Developing a Sustainable Financing Mechanism for Energy ... fileChallenges Multi-apartment buildings...
Transcript of Developing a Sustainable Financing Mechanism for Energy ... fileChallenges Multi-apartment buildings...
79th Session of the Committee on Housing and Land
Management
Roundtable 3
Geneva
4th October 2018
Developing a Sustainable Financing Mechanism
for Energy Efficiency Investment In
Multi-apartment Buildings
Experience from
Bosnia and Herzegovina
and Armenia
Content
• Challenges
• Issues to consider
• USAID Development hypotheses
• USAID approach to supporting investment in EE
• Financing model
• Barriers to EE investment
• Summary
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ChallengesMulti-apartment buildings use 30-60% of the country’s energy, offering
substantial energy and emissions saving potential, BUT implementation has
many challenges:
➢ Difficult to Organize
➢ Insufficient Legal Environment
➢ Lack of Incentives
➢ Low Political Will
➢ No De-risking Mechanism
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Issues to Consider
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Governments
• Prefer to avoid political risk, rather providing subsidies and incentives
• Tend to develop directives/regulations and subsidize implementation cost,
• Are slow to implement legislative changes related to housing sector, and
process is often derailed by contradicting interests
Donors:
• Prefer working with public buildings
• No emphasis on sustainable financing schemes without grants or
subsidies
• Energy Efficiency investment in multi-apartment buildings past the Donors-supported “free” or “heavily subsidized” demonstration
phase happens rarely in countries with developing economy
Issues to Consider
Banks:
• Recognize extremely large market potential offered by the residential
building sector, but are shy to develop it
• View HOAs as risky borrowers and are reluctant to share the risk
Home Owners:
• Adverse to assume ownership and responsibility for proper Operation
and Maintenance of their own building
• Lack resources and economic incentives and are often passive.
• Accustomed to the past housing maintenance system
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USAID Development Hypotheses
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If the investment in energy efficiency is economically justified,
functioning legal framework is in place, funds are available, and benefits
are understood by the active apartment owners, then energy efficiency
investment will happen without subsidies.
If the government needs to mitigate negative impact on environment,
reduce dependency on energy import, or support economically vulnerable
citizens, subsidies should be used in targeted manner for limited time.
Subsidies and incentives are working without unintended consequences
only under very specific conditions. If applied prudently, subsidies function
as a “startup fuel”. If not, they could (and will) cause market distortion,
disincentivize investment, and cause other issues
USAID approach to supporting energy efficiency
investment in residential sector:
• Apartment owners must drive the process, be motivated
• Investment funded through commercial loan
• Subsidies used only for supporting vulnerable residents
• Incentives used for only for advancing national and global objectives
• Loan guarantee mechanism supported by the government
• Donors provide technical assistance and capacity building for:
➢ Residents, HOAs
➢ Government agencies, officials and staff at State, Canton or municipal levels
➢ Bank officers
➢ Contractors
➢ Press representatives
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USAID approach to supporting investment:
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Amended Laws and Regulations
Homeowners Associations
Tariffs
Social Protection
Norms,
Directives,
EE, RE, Metering
AssistanceGovernment
Subsidy Programs for HOAs
Loan Guarantee programs
Donors, IFIs assistance Programs
Education, capacity buildingPublic outreach
Performance
HOA decision process
Loan/loan repayment
scheme
Loan guarantees Implementation
and Feedback
HOA
EE Project Financing Process by HOA tested by REELIH in Armenia and BiH
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HOA
Government
Subsidized Loan Guarantees Program
Financial Source (Bank)
Donors (TA)
Transitional Technical
Assistance
Selected
Construction
Company performs
the Works
Government (municipality)
Targeted Subsidy to Low Income Households
HOA manages the
entire process or hires
project manager
Preliminary agreements
with Government &
Bank(s)
Technical tasks, design,
costs
HOA purchases loan
guarantees at
subsidized premium
Government provides
targeted subsidies to
LIH
Bank Finances the
project, no collateral
from HOA
USAID approach to supporting investment:
Financing Model Tested by REELIH, Habitat for Humanity
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USAID approach to supporting investment
In Armenia – City of Yerevan
In Bosnia and Herzegovina – Tuzla Canton, Municipalities of Banovici, Doboj, Tesanj, Zivinice
Barriers to Energy Efficiency Investment
1. Legislative Environment: Needs to provide necessary legal basis
for EE investment, including clear definition of ownership, authorities,
responsibilities, operation and risk management in multi-family houses
2. Access to funds: While funds are readily available, actual access to
such resources is complicated, hindered mainly by “distribution of risks”
3. Risk Management: Loan guarantee needs to be addressed. This is one of the most important issues hindering the investment
4. Subsidies: Governments need to go through the “pain” and structure
targeted subsidy approach and sensible use of incentives
5. Apartment Owners: Must realize they are responsible for maintaining
their property – their home - and be proactive.
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Summary
USAID’s objective is to develop sustainable financing
mechanism based on commercial principles:
• Use of well structured, time-limited government subsidies as a “startup
fuel” for the process and as assistance to vulnerable low income households
• Provide technical assistance to develop and demonstrate the process,
not to fund implementation
• Establish de-risking mechanism for commercial bank loans, eliminating
need for collateral (usually apartment) with government or commercial involvement
• Utilize best practices from other countries.
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Thank you
Andrew Popelka
Senior Energy Advisor
Unites States Agency for International Development
E&E/TSO/EI
Washington DC
Tel: +1 202 567 4514
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