Fawkes Steven ACEEE conference May 2013
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Fawkes Steven ACEEE conference May 2013

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  • Now – show me the moneyAs an aside Boulton & Watt who are pictured here – made their money by implementing energy efficeincy – the Watt steam engine was much more efficient than the existing technology and saved coal mine owners a fortune. Bolton & Watt had the first example of shared savings deal – they took a % of the savings over a long term contract.Now I am going show you some big numbers

Fawkes Steven ACEEE conference May 2013 Fawkes Steven ACEEE conference May 2013 Presentation Transcript

  • UK EE Financing Programmes:An UpdateDr. Steven FawkesACEEE Financing Forum15th May 2013
  • Brits in the US this week2
  • 3
  • AgendaUpdate on Green Deal- Latest numbers in over nightECO, GIB & other initiatives in an Appendix to PPT4
  • Green Deal – the basics• Financing of efficiency with repayment throughelectricity bills• Tied to meter i.e. property• Golden Rule:– repayments always less than estimated savings• Target of £14 billion investment over 10 years– cf. £80 billion requirement• ‘Light’ credit assessment:– 80% eligible• 10-25 year debt from private sector• Residential focus but can be applied to business5
  • Eligible measures45 eligible measures in categories:• Heating, ventilating and air conditioning• Building fabric• Lighting• Water heating• Microgeneration6
  • Context – housing stock & energy• 76% of UK properties built before 1980– Pre 1919 – 21%– 1919-1944 – 16%– 1945-1964 – 19%– 1965-1980 – 22%– 1981-1990 – 9%– Post 1990 – 12%• Homes produce 27% of GHG emissions• Domestic energy bills a big social/political issue:– 2007 – 2012:• 37.1% real increase in average gas bill• 15.5% real increase in average elecricity bill– One in five now in debt to energy supplier– 6 million households in fuel poverty – 9 million by 2016? 7
  • 8
  • More energy price rises expected9
  • Green Deal - Process & ActorsAssessmentRecommendationsQuotesPlanImplementationRepaymentGreen Deal AssessorGreen Deal ProviderGreen Deal InstallerElectricity suppliersGreenDealOversightandRegistrationBody(ORB)Green DealFinanceCompany10
  • Green Deal Finance Company (GDFC)Structure and function• Industry led consortium > 50 members• Provides finance to Green Deal ProvidersFunded by• £7m loan from DECC to cover set-up• £69m Loan and Junior Capital from 16 members of GDFCo• £30m Junior Capital Facility of £20m and Contingent Capital Facility from DECC• £125m Senior Debt from UK Green Investment Bank• Negotiating £125m debt with European Investment BankCustomer offer• 6.96%• Set up charge £63• Annual operating charge £20• Exploring Islamic financing option to access 2.7 million Islamic population11
  • Additional support for Green Deal• DECC £125m to fund ‘Green Deal Cashback Scheme’• Available on ‘first come first serve’12
  • Green Deal status 16th AprilLaunched 28th January 2013• 108 Accredited Green Deal Assessor organizations• 1,003 Accredited Green Deal Assessors• 40 Green Deal Providers• 629 Accredited installers• 9,268 Green Deal Assessments completed• 1st Green Deal ‘good to go’, 2 others being reviewed (11thApril)• GDFC established and funded (£244m)13STOP PRESS14th May 2013- 152- 1,274- 55- 942- 18,861
  • Green Deal gaining momentum02004006008001,0001,200Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13Assessor organisations Individual AdvisorsGreen Deal Providers Installer organisations‘The latest figures on the GreenDeal show that this new market isgathering real momentum; 9,268Green Deal assessments takingplace in just over two months isvery encouraging and shows agenuine interest from consumers.’Greg Barker, Minister, DECC, April14
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  • Inevitable teething problems‘We’ve had the official launch – this time accompanied by apress campaign – but the sad reality is that the systemsaren’t ready yet. The largest part of the system still missing isthe finance, but there are also problems with the wording inGreen Deal plans, the snail-like pace of certifying Assessorsand the lack of guidance about how ECO will work. I’d beinterested to hear from anyone who has actually producedand financed a Green Deal plan… anyone?’Diary of a Green Deal Provider3rd April 2013http://www.localenergy.org.uk/diary-of-a-green-deal-provider/16
  • Green Deal for Business• Always envisaged that Green Deal could be used bybusiness• Limited number of Green Deal for Business assessors• Lot of potential demand• Very early days17
  • Local Authority GD initiatives - 1Birmingham• £75m Prudential borrrowing• £25m from ECO (Energy Company Obligation)• Will fund Green Deals directly and be repaid throughelectricity bills• Intention to aggregate and issue bonds• Appointed Carillion as exclusive delivery partner• 8 year framework contract worth up to £600m• Aim to retro-fit 60,000 houses plus non-domestic buildings• Commitment to create local jobs18
  • Local Authority GD initiatives - 2Leeds & 10 surrounding local authorities• £100m over first 3 to 4 years• 12,000 houses• Likely to appoint a delivery partner in MaySimilar initiatives in:• Newcastle• Sussex• LondonCambridge looking to create a sustainable energy fund to financeretro-fits and sustainable generation projects19
  • Issues with Green Deal• Max loan of £10,600 under Golden Rule at 7% 25year loan• Quality of GD Assessment (2 day training)• Potential scams (already happening)• Subsequent property buyers not liking GD liability• Potential for massive disappointment if savings arenot delivered– a mis-selling scandal waiting to happen?20
  • Green Deal questions• Is the demand there? / How do we create demand?• Will demand be created in segments that need itmost e.g. fuel poor?• Why borrow at 6.96% when you can use:– Personal loans from 5%– Re-mortgage at 1.75 to 2.5% (initial rates)– Savings currently earning very low rates?• Will savings be delivered?21
  • Green Deal summaryGreen Deal launched!!!• Activity increasing• Early days• Potential issues with demand– Conversion rate from Assessment to Green Deals?– Assessment and implementation rate once early DECCsupported GDAs are completed• Local Authority led model is promising22
  • ECO – Energy Company Obligation• A licence condition for suppliers with:> 250,000 domestic customers> 400 GWh electricity supplied to domestic customers> 2,000 GWh gas supplied to domestic customers• 1 January 2013 to 31 March 2015• Replaces previous schemes (CERT and CESP)• ECO obliges suppliers to spend on efficiency relative toenergy supplied• c.£1.3 billion per annum• ECO money can be used to supplement Green Deals– Assists with ‘hard to treat’ and expensive situations like externalwall insulation23
  • ECO has 3 componentsCarbon Saving Obligation• Solid wall and hard to treat cavity wall insulation thatcan’t be financed under Green DealCarbon Saving Communities Obligation• Insulation measures in specified low income areas (15%of each company’s obligation)Affordable Warmth Obligation• Insulation and heating measures to consumers in privatetenure properties receiving benefits e.g. elderly, disablesand families24
  • ECO brokerage• Fortnightly auction• Green Deal providers sell ‘lots’ of future ECO deliveryto energy suppliers• 6 auctions by end of March• Total value £68.9 million to date• Energy suppliers very keen to deploy ECO funds25
  • Green Investment Bank• Formally launched November 2012• £3 billion to deploy in 3 years• Aims to ‘crowd in’ private investment• 3 areas of focus:– Off-shore wind– Waste to energy– Non-Domestic Energy Efficiency (NDEE)• Must invest alongside market on market terms• No soft capital26
  • GIB NDEE progress• Selected 2 NDEE fund managers- £50m allocated to SDCL- £50m allocated to Equitix• Fund managers have to source deals and matchingcapital• Deals size £500k to £30m• Deals > £30m will be done directly by GIB27
  • GIB NDEE progress - 2• £5m EPC project for Kingspan• Working on a development model with GreaterManchester• £50m committed to Aviva REalM Energy CentresFund– Fund has invested in 1st project (£36m - £18m from GIB)• Cambridge University Hospitals NHS Trust• Biomass boilers, CHP and heat recovery from medical wasteincineration• Energy centres rather than end-use energy efficiency28
  • GIB issues• Lack of soft money to assist development process• Lack of skills developing large scale projects in supplychain and end-users• Fund managers relatively passive• Relatively expensive money• Paradox of ‘addressing market failures’ by investingalongside the market29
  • Other Local Authority initiativesPeterborough ESCO -• Owned by Local AuthorityScope:• Green Deal• NDEE• Renewable projects• Collective purchasing• Energy supply to local consumers• Sell excess power to gridAchievements• Solar PV framework (1 MW installed)• EPC procurement framework due May 201330
  • Other initiativesRoyal Bank of Scotland- £200m corporate energy efficiency fund- Draws on government’s Funding for Lending scheme- Borrowers must have revenues > £25m- 5 to 7 year tenor31
  • Summary and conclusionsGreen Deal launched• Activity increasing• Early days• Potential issues with demand• Local Authority led model is promisingGreen Investment Bank launched• NDEE a key area• Early days• Need to increase flow of investment quality deals• Still need to access long-term low cost fundsSome other interesting developments• Peterborough ESCO• Many other Local Authorities gearing up to create ESCOs• Royal Bank of Scotland allocation of £200m32
  • ContactSteve Fawkessfawkes@dayoneenergy.com+44 77 0223 1995www.onlyelevenpercent.com@DrSteveFawkes© Steven Fawkes 201333