Financing the (Environmental) Quality of Cities with Energy Efficiency Investments
Abstract
:1. Introduction
2. Literature Review
- private gap,
- public gap.
2.1. Private Energy-Efficiency Gap
2.2. Public Energy-Efficiency Gap
2.3. Public–Private Space Ownership
3. Methodology
4. Bridging the Gap between Public and Investor Finance
4.1. Mature Financing Models
4.1.1. Dedicated Credit Line
4.1.2. Energy Performance Contracting
4.1.3. Risk-Sharing Facility
4.1.4. Subordinated Loan
4.2. Emerging Financing Models
4.2.1. Energy Efficiency Investment Fund
4.2.2. Green Bond
4.2.3. On-Bill Repayment and On-Tax Finance (PACE)
4.2.4. Public ESCo for Deep Renovation of Housing
4.2.5. Third-Party Financing
5. Method of Analysis
- (a)
- (b)
- (c)
- The author has reviewed the results of the survey to check the internal validity of the scores, i.e., appropriateness in scaling, completeness in the answers, and the apparent coherence within the categories. Different experts should score the indicators in a similar way. The goal is to minimize errors and biases in case study.
- (d)
- In case of internal or reliability inconsistency, clarifications have been requested to the Institution at Section 4. or a third-party expert has provided an independent evaluation.
6. Discussion: Implications for Financing Interventions on Cities
6.1. Multidimensional Comparison of Financing Models
6.2. Suitability of Model to Finance EE Projects on Public–Private Spaces
7. Conclusions
- The trend towards private ownership status to the detriment of the public one in investments.
- Besides the barriers already considered, the ways and means to access EEF can disadvantage smaller or less proactive public administrations.
- In leveraging private funding, local governments may struggle to get the investment levels required to finance their measures at reasonable costs.
- Financial institutions are reluctant to invest in new domains, especially if the returns are not clearly envisaged in a business model, and the renovation of open spaces is among them.
- finance the mutual regeneration of buildings and of open spaces,
- assist local administrations in leveraging resources,
- manage the constraints coming from the Stability Pact for administrations affected by structural problems or distortions,
- improve the administrations’ creditworthiness,
- collect upfront capital for projects with long return-on-investment period.
Supplementary Materials
Funding
Acknowledgments
Conflicts of Interest
References
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Space Ownership: | Instances: | ||
---|---|---|---|
Private Public | 1 | private | home |
2 | private, co-owned | condominium grounds, fences, landscaped and rooftop areas, parking places, corridors, and stairs | |
3 | private, with open or controlled access | shops, shopping malls, theatres, plazas at the entrance of high-rises, | |
4 | private/public, public property sale with political and administrative spin-off | gated communities, where developers, inhabitants organise according to local tasks and self-defined governance | |
5 | public, commodification of quasi-public property | underground, railways | |
6 | public, transfer of rights of use and of maintenance | redevelopment of parks and public greens | |
7 | public, privately managed, e.g., installation of signs of private character | pedestrian areas, business improvement districts | |
8 | public | city streets, plazas, parks |
Benefits | Gaps |
---|---|
Below market interest rates Integrate aid mechanisms Recover funds for further EE projects Fill loan EE market gaps | Homeowners’ behavioural biases to take on or increase debt Homeowners’ behavioural biases on borrowing from banks Financial institutions’ biases on value of EE projects Energy poverty unwilling to credit means EE projects fragmentation makes credit delivery unattractive to financial institutions |
Benefits | Gaps |
---|---|
Recover funds for further EE projects ESCos involvement ease the integration with and bundling of credits for financial institutions | Homeowners’ behavioural biases on value of EE projects Financial institutions’ biases on value of EE projects Gaps for ESCos due to EE market maturity Energy poverties unwilling to save or invest on EE |
Benefits | Gaps |
---|---|
Reduce risks on upfront capital Reduce financial costs on EE investments Independent from the ownership of the loan EE projects ease of access to credit | Gap on levels and structure of energy billing Gap on insolvency on energy bills Gap on appraising homeowners’ credit eligibility and default |
Benefits | Gaps |
---|---|
Homeowners’ ease of access to credit Reduce risks on upfront capital Below market interest rates Recover funds for further EE projects EE projects bundling makes credit delivery attractive to financial institutions | Gap in levels and structure of energy billing Gap in insolvency on energy bills Gap in appraising homeowners’ credit eligibility and default |
Benefits | Gaps |
---|---|
EE projects bundling makes credit delivery attractive to financial institutions Suitable to focus on specific EE projects funding Investors willingness to environmental consciousness | Above Dedicated Credit Line interest rates Unsuitable to large-scale uptake rates Gaps on investors biases on EE projects Gaps on volatility in energy price Gaps on fluctuation in interest rates and investment return |
Benefits | Gaps |
---|---|
Reduce cost on upfront capital EE projects bundling makes credit delivery attractive to financial institutions Suitable to focus on specific EE projects funding Amortised over long periods of time | Return on investment over long periods of time Gap on structure and transparency of fund-raising Above Dedicated Credit Line interest rates Gaps on investors biases on EE projects Gaps on volatility in energy price Gaps on fluctuation in interest rates and investment return |
Benefits | Gaps |
---|---|
Reduce cost on upfront capital Ease of repayment Homeowners’ credit eligibility Amortised over long periods of time Associated to the property, not to the homeowner Offered with technical assistance on the measures | Return on investment over long periods of time Gap on structure and transparency of fund-raising Above Dedicated Credit Line interest rates Gaps in investors behavioural biases on EE projects Gap in homeowners’ insolvency on energy bills Gaps in volatility in energy price Gaps in fluctuation in interest rates and investment return Gaps in transferring the property without the loan Gaps in regulations on house and taxation policies Gaps on regulatory transparency |
Benefits | Gaps |
---|---|
Trig high-performance energy renovation projects, e.g., zero energy or passive Below market interest rates Reduce cost on upfront capital Amortised over long periods of time Financial offer packed with technical assistance on measures EE projects bundling makes credit delivery attractive to financial institutions | Return on investment over long periods of time Gaps in volatility of energy price Gaps in fluctuation in interest rates and investment return Gaps in regulations on house and taxation policies Gaps on regulatory transparency Homeowners’ behavioural biases to take or increase debit Energy poverty unwilling to credit means |
Benefits | Gaps |
---|---|
Ease of implementation by financial institutions ESCos in charge of paperwork and technical procedures, and filling the request [to the bank] ESCos involvement ease the integration with and bundling of credits for financial institutions Rapid evaluation and delivery of credit ESCos projects bundling makes credit delivery attractive to financial institutions | Return on investment over long periods of time Gaps on volatility in energy price Gaps on fluctuation in interest rates and investment return Gaps on trigging zero energy/passive renovations Gaps on scaling-up projects at regional/national levels |
Category | Indicator | Score |
---|---|---|
(a) systematic behavioural biases | (a) systematic behavioural biases | −2: very low −1: low 0: neutral 1: high 2: very high |
(b) uncertainties or negative externalities | (b) uncertainties or negative externalities | |
(c) economic and financial risks | (c1) volatility in energy price | |
(c2) levels and structure of tariff | ||
(c3) fluctuation in interest rates | ||
(c4) loan default | ||
(d) regulatory risks | (d) regulatory risks |
Financing Model | 4.1.1. Dedicated Credit Line | 4.1.2. Energy Performance Contracting | 4.1.3. Risk-Sharing Facility | 4.1.4. Subordinated Loan | 4.2.1. Energy Efficiency Investment Fund | 4.2.2. Green Bond | 4.2.3. On-Bill Repayment and On-Tax Finance | 4.2.4. Public ESCo for Deep Renovation of Housing | 4.2.5. Third-Party Financing | |||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Case study | KfW | Eco-loan at zero rate | Energy Saving Partnership | CEEF | Risk Sharing Facility | ELENA EEEF | ADEME | NAPE | PACE | PACE | UK Green Deal | Energies POSIT’IF | City of Berlin | MEEF |
Suitable for Space ownership | 1–8 | 1–5 | 1–3 | 1–8 | 1–7 | 1–8 | 1–4 | 1–8 | 1–3 | |||||
(a) systematic behavioural biases | 2 | 1 | 1 | 1 | 2 | 2 | 1 | −1 | 1 | |||||
(b) uncertainties or negative externalities | −1 | 2 | −1 | −1 | −1 | −2 | −1 | 0 | 2 | |||||
(c1) volatility in energy price | −2 | 2 | −2 | −2 | −2 | −2 | −2 | −1 | 1 | |||||
(c2) levels and structure of tariff | 1 | 2 | 2 | 1 | 1 | 1 | 2 | 1 | 2 | |||||
(c3) fluctuation in interest rates | −1 | 1 | 1 | 1 | 2 | 2 | 2 | 1 | 2 | |||||
(c4) loan default | 1 | −2 | −2 | −1 | 1 | 1 | 1 | 1 | 1 | |||||
(d) regulatory risks | 1 | 1 | 1 | 1 | 1 | 1 | 2 | 2 | 2 |
4.1.1. Dedicated Credit Line | 4.1.2. Energy Performance Contracting | 4.1.3. Risk-Sharing Facility | 4.1.4. Subordinated Loan | 4.2.1. Energy Efficiency Investment Fund | 4.2.2. Green Bond | 4.2.3. On-Bill Repayment and On-Tax Finance PACE | 4.2.4. Public ESCo for Deep Renovation of Housing | 4.2.5. Third-Party Financing | |
---|---|---|---|---|---|---|---|---|---|
1 private | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 |
2 private co-owned | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 |
3 private with open or controlled access | 0 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 |
4 private/public | 0 | 1 | 0 | 1 | 1 | 1 | 0 | 0 | 0 |
5 public commodification | 1 | 1 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
6 public transfer of rights | 1 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
7 public privately managed | 0 | 0 | 0 | 0 | 0 | 1 | 0 | 0 | 0 |
8 public | 1 | 0 | 0 | 0 | 0 | 1 | 0 | 0 | 0 |
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Caneparo, L. Financing the (Environmental) Quality of Cities with Energy Efficiency Investments. Sustainability 2020, 12, 8809. https://doi.org/10.3390/su12218809
Caneparo L. Financing the (Environmental) Quality of Cities with Energy Efficiency Investments. Sustainability. 2020; 12(21):8809. https://doi.org/10.3390/su12218809
Chicago/Turabian StyleCaneparo, Luca. 2020. "Financing the (Environmental) Quality of Cities with Energy Efficiency Investments" Sustainability 12, no. 21: 8809. https://doi.org/10.3390/su12218809
APA StyleCaneparo, L. (2020). Financing the (Environmental) Quality of Cities with Energy Efficiency Investments. Sustainability, 12(21), 8809. https://doi.org/10.3390/su12218809