EE Finances » Financing Energy Efficiency » Transnational EE financing strategy » Assessment of existing financing models and their deployment » Assessment of Self-financing Through Energy Savings

Assessment of Self-financing Through Energy Savings

Features favourable for municipalities

Features NOT favourable for municipalities

  • Can be financed from own budget

  • Favourable for municipalities when the audit has identified that initial savings can be achieved through low-cost replacements or operational changes and the municipality is unable to access capital funds, neither internally nor externally

  • works well when energy costs are a budget item and accumulated savings can be "banked" (internally) and used later for more capital-intensive projects.

  • No debt service costs



 

  • If municipalities lack skills and capacity because this method is self-managed and projects must be identified, selected, implemented and monitored internally.

  • Without an energy management plan there is a tendency to do simple, short-term measures that could effectively eliminate some more effective but more costly measures later and may result in lost opportunities to save energy.

  • Transaction costs associated with economic exchange, not of a financial nature, but due to the time and effort required to obtain sufficient information to make a decision and organize the work to be done, may be too demanding for the municipality

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

  • Smaller projects with lower investment costs and short payback period

  • Each EE project or service for which it is expected to have big energy savings achieved, meaning also huge money savings.

  • Small investments in established and well-known technologies with short payback time

Recommendations for deployment

  • The prerequisite for self-financing 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 about optimization and operation of the investments. Otherwise the saving target can be missed.

  • Creating partnerships in the field of exchange of experience in financing energy efficiency - some organizations may have the flexibility to reallocate resources to free up working capital for investment in energy efficiency retrofit projects. For example, organizations that have large sustainability teams dedicated to implementing energy conservation measures, may benefit from outsourcing the function of project design, project management and project implementation to a single-point-of-contact service provider that can deliver fixed price services and guaranteed savings.

  • The owner and operator of the facility where the savings are achieved should be the same entity (e.g. the municipality or its public service company), otherwise these two actors have to agree on sharing the savings. With public buildings owned by the state (school buildings) this is hardly manageable in Hungary, there are no experiences in sharing savings between the State (owner) and the municipality or the school management (operator).



Examples

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

  • A combination of self-financing with European funds and national programmes is the most popular and used model of EE financing in the City of Koprivnica. The main reason for this situation is a wide availability of grants on both European and national level. The great advantage of this model is the fact that there is not any additional burden laid on taxpayers but the opposite, projects financed this way can themselves even improve municipal budgets. Prerequisite for the deployment (upgrade) of this financial model is the formation of an experienced team which consists of competent and relevant individuals who will do a detailed and thorough preparation of each planned investment. A portfolio of EE projects that will guarantee sufficient savings or revenues will be developed and accompanied with an action plan for financing public infrastructures.

  • Reconstruction of boiler room plant in General County Hospital “Dr. Tomislav Bardek” Koprivnica – investment return model without any external support.