Local innovative financing schemes - INFINITE insights in Parma
By on 5 avril 2016
Eleven Energy Cities’ members and associated partners have set up local innovative financing schemes thanks to the support of the Infinite Solutions project. A recent meeting in Parma (Italy) in March was a great opportunity to meet and discuss progress.
Revolving fund for improving energy efficiency in public buildings and facilities
The Portuguese cities of Agueda and Almada as well as Udine (Italy) and Koprivnica (Croatia) have set up local revolving funds linked to an internal contracting (intracting) financing scheme - inspired by a model already implemented by the city of Stuttgart (DE) since 1995. The objective of the fund is to finance measures reducing energy consumption of public buildings, equipment and facilities.
It was relatively “simple” to transfer the Stuttgart model to the medium-sized/large cities with more than 100,000 inhabitants such as Udine and Almada, whose city administration structure and relations with city companies and associations are quite similar. Small cities with less than 20,000 inhabitants which is the case of Agueda and Koprivnica had to opt for a different approach. Their city administrations are much smaller - several services or departments are managed by the same staff and are under direct authority of the mayor. Internal agreements signed between different city departments are therefore simplified.
Although, in these times of municipal budgetary cuts, it was rather difficult to convince some city councils of the benefits of the scheme and in particular to allocate a significant initial budget to the revolving fund, the small city of Agueda is rather living the opposite story ! The city council unanimously approved the creation of a local Fund for Energy and Water Efficiency. 300,000 EUR were allocated as “seed money” to the fund, which is quite an impressive sum for a city of this size.
Moreover, collaboration of Energy Cities with the French universities, the public bank Caisse des Depôts and the Federal State of Baden-Württemberg has shown that the intracting financing scheme is not only a financing tool suitable for local authorities but also for other public bodies like universities, hospitals or museums. Several French universities, including Eco-Campus Clermont-Ferrand or University of Reims Champagne-Ardenne allocated EUR 1.69 million and EUR 0.5 million respectively to their revolving funds.
Soft loans and private contracting boosting energy refurbishment of private housing
The objective of Brussels-Capital Region (Belgium), Frederikshavn (Denmark), Riga (Latvia), Parma (Italy) and Bordeaux Metropole (France) was to set up revolving funds and/or soft loan financing schemes that would finance measures reducing energy consumption of private residential buildings. Here, each financing scheme is very different, largely depending on the initial situation and local context of each city as well as the willingness of local banks to cooperate.
- Riga decided to set up a municipal revolving fund, fed by its own public resources and managed by a private financing institution.
- Frederikshavn convinced eight local commercial banks to provide soft loans to citizens and is mobilising a network of craftsmen and energy advisors who are contributing to the scheme.
- Brussels-Capital region revamped its existing Brussels Green Loan and is cooperating now with a public ‘Housing Fund’ and a cooperative bank Credal.
- Bordeaux Métropole realised that 85% of its inhabitants do not lack the money but a complex independent assistance with the renovation works.
- Parma, unfortunately, faces difficulties to allocate its own budget to a revolving fund and to convince local banks to cooperate and is actively seeking a dialogue and relevant solution.
- The city of Stuttgart is setting up a public financial engineering support service for private contracting dedicated to owners of residential buildings who wish to refurbish their homes according to high energy efficiency standards.
Soft loans schemes : lessons learnt
The main lessons learnt so far are that it would be inefficient to set up municipal revolving funds and let the municipal staff manage the soft loan schemes. A local authority is not a financing institution and it is not its core business to manage the funds and disburse the loans to citizens. This role would be more efficiently played by banks and financing institutions. Moreover, municipal budget is limited and public money alone cannot cover energy renovations of private housing at a large scale. Instead, public funds have to be used efficiently and aim at involving banks and triggering private investment.
Another important lesson learnt is that if local authorities want to succeed energy renovation in the private housing sector and facilitate the role of banks disbursing the soft loans, they have to take on the following roles :
- Raise awareness of citizens on necessity of energy renovation.
- Provide technical assistance & guarantee energy savings and quality refurbishment to their citizens (as via ‘Energy House’ in Brussels Capital, one-stop-shop in Delft).
- Provide citizens with personalised financial advice (e.g. on available financing sources, development of personal financial plan, information on existing incentives and support schemes).
- Involve and coordinate local key actors contributing to energy renovation (via for example local “Energy Renovation Platforms’ as in Bordeaux Metropole) and establish partnerships with local banks and financing institutions who very often already offer green financing products which are not used by citizens for different reasons.
More information about the project and its results : here