Private investment to fund the renovation of buildings in line with Europe’s energy efficiency goals can be difficult to find. A financing scheme in Latvia has shown how energy service companies could be supported in funding the renovation of such buildings.
This EU-funded initiative stimulated more than €20 million of investments to renovate over 100 000 m2 of public and multi-family residential buildings in Latvia dating from the Soviet era.
Energy savings of between 30% and 60% were achieved and, in total, an annual energy saving of 8.6 GWh was made.
Energy service companies are a relatively new breed in the market. In addition to providing traditional consultancy and equipment services, they may also finance and implement energy efficiency projects.
They can contractually guarantee energy savings. Such savings guarantees, referred to as energy performing contracts, can be used to convince lenders to finance the extensive renovation work required for older buildings.
However, in emerging energy performance contracting markets like Latvia, banks are hesitant to get on board. To initiate the market in Latvia, the initiative helped set up the Latvian Baltic Energy Efficiency Facility to help small- and medium-sized municipalities get their major renovation projects financed.
The facility helps minimise the capital investment and risk, and ensures operation and maintenance of the renovation contract, including decreased energy consumption, for the entire contract duration – potentially up to 20 years.
The lessons learnt in Latvia on financing energy efficiency investments and the platform developed could be adjusted for use by other countries, allowing for scaling up across Europe. It is one of several EU-funded initiatives to encourage the private financing of deep renovations to achieve energy efficiency savings for older buildings.
An estimated 220 million buildings, representing 85 out of 100 buildings in the EU, were built before 2001. Most are not energy-efficient, have poor insulation, rely on fossil fuels for heating and cooling, and use older, wasteful technologies.
Standard renovation can achieve energy savings of 20 to 30 %. A major renovation using state-of-the-art technologies can slash a building’s energy use by more than 75% and extend its life by 30 years or more.