Energy Cities proposition 19 - Dedicate human capacities in financial engineering
Rethink financing solutions
2014
Energy Cities is a network of more than 1,000 cities in 30 different countries. Convinced that energy transition is more than a question of renewable energy or advanced technologies, Energy Cities proposes to use resources in a reasoned way, to strengthen local participation and to improve the quality of life in a democratic Europe. In 2014, the network presents 30 proposals for the Energy Transition of Territories.
They are a source of inspiration to think and act differently. To finally turn the page on unsustainable practices that lead us into energy, climate and perhaps economic and social dead ends.
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Energy Cities proposition 19 - Dedicate human capacities in financial engineering
The problem at hand
Local authorities have developed administrative and technical capacities in their areas of responsibility. As regards to energy efficiency, most have hired an “energy manager’’ or even a specialised team. These teams usually have a technical background and have gradually integrated an economic dimension so as to be able to present their projects on a technico-economic basis. They are starting to integrate communication skills, but very few are well-versed in finance.
The local authority’s financial directorate is responsible for managing the budget voted by the Council.
It has the power to say “yes” or “no” to other departments’ projects but is not always well informed about the solutions provided by financial mechanisms concerning energy efficiency. Many project opportunities are therefore lost.
And this lack of financial engineering competency becomes blatant when it comes to finding solutions to territorial stakeholders’ financial needs, and not just the local authority’s.
Proposal
Have a financial engineering team so as to come up with suitable financial solutions for both the local authority and local stakeholders.
Conventional public or bank financing systems have shown their limits. It is now time to invent and implement solutions combining loans, grants, third-party financing, co-operative solutions, “revolving” funds, etc. And we need financial engineers to invent financial solutions.
Conditions for success
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Being aware of the current lack of financial solutions for financing investments in building retrofitting, local energy resource harnessing, etc.
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Calculating the cost-benefit ratio of the financial engineering team which will have to show that it is capable of coming up with new solutions.
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Teaching technical and financial engineers how to work together as closely as possible.