Assessment of Debt Financing (commercial loans)

Features favourable for municipalities

Features NOT favourable for municipalities

  • Advisable in times of low interest rates and if municipalities have the necessary financial resources in their running budget to redeem the loan.

  • In the case the municipality needs to bridge the period between pre-financing of the EE project and lately paid subsidy from Operational Programme

  • For large municipality with lines of credit already open for ordinary business

  • Easy availability and quick acquisition

  • Sometimes not possible for municipalities with a negative budget because loans have to be approved by higher public level (the provincial government, national government)

  • Other specific legal constraints of municipalities concerning borrowing financial sources

  • There are usually not any special conditions for energy saving projects

  • Need of collateral which, in the case of insolvency, is claimed by the bank to seize the asset that has been used as collateral

  • Debt service costs

Types of EE projects or EE services suitable to be financed this way

  • Projects generating income to pay back the loan (e.g. rental income, energy savings, revenues from sales of energy etc.)

  • In some countries (Hungary, for instance) the government doesn’t support debt-generating activities in general, instead it provides support for municipalities via the relevant OPs. Therefore, this financing can be recommended only in well-justified cases.

Recommendations for deployment

  • The prerequisite for debt-financing and loans through energy savings is having a good energy monitoring system for benchmarking on energy consumption and costs. Energy audits and planning skills are necessary as well as know-how of optimization and operation of the investments, otherwise the saving target can be failed.

  • The customer arranges loan financing through the manufacturer, vendor, or installer of the energy equipment being purchased or, if unavailable, directly with a third-party bank or other lender. Regional and local banks have been the primary drivers of these offerings to date, but larger banks have shown increasing interest in energy efficiency and renewable energy. In addition, project financiers specializing in energy projects are increasingly offering commercial loans or other debt products to fund these projects. The customer owns the equipment from day one and pays down the loan over time.

  • The commercial loan market may vary in different countries; however, trainings about calculating the use of the leverage effect can be introduced for subjects who do not use it by those who do so successfully.

  • The case study on effects of loans as well as subsidies is the part of the BOOSTEE- CE Transnational Methodological Framework.


In Austria the debt-financing through energy savings is constantly practiced and suitable for all measures in buildings. It is important to install a detailed energy monitoring for benchmarking the planning and reality, optimization for reaching energy saving targets.

In Croatia the municipalities, whose own funding resources are limited, obtain debt which is then paid back from the tax revenues of municipalities and saved energy costs and revenues generated by the projects themselves. Municipalities can obtain a loan from a commercial bank. The main idea for this financial model upgrade is to identify financially sustainable infrastructure projects of various sizes (similar to the previous one) which could be appealing for financial institutions in order to get from them lower interest rates which can considerably (in a positive way) influence the profitability of the EE project implementation.

In Slovenia they have established the debt financing system at a lower interest rate for municipalities at EKO fund. The fund co-finances following EE investments:

  • Remote heating

  • Purchase of cars or working machines on hybrid, electric or gas propulsion or with EURO 6 engine installed.

  • Heating or cooling from renewable energy sources

  • Construction of almost zero-energy buildings of general social importance

  • Installations for cogeneration of heat / cold and electricity from renewable energy sources

  • Renovation of existing lighting.