On the 17th of October 2016 , the Vice-President Katainen’s speech about energy efficiency investments at the Press Club Brussels Europe on the occasion of the Press conference organized by the European Alliance to Save Energy “Strategic Investments for Europe : Evidence from cost-effective energy efficiency stories”
Benefits of energy efficiency
- Investment in energy efficiency is one of the most cost-effective ways to support the transition to a low-carbon circular economy. It brings multiple benefits for European companies. But also – or perhaps most importantly these days – for European citizens:
- Energy efficiency creates local business opportunities and jobs, especially in the construction sector.
- Today, around 1 million people are already employed in jobs relating to the supply of energy efficient goods and services. This number is expected to increase significantly in the near future. The energy efficiency market has a high growth potential.
- Energy efficiency investments help European companies improve their competitiveness on the world stage:
- They keep production costs down and protect against rising and volatile energy prices.
- Energy cost can represent the major part of production costs for some sectors and the big gap in prices with our global competitors is a cause for concern for the competitiveness of energy intensive industries in the EU.
- The good news is that EU industry responded to these trends by becoming more energy efficient. Over the last decade, it lowered its energy intensity twice as fast as its American competitors!
- Energy efficiency creates export opportunities:
- As demonstrated in the new publication from EU-ASE, the EU is well positioned to embrace the business opportunities and deliver innovation by bringing forward more energy efficient technologies, appliances, buildings, services and business models.
- For instance, EU companies in the green and sustainable building sector are particularly dynamic with a threefold increase of related patents over a decade. This covers solutions such as building automation systems or highly energy efficient heating and cooling technologies.
- The digitalisation of the energy system – spanning from the greater integration of renewables via smart grids to the digitalisation of the building sector – is a particularly promising area. New business models are expected to develop, with packaged offers combining the provision of both goods and services in ever more hybrid forms.
- Europe, with its sizable single market and strong tradition in manufacturing state-of-the-art products, is the perfect breeding ground for innovative companies to benefit from the first mover advantage in this new, hyper-connected, interoperable economy.
- But energy efficiency is not only good for businesses. It is a great opportunity to bring the EU closer to the citizens – helping them to cut their energy bills and reduce social inequalities. It contributes to cutting air pollution and greenhouse gas emissions and, thus, to improving health.
- Last but not least, energy efficiency reduces the need for imported hydrocarbons, improving security of energy supply and keeping billions of euros in the EU that can be further invested. For every 1% improvement in energy efficiency, EU gas imports fall by 2.6%.
Rolling out the Energy Union and the energy efficiency first principle
- For all these reasons, energy efficiency is at the heart of the Energy Union Strategy.
- We have already put in place in Europe one of the world’s leading energy efficiency frameworks, succeeding in reducing energy consumption in all sectors. Driven by ambitious policies implemented at local, regional, national and EU level, EU energy consumption has decoupled from economic activity since 2006. The economic crisis has only contributed to this decoupling for about a third.
- As a result, the EU is well on track to achieve its 2020 targets of 20% energy savings. The EU-ASE publication presents examples how Europe’s citizens, businesses and the public sector have benefited from this successful policy implementation and reduced energy consumption.
- However, this positive trend must be stepped up. Our aim is to review this year the key EU energy efficiency legislation to make the vision of the Energy Union and our 2030 targets a reality.
- We started our work in summer 2015 with a proposal for revised rules on energy labelling. We hope that the European Parliament and Council will now conclude quickly on this revised framework, to ensure that labels remain relevant for consumers and to strengthen market surveillance by Member States.
- We are now continuing this work with the development of the next package of legal proposals in the context of the Energy Union, which we plan to present before the end of the year.
- This package will set a coherent framework for our engagement until 2030. We will present a set of legislative measures aimed at improving the regulatory framework and at making it coherent with the 2030 objectives, and link them with the financing and investment framework, which is a key engine of economic activity.
The Investment Plan and energy
- But our goals would not be complete without addressing the investment barriers. Energy efficiency is capital intensive. It requires up-front investments in the form of savings from households, equity from businesses, or debt financing from lending institutions, in order to benefit from reduced energy bills in the future. However, many project promoters willing to invest in energy efficiency still encounter difficulties in accessing or raising this capital.
- This is partly explained by the lack of adequate and affordable commercial financing for energy efficiency investments on the market. Most financiers and investors do not yet consider energy efficiency as a specific market segment offering clear incentives and new business opportunities. There is a general lack of understanding of the real risks and multiple benefits of energy efficiency projects by financiers.
- Other reasons are the lack of awareness about existing energy efficiency solutions and their business case by project promoters, and the lack of skills, experience and knowledge in developing bankable projects.
- I often meet local politicians and investors who tell me that they do not have the human resources to develop a good project, apply for funding, and follow through with it.
- To address these barriers the Commission has proposed the Investment Plan for Europe based on the European Fund for Strategic Investments (EFSI).
- Up till now, the EIB group has approved EFSI projects for total investment value of more than EUR 138 billion.This means that we are on track for achieving the original objective to mobilise EUR 315 billion of new investments over three years [by mid-2018].
- A significant share of that sum, at least EUR 30 billion, will be directed towards energy projects, including some energy efficiency investments, especially in the building sector with a total investment value of about EUR 4 billion.
- The overall results for the energy sector are positive. However, we should not rest on our laurels. More needs to be done especially for those Member States with less developed financial markets, but with great opportunities for blending EFSI with structural funds, which represent EUR 18 billion in the area of energy efficiency for the period 2014-2020.
- The Commission has proposed last month to double the EFSI and to extend its duration until the end of 2020, providing the necessary certainty to promoters and allowing for it to be continued in the future.
- Furthermore, the Commission has now proposed that at least 40% of projects in the EFSI infrastructure and innovation window should contribute to climate action in line with the COP21 objectives. This is a major opportunity and a concrete contribution to leverage public and private money for energy efficiency investments.
- To make these investments happen, the other elements of the Investment Plan, the European Investment Advisory Hub (EIAH) and the European Investment Projects Portal (EIPP) are also important.
- The EIAH acts as a single point of entry for technical assistance, guidance and advice. It supports the preparation of projects. But it can be also helpful in establishing dedicated investment platforms, aggregating smaller projects and matching them with the financing sources. [As regards the energy efficiency – the platform set up in Ile de France can be treated as a classic example.]
- The objective of the EIPP is to provide greater visibility about EU investment opportunities and to catalyse the fruition of these projects. This portal allows the investors to enter in contact with promoters. Since its launch in June 2016, 9 projects in the energy efficiency sector have already been published and we are looking forward receiving more projects in a near future.
- To achieve critical scale of investment we have stepped up our engagement with cities and regional authorities, as we see them powerful engine-houses. Last week we set up in a form of a web-page, the One Stop Shop for cities. Mayors can find there all necessary information supporting the investment decisions. We will continue this work to crowd in private investments in urban areas.
- In addition to EFSI, the Commission is currently developing a “Smart Finance for Smart Buildings” initiative, which will to great extent draw from the Investment Plan experience. It will bring further practical solutions to engage private finance at scale.
- The envisaged de-risking activities could be very much in line with the purpose of the new EU-ASE publication showcasing success stories. All these actions are essential to help the market actors better understand what the real risks and benefits of energy efficiency investments are.
Conclusion
- This year is going to be an important step forward for the Energy Union and for the European energy efficiency market. By addressing the key drivers for both investment demand and finance supply, we will enable the energy efficiency market to mature, industrialise and become more investable.
- As shown in the success stories presented by the European Alliance to Save Energy, there is already a strong business case for energy efficiency and strong benefits in terms of jobs and growth. We need to build on those encouraging projects and promote them to other parts of Europe.
- All this will require efforts at all levels of the investment chain, from local project promoters to the global capital markets. Businesses are an important part of this chain, and we therefore welcome their active involvement in promoting energy efficiency.
- And on top of that, facilitating investment in energy efficiency is a great opportunity to show that the action on the EU level can bring concrete benefits to European citizens. We cannot miss it