Alternative Financing Schemes

The European PPP Expertise Centre supports the public sector across Europe in delivering better public-private partnerships (PPPs). PEC's team of experienced PPP professionals, based in the Advisory Services Department of the European Investment Bank (EIB), serves 42 EPEC member organisations. These organisations are typically national or regional PPP units, and other public entities in charge of PPPs, as well as the European Commission.

EPEC covers the following activities:

Financing the energy retrofitting of buildings is a great challenge. With investments varying from 200 to 1,200 EUR/m2, access to attractive and long-term financing is perceived as the primary barrier for homeowners. Financial incentives such as grants, guarantees or soft loans for energy renovation could motivate homeowners to make the investment decision more easily.

Local and regional authorities in cooperation with financing institutions can offer to homeowners of private residential buildings:

A revolving loan fund is a source of money from which loans are made for multiple sustainable energy projects. Revolving funds can provide loans for projects that do not have access to other types of loans from financial institutions, or can provide loans at a below-market rate of interest (soft loans).

On-bill lending is a method of financing energy efficiency improvements that uses the utility bill as the repayment vehicle. Energy suppliers collect the repayment of a loan through energy bills. It leverages the relationship, which exists between a utility and its customer in order to facilitate access to funding for sustainable energy investments.

Bond is a debt investment in which an investor loans money to an entity (typically corporate or governmental) which borrows the funds for a defined period of time at a variable or fixed interest rate. Bonds are issued by companies, municipalities, states and sovereign governments to raise money and finance their projects and activities. Green bonds are all those instruments which are used exclusively to fund qualifying green investments. They can be made attractive via tax-exemptions.

Energy Performance Contracting (EPC) is a form of creative financing for capital improvement which allows funding energy upgrades from cost reductions. Under an EPC arrangement, an external organisation (Energy Service Company - ESCO) implements a project to deliver energy efficiency, or a renewable energy project, and uses the stream of income from the cost savings or the renewable energy produced to repay the costs of the project (including the costs of the investment). Essentially, the ESCO will not receive its payment unless the project delivers energy savings as expected.

Energy cooperatives refer to a business model where citizens jointly own and participate in renewable energy (RES) or energy efficiency (EE) projects. In energy cooperatives citizens are involved in both the decision making and financial & economical participation. All citizens are eligible to participate. After purchasing a cooperative share and becoming a member or co-owner of local RES and EE projects, members share in the profits and often are given the opportunity to buy the electricity at a fair price.