ManagEnergy talks with Stuart Broom at the EIB’s European PPP Expertise Centre (EPEC) about energy performance contracting and what local authorities need to do to get energy efficiency projects ready for the next funding period.
Could you tell us about EPEC’s work, especially how it relates to investments in energy efficiency and renewable energy?
EPEC was established in September 2008 as a unique cooperative initiative of the EIB, the European Commission and EU Candidate Countries and Member States. We have an international team of 18 professionals working on a range of PPP issues alongside Member States.
As regards energy efficiency it’s an area where we feel there is a clear public sector need for private sector knowledge and expertise to deliver projects. As part of that there are clear similarities between PPPs and long-term energy efficiency contracts e.g. Energy Performance Contracts (EPCs).
Our website www.eib.org/epec/ee has been recently set up to host some of our core materials, case studies and key links. For example, we have prepared a number of factsheets on key energy efficiency issues, such as on the new Cohesion Policy and streetlighting as well as what you might call our flagship document Guidance on Energy Efficiency in Public Buildings.
On a more interactive basis we are arranging and attending relevant events in Member States to share knowledge about EPC contracts and try to establish a forum among the key players, especially at the national level, for discussing some of the key obstacles to delivering more EPCs.
What do you think has been learned from the Structural Fund allocation of EUR9 billion to sustainable energy projects in 2007-2013?
Looking at the principles around the proposed new Cohesion Policy, the Commission is clearly keen to move away from what is perceived as a grant-only culture. There seems to be evidence that this has created some perverse incentives such as commercially viable projects, which would benefit the public sector, being rejected for funding or delayed. This is often because Regulations were not helpful to private sector participation or authorities waited for grants that were often slow to arrive, if they arrive at all. The next funding period will see a bigger focus on the use of financial instruments, leveraging grant and focusing grant where it is most needed e.g. to stimulate innovation.
How can we apply the lessons learned in 2014 -2020?
Clearly energy efficiency is much higher up the policy agenda than it was at the beginning of the current funding period. In addition the fiscal crisis has brought both challenges and opportunities for energy efficiency projects. In making the case for these projects money is clearly tight across Europe but energy efficiency projects do at least offer the opportunity of monetary payback on the investment over the medium/long-term as well as evidence that they stimulate the economy in the short term in terms of jobs. It’s therefore important that the Member State strategies for the current funding period give sufficient weight to EPCs and other energy efficiency projects and that the rules at European and national level are flexible enough to react to what is clearly a fast-moving policy environment.
What advice do you have for local authorities and municipalities in developing sustainable energy projects?
There’s now a good body of project experience out there so there’s no sense in not utilising that in preparing their own projects. There are many organisations now operating in the energy efficiency space that have made available a number of excellent case studies, guidance etc. so there’s no sense in starting from the beginning. Also given the way energy efficiency is rising up the agenda at European level there will be a lot of help out there, both financial and technical, going forward into the next funding period.
EPEC helps strengthen the capacity of its public sector members to enter into Public Private Partnership (PPP) transactions. Can you describe how this work is carried out?
We work in a number of different ways.
Our website www.eib.org/epec contains a lot of guidance on a range of PPP issues and Member States can access more information on our Members website through their PPP Unit.
We share information, experience and expertise through Working Groups on specific PPP issues such as financing, statistical treatment and EU grant/loan blending.
We also work one-to-one with Member States, on request, on specific issues which help to build their institutional capacity to deliver PPPs e.g. skills, legal issues, commercial advice. We also have a helpdesk facility for a rapid response to more straightforward queries.
What kind of expertise do public sector managers need to enter into successful PPP partnerships?
In a way the key expertise is management itself and an ability to utilise what is already out there. Managers need to be, as a minimum, aware of the challenges and peculiarities of PPP projects and therefore well prepared for what might come up. More importantly, though, they will need to be able to build a team around them capable of delivering the project. There are a range of skills required to deliver an effective PPP project e.g. legal, commercial, policy, therefore bringing all that together into a coherent package, addressing the issues that emerge, and delivering the project to time is a crucial skill.
Please can you identify some exemplar projects in this area, with regard to energy efficiency and renewable energy?
Projects we are of course closer to are those funded through the Bank’s own instruments like EEEF, ELENA and JESSICA. Therefore the most obvious examples are the Jewish Museum in Berlin (winner of the European Energy Service Initiative’s Award) which has a “forfeiting” style financial structure which allows the ESCO to be effectively recapitalised, and the schools project in Milan for which ELENA gave technical assistance to help prepare the project.
Thanks to Stuart Broom and the team at EPEC, see you on the EPC campaign trail!
For more information:
ManagEnergy and the Energy Performance Contracting Campaign http://managenergy.net/news/articles/217
Covenant of Mayors www.eumayors.eu
Intelligent Energy Europe http://ec.europa.eu/energy/intelligent