Innovative Mechanisms for Financing Municipal Energy Efficiency Programs and Projects
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Transcript of Innovative Mechanisms for Financing Municipal Energy Efficiency Programs and Projects
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Innovative Mechanisms for Financing Municipal Energy Efficiency
Programs and Projects
Eupatoria, 9 June 2004Dr Zdravko GenchevEnEffect, Bulgaria
Center for Energy EfficiencyThe experience of Bulgaria, compared to EU and US practices
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The need of municipal energy planning in transition countries
Functions of municipalities change and their influence on energy sector
The need of energy efficiency improvementThe need of investments in energy supply
and demand sectorThe need of integrated planning of energy
resourcesThe lack of capacity and data for IRP
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New functions of municipalities in local energy management
Municipality as a consumer of energy Municipality as an energy producer and
energy provider (distributer)Municipality as a regulator and an investor in
the municipal energy sectorMunicipality as a motivator to improve
energy efficiency
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Prerequisites for an effective municipal energy planning
Political will of local authorities to introduce energy management on the local level
Local capacity to develop and implement a municipal energy program, based on IRP
Municipal energy database Instruments to manage, finance, monitor and
evaluate a municipal energy program
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Municipal energy planning processMunicipal energy planning process
Municipal energy information system (MEIS)
Building of local capacity
Developmentof the municipal energy program
Implementation of the municipal energy program
Decision for Decision for MEISMEIS
ІІ ІІ political decisionpolitical decision
ІІІ ІІІ political decisionpolitical decision
І І political decisionpolitical decision
Selection of planning approach and determination of the goals
Feed
bac
k
Preparation
Development
Implementation
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Factors that lead to a decision to invest in energy efficiency
Significant burden of energy expenses on municipal budgets
Availability of cheap and easy to access credit resources
Availability of cheap energy saving technologies and equipment
Guarantees that achieved savings will be secured in the municipal budget
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What do specific financing mechanisms offer?
Flexible schemes for financing of energy efficiency projects
Financing investments under conditions different from the regular banking practices
Unification of multiple financing sources thus distributing and reducing the risk
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Financing mechanisms, applicable in Bulgaria during the transition
Financing by bondsLeasing financingEnergy Service companies (ESCOs)Vendor (commodity) creditsPublic-private partnership (PPP)
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Financing by bonds (1)
Relatively long period of bond emission preparation
Emission prospect should be developedand approved by the State Commission on Securities
Investment agent should be selectedSuccessful completion of subscriptionIn case of failure bonds should be bought
back by the municipality together with the respective interest
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General Obligation BondsThe emission is recorded in the municipal budget and the whole risk is taken by the municipality
Revenue BondsBonds are related to the project results and depend on their profitability
Financing by bonds (2)
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Leasing financing (1)
Avoid budget restriction of investment expenses
Leasing installments are equal and defined at fixed interest rate
Leasing period may last 3-5 yearsLeasing raises the purchase expences due to
the risk of final pay back denial
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Leasing financing (2)
Financial leasingKnown as capital leasing, conditional purchase contract or installment purchase contract
Operational leasing At the end of the leasing period the lessee may obtain the equipment ownership for its real market price
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Leasing financing (3)
Municipal leasingFinancial leasing under benign conditions – applied mainly in the US
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Energy Service Companies (1)
The ESCO which implements the project ensures the investment and takes the whole investment risk
The owner of the project site (the municipality) repays the capital investments on the account of the achieved savings
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Energy Service Companies (2)
The owner of the project site (the municipality) is not committed to the implementation of the project
After the completion of the contract the equipment ownership is transferred, free of charge, to the owner of the project site (the municipality)
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Energy Service Companies (3) Energy Performance Contract - 1
The owner of the project site (the municipality) finances the energy efficiency measures by a loan from a third party (in most cases commercial banks) or signs a leasing contract for the project equipment
The ESCO guarantees the savings in result of the project implementationand takes all related risks
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Energy Service Companies (4) Energy Performance Contract - 2
In case of savings lower than contracted, the ESCO refunds the difference to the owner of the project site (the municipality)
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Energy Service Companies (5)Pay off Savings Contract
Pay off is a subcathegory of energy performance contract
The payment schedule depends on the savings level
The higher the savings – the quicker the pay off
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Energy Service Companies (6) Shared Savings Contract
The ESCO finances the project by its own means or by a third party loan
The ESCO is responsible for the loan borrowing and repay and takes all related risks
The ESCO guarantees that the project owner (the municipality) will never pay more than the amount of the energy bills agreed in the contract
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Energy Service Companies (7) Chauffage contract (heating contract)
Long-term (20-30 years) energy service contract, under which heat supply is the subject of the purchase
The ESCO ensures the necessary modernization and maintenance of the heating systems on its own account
The project owner (municipality) pays the consumed energy in accordance with the contracted price
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Public-private partnership (1)Joint Ventures with Private Enterprises
The municipality disengages itself from the role of investor
The private sector ensures bank financing and takes all corresponding risks
The private companies provide the necessary capacity and qualified experts
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The municipality participates with long term assets, which usually do not have significant market value out of the project
The municipality preserves its key role in the management of the joint venture
Public-private partnership (2) Joint Ventures with Private Enterprises
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Other financing mechanisms
Equity financingFinancing of power distribution
companiesFinancing of WB Prototype Carbon FundFinancing through JI (Joint
Implementation) projects (Kyoto Protocol)
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Room for cooperation in local energy planning and financing
Results of the energy efficiency demonstration zone project in Gabrovo
Experience of the Bulgarian Municipal Energy Efficiency Network EcoEnergy
The role of the Regional Network for Efficient Use of Energy and Water Resources (RENEUER) in SE Europe
Cooperation within UNECE EE21 project