[Report] Risks of Energy Efficiency Financing and Mitigation Strategies Typology

Energy efficiency is one of the key elements of the EU energy policy. This is reflected in the EU’s existing legislation and the targets to be reached by 2030 and 2050. Specifically, the EU has set the clear commitment to become the first carbon-neutral continent and remain the leader in the clean energy transition at a world-wide level as stated by the European Green Deal. To achieve those, significant investments in energy efficiency projects have to be implemented.

However, even though energy efficiency projects are profitable, several barriers prevent financial institutions from entering the market:

  • the heterogeneity and immaturity of the energy efficiency market,
  • project developers do not have the expertise or resources to make a convincing financing case for investors,
  • private investors suffer from a lack of knowledge on the way project developers implement their projects.

The following questions are raised in this report:

  • What are the key risks affecting energy efficiency investments financing from the financing bodies (banks, investment funds, etc.) perspective?
  • What are the main risk mitigation strategies? (in five categories: i) financial, ii) behavioural, iii) energy market and regulatory, iv) economic and v) technology, planning and operational)
  • How are they currently implemented, and which gaps emerge?
  • What are the key sectors where energy efficiency investments will deliver the most impact?
  • How can energy efficiency projects be mainstreamed via innovative financing schemes (e.g. green bonds, energy efficiency auctions, warehouse lending)?

Within the framework of this report, a systematic review was conducted both in EU legislation publications and relevant EU projects’ previous experience on sustainable financing, as well as in scientific papers and working documents of financing sector key players such as the World Bank, Deloitte, ADBI, etc.:

  • to collect and categorize risk and uncertainty factors that might reduce profitability of investments and in particular endanger debt repayment,
  • tο better understand Triple-A’s contribution in the field of EE financing in comparison with the other relevant H2020 EE financing projects.

Finally, the aim of this report is to support the identification of Triple-A projects and prepare input for the rating system for energy efficiency investment projects to be developed as part of the Triple-A scheme, which will lead to a pre-screening of investment ideas at EU level.

risk factors in EE investments TripleA

risk factors and categories Triple A

Authors: Diamantis Koutsandreas (NTUA), Nikos Kleanthis (UPRC), Dimitrios Angelopoulos (NTUA), Aikaterini Papapostolou (NTUA), Petra Ristau (JRC), Alexandros Flamos (UPRC)

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Triple-A has a very practical result-oriented approach, seeking to answer three questions:

  • How to assess the financing instruments and risks an early stage?
  • How to agree on the Triple-A investments, based on selected key performance indicators?
  • How to assign the identified investment ideas with possible financing schemes?

The Triple-A scheme comprises three critical steps:

  • Step 1 – Assess: Based on Member States (MS) risk profiles and mitigation polices, including a Web-based database, enabling national and sectoral comparability, market maturity identification, good practices experiences exchange, reducing thus uncertainty for investors.
  • Step 2 – Agree: Based on standardised Triple-A tools, efficient benchmarks, and guidelines, translated in consortium partners’ languages, accelerating and scaling up investments.
  • Step 3 – Assign: Based on in-country demonstrations, replicability and overall exploitation, including recommendations on realistic and feasible investments in the national and sectoral context, as well as on short and medium term financing

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