Energy Cities proposition 20 - Set up financial structures dedicated to the energy transition
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 20 - Set up financial structures dedicated to the energy transition
The problem at hand
Investment needs for thermal retrofitting of buildings, producing local renewable energy, and developing CHP and district heating are considerable. These investments are cost-effective but their economic impact spans over a long period of time. In financial terms, this means that their return on investment is moderate and the banking system prefers short-term, risky products with a high return. Sustainable development has not yet found its business model. Only a few public, co-operative and ethical banks are interested. Transaction costs can also be disproportionate in the case of small projects. Some large companies offer comprehensive packages (audit, feasibility studies, installation, financing) but these are often expensive with little impact for SME and local craftsmen.
This is why local authorities are inventing new solutions, some of which are closely connected to the conventional banking system.
Proposal
Set up financial structures dedicated to the energy transition.
These may take several forms: a guarantee fund using local savings for reassuring banks and supporting project managers; a local sustainable energy fund for financing widely ranging public and private projects; a specialised public or semi-public company providing both technical and financial solutions; an ESCO (Energy Service Company) for energy performance contracting.
Conditions for success
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Clearly identifying local public and private financial needs as well as existing solutions, including those that are under-used.
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Highlighting examples of necessary investments for which no satisfying solution has been found.
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Gathering information on instruments that are -or are in the process of being- tried and tested using, notably thanks to the support of European programmes.
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Setting up a panel of the public and private stakeholders concerned.