EE Finances » Financing Energy Efficiency » Transnational EE financing strategy » Key stakeholders and investment barriers in EE financing » Barriers to investment into energy efficiency and ways to cope with them » Finance and economy barriers

Finance and economy barriers

Specific barriers

Ways to cope with them

Lack of financing in the public sector / Lack of own capital at municipalities

For example, in Austria municipalities are controlled by the government of the province, if they have a negative balance, they need an agreement if they want to take loans. Even if funds are granted by the federal or provincial state, pre-financing and financing of the co-payment can be difficult.





 

Contracting and private public partnership models are a good option to avoid loans and additional debts

Services can be outsourced to external partners (e.g. public transport).For instance, the province of Styria (Austria) may provide specific financial resources for the implementation of projects.



Municipalities need to apply for tenders under the various Operational Programmes and other funds on national level as suggested in the Chapter 3 of this document, which provide up to 100% contribution.



Financial support from the EU is provided in a great extend as indicated in the EU funding part of the BOOSTEE-CE Transnational Methodological Framework

Lack of adequate financing models, especially for citizens

Citizens mainly rely on national subsidies for implementation of EE measures but these are not often available due to various administrative, regulatory or other constraints or they are not available at all

All relevant stakeholders need to be engaged in order to find innovative and financially viable business models or financing schemes as suggested for example in the BOOSTEE-CE - Transnational Methodological Framework to boost the energy efficiency renovation market and implementation of EE measures.

Accumulation of public debts

For instance, in Hungary between 2011 and 2014 the government consolidated the total debt of Hungarian local governments accumulated during the 2002–2008 period. In order to avoid the generation of further debts the Government has announced the 2011 CXCIV Act and the 353/2011 (XII.30) Government Decree. The Decree has to be applied for debt-creating transactions of local municipalities, associations of local municipalities, regional development councils, non-governmental organizations that are owned by local municipalities in 100% and companies owned in 100% by these entities

The municipality has to be prepared by adequate financial justifications to get the approval of the relevant organisations.

Following the Hungarian case, after the adoption of its annual financial regulation but not later than March 16, the municipality is obliged to send information on the planned transactions for the Directorate with territorial jurisdiction of the State Treasury via the treasury-operated electronic data supply system. The Directorate examines the ratio of payment obligations compared to the own revenues of the municipality and forwards the request to the Government Office with territorial jurisdiction until 31 March. The Government Office examines whether the planned development goal results in the creation of the capacities required to perform the tasks of the municipality, specified by law. Once the goal is checked, the office forwards the request to the responsible ministers. The Government decides on the approval of the request on the basis of the joint proposal of the above-mentioned bodies.

Risk of long payback periods, especially for expensive thermal insulation which results in long payback periods.

 

Possible investments should be ranked according to their payback periods. Municipalities have to calculate – often with the involvement of experts – the specific energy saving values (electricity and heating) of their buildings and decide on the retrofitting of the building with the highest saving potentials. An initial idea of the payback period can be obtained with the BOOSTEE-CE simplified EE financing calculator

In Poland, for instance, BKG (bank) operates the Thermal Insulation and Renovation Fund which offers compensations in form of partial repayment of loans used for thermal insulation projects

 

High project risks

Capital markets are not used to invest in energy efficiency and are unable to accurately assign the price of risk which results also in the lack of finance, especially for SMEs and start-ups. Investments in efficiency are considered at a level of risk such as to require high levels of interest rates or high level of subsidized financing.

To acknowledge the regulatory level and spread the knowledge on the technical procedures and the certified and shared professional figures that can contribute to reduce and manage the risks

The financial leverage ratio, understood as debt to equity ratio, is considered too high which is a problem especially for SMEs

Creation of innovative financial instruments at the level of managing authority, capable of attracting private capital with the sharing and guarantee offered by public funds such as Multyscope Regional Fund of public financing in Italy, also using tools such as crowdfunding and the EPC

Energy poverty

Socially endangered groups and low-income groups may have not enough funds, as a result, they may be reluctant to take advantage of any EE measures

Introduction of new regulations regarding personal income tax exemptions which enable tax deduction of expenses related to thermal insulation;

 

Relatively high costs of EE solutions based on the newest technology

Use of proven but still efficient technology

The priority of EE implementation on local and regional level highly depends on co-financing opportunities and available funds in municipal budgets.

 

To implement larger EE projects smaller municipalities need to join forces to bring together higher amount of co-financing. Smaller municipalities usually invest in smaller EE projects, but because of lack of staff and knowledge they need technical assistance in preparing applications for financing those projects.