The improving ratio of conferences to deals in the 'Paris of the East'
One of the most memorable phrases I first heard at the ACEEE Finance Forum in 2012 was that ‘the problem with efficiency financing is that the ratio of conferences to deals is too high’. That remains true although there are good signs that the ratio is improving, the number of conferences seems the same (or maybe higher) but the number and value of deals is definitely increasing in lots of places around the world. On my recent trip to Bucharest for the 2nd Round Table on Energy Efficiency Financing held under the auspices of the Sustainable Energy Investment Forum I saw more evidence of this change. The meeting was encouraging because a) several banks were in the room leading the conversation (& deals) and b) there are a now a number of successes to point to.
The first of these was a UNDP Global Environment Facility project which I had a small part in designing when I first went to Bucharest in the 1990s and was implemented from 2003 through to 2006. This project was executed extremely well with only $2m of UNDP money which supported project development assistance and capacity building, and yet catalysed nearly $70m of private investment into 34 energy efficiency projects, compared to a target of $12.5m and 20 projects. Although I had not developed my jigsaw of energy efficiency financing back then on reflection the project had the four pieces of the jigsaw, finance (development and project), building pipelines, standardisation, and capacity building within the demand side, the supply side and the finance industry. The implementing consultants carried out activities in all four areas. Although it is now a long time ago, the project merits study for anyone designing programmes designed to catalyse private investment using a small amount of public money.
Since the UNDP GEF project there has been a series of EBRD Green Economy Financing Facility (GEFF) facilities that ran between 2008 and 2018; the Energy Efficiency Finance Facility (EEFF) – for private sector industrial companies, the Municipal Fund for Energy Efficiency (MFFEE) – for municipalities, and the Romania Sustainable Energy Finance Facility (RoSEFF) which financed projects in SMEs. These facilities provided technical assistance to help develop and close projects and used a mixture of grants from the EU (between 10% and 20%) and loans to finance projects. The EEFF made 129 investments totalling €111m, the MFFEE deployed €10m into three public lighting schemes, and the RoSEFF made 341 investments totalling €69m. The current GEFF in Romania was launched in 2017 and is a €100m financing framework for the household sector, the first time this sector has been specifically addressed. Concessional financing is provided by the TaiwanICDF through EBRD to local financial institutions Banca Transilvania and UniCredit Bank and to date $64m has been deployed. The facility consultant, Tractebel, trains local financial institution branches how to recognise and act upon energy efficiency lending opportunities which builds capacity and ensures extensive outreach throughout the branch network.
The other exciting project is the Romania Green Building Council’s ‘Smarter Finance for Families’. This project developed a low-cost, local green home certification system in which homes have to achieve an energy performance more than 30% better than an A rated home and have other green features including use of non-toxic materials and reduced construction waste. Furthermore the scheme links this to green mortgages from major banks which offer lower interest rates for homes certified to the standard. The programme now accounts for about 10% of total new home building in the country. This would have been unimaginable back when I worked in Romania in the mid-1990s and is a great achievement by the Romania GBC who are now replicating it in 11 countries with the support of a Horizon 2020 funded project. Like the other successful projects it has the four elements of the energy efficiency financing jigsaw.
The last time I had been in Bucharest was for the total solar eclipse on 11 August 1999 and after twenty years away it was great to see some old friends and colleagues as well as the big changes in Bucharest, which is a lot more pleasant to be in than it was back then. There is a lot of building rehabilitation underway, rehabilitation that has to improve earthquake resistance as well as thermal performance. Much work needs to be done to increase the flow of capital into increasing the performance of the building stock in all aspects but that applies everywhere. The country is moving in the right direction and the continuing dialogue between banks and other stakeholders catalysed by events such as the Roundtable, coupled with the available tools such as the Romania Green Building Council standards, the Investor Confidence Project, the EEFIG Underwriting Toolkit and the Derisking Energy Efficiency Platform (DEEP), will help accelerate the trend.
Although I greatly enjoy speaking at conferences our real work is working to improve the ratio of projects to conferences – that is getting more investment into energy efficiency. If you share this mission and want to discuss how EnergyPro can help you let me know.