Finance expert: Small-scale energy efficiency loans deserve more EU attention

There are many snippets of good legislative pieces on energy efficiency at EU level but the European Commission should give it some more time and thinking, says Jessica Stromback. [pdvos / Flickr]

There are many creative ways to finance small-scale energy efficiency projects such as building renovations, but they need to be discussed more at the European Commission level, and defined more precisely, Jessica Stromback told EURACTIV Czech Republic.

Jessica Stromback is chairman of Joule Assets Europe, a consulting firm specialised in energy efficiency projects. She is leader of the SEAF, an EU-funded project that seeks to enable investment in small to medium sized projects in Sustainable Energy Assets (SEA) such as demand response, energy efficiency and distributed renewable generation.

She was interviewed by Adéla Denková, from

The SEAF project (Sustainable Energy Asset Evaluation and Optimisation Framework) aims to “bridge the finance gap in energy efficiency”. What does that mean?

The basic problem is that money on the European market does not reach projects in energy efficiency and vice versa. There is a big disconnection between the industry and private finance, and the mission of SEAF is to remove that barrier through the creation of a holistic online platform, which connects viable energy efficiency projects and investors.

Why aren’t banks interested in energy efficiency projects?

Banks provide loans to energy services companies (ESCOs) just like they would do to any other business, and they loan you money for an energy efficiency upgrade of your house or office block just like they would do in case of any other loan.

The issue comes at the moment of a credit check that is executed on the ESCO by the bank. If an ESCO wants to start a new project and their client is not able to finance it, they have to finance it on their own. But if they take a loan, they become more and more indebted with each new project.

What is your solution to that?

The particular bridge we are building here is between companies and funds. What funds may do is to provide creative off-balance-sheet financing that will not burden the ESCOs with more and more debt.

But it is important for the investor to be sure that the project is credible, and to know how much they will earn. In energy efficiency, the projects are often too small to be financed in a one-off deal, and each of them behaves very differently.

We are able to overcome these practical barriers by presenting the projects in a standardised form, using a standardised due diligence process based on the Investor Confidence Project (ICP) methodology, so that the investor may compare the projects with each other.

There is an automated insurance feature that allows the investor to get an insurance quote on the projects. For this purpose, we have a partnership with HSB Engineering Insurance, an international insurance company.

For ESCOs who generally undertake smaller projects (projects well under the €1,000,000 range), we look to create bundles of projects, which can be financed as one big piece.

This is the essence of how the SEAF platform works. We as Joule Assets Europe oversee the project and we will continue to develop the platform as a commercial product that we call eQuad, after our H2020 project comes to an end in 2018.

Should funds come closer to the ESCOs, or the other way round?

They need to be willing to work together, because none of them can solve all the problems individually.

We understand the challenges of both sides, and we are able to help them find solutions together. ESCOs should understand that investors need to mitigate the financing risk; investors cannot bear the danger of loaning them money for poorly designed projects with weak business models or unsolvable clients. An ESCO will often have a contract with their client that only looks at their own risk, as they have not worked with a fund before, so they do not know that they need to take into account the investors’ risk as well.

On the other side, investors should be more creative. Instead of saying “no, we only do projects of above 10 million”, they should be able to say “if you bundle four or five smaller projects together, as long as all of the contracts are the same, we can look at it”.

Pension fund: EU should promote ‘one-stop shop’ for housing renovation

Homeowners typically don’t have the capital to invest in energy renovation solutions, despite the proven returns. Danish pension fund PKA helps bridge that gap with a one-stop-shop solution which, it believes, could be replicated across Europe.

This sounds similar to the Investment Plan for Europe, also known as the Juncker plan. Does the Commission’s own activities on finance mirror what you do?

There are a couple of different things that the Commission is working on. Of course, bundling projects for financing is a good idea. To be honest, infrastructure and developing funds like EFSI are not designed to support smaller companies. It would be a big jump for them, with their way of managing risk, for example.

Another thing that the Commission is working on is that they are improving the rules for municipalities who want to do projects based on an energy performance contract (EPC). At the moment, it is very complicated for municipalities to get operational loans because it adds to their debt. However, the relevant Eurostat regulation was recently updated which is a positive sign. How it is applied, will be very important for small municipalities being able to improve the infrastructure in their communities.

Then you have other smart forms of finance. I would highlight for example the Project Assessed Clean Energy (PACE) model, which is active in North America and is on its way to Europe. It is a model where you attach the costs of an energy efficiency renovation to the house or the apartment rather than the people living there. Which means that the debt stays with the home and when it is sold, the energy bills are much lower, but the property tax is a bit higher. So the loan goes to the property tax.

There are many creative ways for energy efficiency finance, but they need to be discussed more at the European Commission level, and defined more precisely. At the moment, there are many snippets in different legislative pieces. All of them are good, but the Commission should give it some more time and think about what we are able to do.

The Smart Finance for Smart Buildings Initiative was presented together with the Energy Performance of Buildings Directive. Talking about the directives that are currently being negotiated – would you say that it is more important to have political targets, or initiatives that help put things into practice?

It should work all together. Targets are very important, because the governments have something to aim for.

The problem comes when there is a lack of coordination. For example, on the one side, the energy efficiency directive orders municipalities to lower their energy consumption, and on the other side, Eurostat will literally make it impossible, because they so strongly limited how those energy efficiency upgrades could be financed. That is a ridiculous situation.

Energy performance of buildings

Lawmakers in the European Parliament’s industry committee are voting this week on the revised Energy Performance of Buildings Directive (EPBD). takes a closer look at the latest changes made to the bill before it clears this major political hurdle.

But you said that there had been an improvement.

The Commission updates the rules and they are trying to make it easier to do operational leases for municipalities – assuming those are transposed into national counting regulation properly. It is quite a big change and it could be difficult for national governments to transpose them, but it can make the situation of municipalities significantly easier and they will not have to become indebted.

So it depends on member states.

And also on how much the European Commission and Eurostat push for those guidelines to be interpreted. There is a lot work to be done.

Stars are (almost) aligned for energy efficiency projects in Europe

Eurostat last week revised its accounting rules, allowing local authorities to stop counting as public debt the building refurbishment work they undertake as part of energy performance contracts, writes Quentin Genard.



EU funded

This project has received funding from the European Union’s Horizon 2020 research and innovation programme under grant agreement No 893858.

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