targets. Various credit lines are extended to local banks or made directly available to potential investors.
Simply investing in refurbishment projects is, however, not sufficient for achieving the set targets. The types of projects vary greatly, making it difficult to assess success and results. EU level programs offer support, either through funding for research and innovation or technical assistance, to standardization attempts, riskmitigation initiatives, market uptake of new technologies or mainstreaming energy efficiency.
Valuation and risk assessment for fundings
The funding landscape is further complemented by commercial banking finance. In Central and Eastern Europe, as in the rest of Europe, banks have not yet fully embraced energy efficiency projects as they present new risks and are in need of a different methodology for valuation and risk assessment than traditional investments. With EU funding, steps have been taken to standardize energy efficiency projects, to develop underwriting tools and methodologies and to attract commercial banking as full partners in the refurbishment of the building stock.
EPC market in Central and Eastern Europe
Last but not least, energy efficiency projects can be developed in close partnerships between clients, either public or private, and energy services providers, through Energy Performance Contracting and ESCOs. Most countries in the CEE are taking timid steps towards developing the EPC market, with a few countries standing out (such as the Czech Republic).
Johannes Becker is responsible for the TPA energy efficiency study: The advisor and expert for grants in the EU is partner at TPA Romania.