FINANCING INSTRUMENTS FOR EPC PROJECTS IN CROATIA

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1 ENERGY PERFORMANCE CONTRACTING (EPC) FOR PUBLIC BUILDINGS FINANCING INSTRUMENTS FOR EPC PROJECTS IN CROATIA International EnPC-INTRANS Conference 15 th November 2016 Vesna Bukarica, Ph.D

2 Agenda Financing energy efficiency in Croatia Environmental protection and Energy Efficiency fund Programme for energy refurbishment of public buildings Participants Main features Procedure (Co)Financing Results Lessons learned Future activities

3 Financing energy efficiency in Croatia (1/2) Environmental protection and Energy Efficiency Fund (Eco-Fund) Extra-budgetary public institution Mechanism polluter pays principle environmental charges: emissions of CO 2, SO 2 and NO x ; waste; special charge on motor vehicles incomes from ETS EU funds Annual incomes: approx. 1.5 billion HRK (200 million EUR) Types of incentives Loans: 0% interest rate, period of 5 years (grace period 2 years) Grants: 40 80% depending on the area Obliged by the Act on Energy Efficiency to co-finance measures defined in the NEEAP

4 Financing energy efficiency in Croatia (2/2) Approved EE and RES projects in 2015: 960 million HRK (127 M ) Source: Eco-Fund

5 Programme for energy refurbishment of public buildings (1/8) Adopted on 31 October 2013 Program goals: To contract and completely refurbish 200 public sector buildings approx. 420,000 m 2 of heated floor area To reduce energy consumption in refurbished buildings for % (ca. 150 kwh/m 2 per year) To reduce CO 2 emission by approx. 20,500 t per year To mobilise investments amounting to approx. 400 mil. HRK ( 53 mil. ) Fulfillment of EED Art. 5 requirements (3% refurbishment per year) To boost energy services market (ESCo)

6 Programme for energy refurbishment of public buildings (2/8) Participants Croatian Government Adopted Program Ministry of Construction and Physical Planning Agency for Transactions and Mediation in Immovable Properties (APN) Environmental Protection and Energy Efficiency Fund Energy Service Client (ESC) Energy Service Provider (ESP) Developed Program and monitors implementation Implements the Programme and signs contracts on energy performance Provides funds for co-financing Building owner/user submits application of the building for the Programme Carries out energy renovation

7 Programme for energy refurbishment of public buildings (3/8) Main features of the Programme ESP ensures project design documentation, implementation of EE measures and maintenance of building elements and installed equipment building envelope measures are mandatory! ESP commits to achieve verifiable savings in energy and water by implementing EE measures and takes over technical an economic risk savings are based on the project design documentation! energy savings = calculated energy needs before renovation calculated energy needs after renovation cost savings = energy savings (%) x baseline energy consumption x energy price

8 Programme for energy refurbishment of public buildings (4/8) Annual energy costs (HRK) Main features of the Programme ESC commits to ensure payment of the energy service fee to ESP during the contract period service fee shall not exceed the savings before renovation Završetak end of renovation en.obnove baseline energy and water costs after renovation contract (up to 14 years) Energy and water costs Contracted fee to the ESP Annual savings for the owner after contract time Source: APN

9 Programme for energy refurbishment of public buildings (5/8) Procedure Application of the building to APN (ESC) Energy audit (APN) Cost-effectiveness analysis (APN) Public procurement (APN on behalf of ESC) Contracting (ESC+ESP+APN) Project design documentation (ESP) Verification (Expert Commission) Refurbishment works (APN supervision) Takeover of works end of refurbishment (ESC+ESP+APN) Monitoring and controlling savings (ESP) Financing?

10 Programme for energy refurbishment of public buildings (6/8) Financing ESP is an SPV that takes the loan in commercial banks under commercial terms guarantees may be a problem Croatian Bank for Reconstruction and Development may provide more favorable loans but is constrained by de minimis state aid regulation (current assets) Feasibility of the projects within 14 years mandatory building envelope measures call for co-financing!

11 Programme for energy refurbishment of public buildings (7/8) Co-financing Provided by Eco-Fund based on the contract between APN and Eco-Fund Grant up to 40% of eligible costs costs of project design documentation and eligible works and equipment requirements for building elements higher than in regulation Grant is treated as own contribution of ESC and not as aid to the ESP grant is paid to the ESC during the implementation of works basis for payment is implementation report stating the percentage of works performed approved by the APN ESC transfers the payment to ESP

12 Programme for energy refurbishment of public buildings (8/8) Results Contracted (in different stages of implementation) In the process of contracting No. of projects 15 4 No. of buildings Area [m 2 ] 203,068 78,770 Investment (VAT incl.) [M ] Source: APN

13 Lessons learned Policy support for ESCO market development Government programmes may be a good way forward Prescribed mandatory measures Co-financing must be ensured Sources of co-financing? Fixed amount or based on actual project needs? M&V of energy savings Is simplified approach based only on calculations really beneficial? Financing issues Creditworthiness of ESP and involvement of banking sector Guarantees, financing of projects vs. project financing

14 Future activities Use of EU funds for energy refurbishment of buildings 211 mil. available for public buildings in Operational programme Cohesion & Competitiveness until 2020 (2023) Adoption of new national Programme for energy refurbishment of public buildings for period Programme prepared, formal adoption pending Huge potential still untapped in the public sector Potential refurbishment area estimated up to 473,000 m 2 until 2020 Potential primary energy savings estimated up to 552 GWh until 2020

Efficiency Fund Contract duration is 14 years Before renovation 1.3 million EUR/a After renovation < 0.

15 Example of finished project Hospital KBC Križine VIDEO LINK Clinical hospital energy refurbishment April to September 2015 Built in 1965 (Ak = 37,000 m2) Around 15 million EUR 60% private capital + 40% of grants from Croatian Environmental Protection and Energy Efficiency Fund Contract duration is 14 years Before renovation 1.3 million EUR/a After renovation < 0.6 million EUR/a 55% of energy savings 74% water savings workers on site every day > 30 Croatian companies involved During renovation the hospital was working

16 THANK YOU FOR YOUR ATTENTION! And good success in your future efforts promoting energy performance contracting in public buildings!

17 For more information contact the project partner: For more information contact the project partner: Energy Institute Hrvoje Požar Zagreb, Croatia Tel Vesna Bukarica, Ph.D. vbukarica@eihp.hr

Status of ESCO Development in Croatia

Group of Experts on Energy Efficiency Investments for Climate Change Mitigation Status of ESCO Development in Croatia Željko Jurić, M.Sc. Energy Institute Hrvoje Požar Geneva, 18 April 2013 Content 1.