Financing for industrial efficiency is available, but where are the projects? New models can change this

(eceee news, 25 Oct 2018) The EU-funded Horizon 2020 project “TrustEE” held a pre-conference workshop at the 2018 eceee Industrial Efficiency Conference. An expert panel suggests ways to stimulate financing for efficiency projects.

A growing body of evidence suggests that the industrial sector is ripe with energy efficiency investment opportunities. Meanwhile, “green finance” markets are growing amidst investor enthusiasm for sustainable projects.

So, why aren’t many promising industrial energy efficiency projects financed?

TrustEE, a EU-funded Horizon 2020 project, sponsored a recent workshop to investigate this question. An expert panel, including Winfried Braumann (REENAG Gmbh, Austria), Ulrika Wising (Macquarie Bank, UK), Alex Gilbert (Transport for London, UK), Nico Hytten (Tocircle Industries AS, Norway), and Margherita Cumani (Hera SpA, Italy), convened to define the financing gaps affecting industrial efficiency projects, and suggest solutions and models to address them.

Diagnosing the financing gap

“Based on our experience in TrustEE, several issues must be addressed simultaneously if we are to dramatically increase the volume of industrial efficiency projects,” says Winfried Braumann, a partner at REENAG Gmbh in Austria and member of the TrustEE project consortium. “In particular, smaller and medium sized (SME) project developers or technology suppliers run into line of credit issues, which limit the volume of projects that they can finance. There are also credit risks associated with industrial asset owners, especially SMEs, which can impede viable financing. And, when we look at opportunities to aggregate or securitise projects for the capital markets then we face challenges that arise from a lack of standardisation. Projects are prepared and documented in many different ways that cover diverse technologies and applications. This raises the cost of due diligence and ultimately the financing costs.”

Other panellists noted that SMEs often lack the capacity and expertise to prepare and document a sound business case for projects. Understanding, attracting, blending and managing the many different types of financing requires a high degree of financial competence and skills not often found in-house. And, guarantee issues can impede the financing of innovative solutions or technologies without a proven track record.

Innovative models and solutions to stimulate project investment

A host of new models and initiatives are moving forward with solutions to facilitate investment in industrial efficiency projects.

TrustEE partners, for example, plan to launch a platform by the end of this year to streamline industrial project development and financing. The platform serves several purposes: screening and identifying quality project developers; standardising the process for project development and assessment; and approving projects for financing. The financing instrument, which is based on a securitisation vehicle, allows projects to be aggregated and sold on the growing “green” bond or other markets.

Panellists and participants also suggested additional solutions to enable greater investment, some of which are underway. Some of the suggestions include:

  • Standardising industrial project financing processes and documentation requirements
  • Establishing guarantee programmes to address the credit risk and credit lines of SMEs
  • Strengthening energy audits so that industrial processes are covered by competent auditors
  • Strengthening communications and providing tools for building a strategic business case for energy efficiency.

More information

The key findings report from the workshop and a presentation about the TrustEE financing model are available on the TrustEE website. Companies and others who are interested in learning more about the TrustEE Platform and financing model should contact the TrustEE partners at: contact@trust-ee.eu.