The solution to financing energy efficiency projects lands in September

Standardisation of energy efficiency projects the key to unlocking private finance.
Fawkes: Standardisation of energy efficiency projects the key to unlocking private finance.

Energy managers are too bogged with compliance and admin at the expense of finding ways to ensure energy efficiency projects get off the ground and financed.

Meanwhile, a lack of data and standardisation is preventing otherwise viable projects from being bankable when presented to financiers.

The result is a yawning disconnect between thousands of stalled energy efficiency projects and billions of pounds in immobile private capital.

That disconnect leaves UK businesses wasting money and helps contribute to the very real risk that Britain will miss its legally binding 2020 targets, whose deadline falls on the next government’s watch.

Part of the problem is that there is no standard way of developing energy efficiency projects. If they cannot be standardised, making them bankable when presented to financiers is a tough ask.

But EnergyPro founder Steven Fawkes thinks that the UK may only be six months away from clearing that hurdle.

Fawkes outlined the need for better project data and standardisation in order to accelerate investment in energy efficiency this week at a PRASEG & APPGIE meeting.

He later told Energyst Media that the solution to the second half of the equation may not be too far off: The Investor Confidence Project should have its first set of protocols in market within the next six months.

Born out of the Environmental Defense Fund in the US, the Investor Confidence Project Europe recently secured a €2 million Horizon 2020 grant to develop a set of protocols that enable standardisation documents and processes for energy efficiency projects. That in turn makes them bankable for investors, which in turn should enable aggregation of projects to unlock vast pools of capital to flow into energy efficiency projects.

Fawkes said banks including ING are on board with the project, as is the Green Investment Bank, and he is confident that, while it has taken “three or four years to really gain traction in the US”, results in Europe should be more rapid.

While there is an “awful lot of interest in energy efficiency in the US, I think here the pressure is bigger to do something,” says Fawkes.

“I talk to more and more lenders and investors who would really like to do something,” he adds. High transaction costs and lack of standards is a real issue. “Because even if you are the Green Investment Bank, you can’t build scale around ad hoc processes. So we are being pulled really to accelerate the programme.”

What would further accelerate it is better data. Fawkes hopes more companies will open up project data so that energy savings can be verified and therefore de-risked.

Verification, alongside standardisation, would also allow an energy efficiency market to be created.

If energy efficiency can be properly measured, “then it becomes a resource you can buy like any other”, says Fawkes.

“At the moment we don’t think about it that way because we’ve always said ‘it’s too hard to measure’. People have to buy into the measurement and verification protocols [which already exist] and build understanding of them. But when you can do that you could end up with a scenario where somebody can come along and say ‘I will pay you for so many units of energy efficiency’, because there is a market.”

If that market can be created quickly enough, it might mean the UK could meet those 2020 goals without security of supply trumping decarbonisation and affordability. It would also mean thousands of energy managers could look up from compliance paperwork and reflect that at least their actual energy saving projects made it off the drawing board, past the boardroom, and onto the bottom line.

A full interview with Steve Fawkes will be published in the April/May print issue of Water, Energy & Environment.

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