financing sustainable energy - events/roseff... · 2013. 3. 22. · o cash flow – dcf – npv –...

EU EBRD Romania SME Sustainable Energy Finance Facility

FINANCING SUSTAINABLE ENERGY – A course to help companies and banks identify, understand and finance energy efficiency and renewable energy investment opportunities.

The RoSEFF Consortium:

The content of this presentation is the sole responsibility of Tractebel Engineering SA and may in no way be taken to reflect the views of the EU or EBRD

FINANCING SUSTAINABLE ENERGY This course covers five themes...

2 Dec. 2012 RoSEFF - EU EBRD Romania SME Sustainable Energy Finance Facility

FINANCING SUSTAINABLE ENERGY

1. Why Sustainable Energy? o What is Energy Efficiency? What is Renewable Energy? o Why banks and their clients need to understand sustainable energy




2. Typical Energy Efficiency Investments o Industry – Machines/Production – Combustion – Cooling – Processes Buildings – Energy Management Systems – CHP – Heat Pumps





3. Typical Renewable Energy Investments o Renewable Heat: Solar – Biomass – Biogas – Biofuels – Geothermal o Renewable Electricity: Wind – PV – Hydro – Bio – RES-E Economics






4. Economics of Sustainable Energy o Cash Flow – DCF – NPV – Payback – IRR Sensitivity Analysis o Balance Sheet Financing – Project Financing – Third Party Financing







5. Subsidies for Sustainable Energy o Green Certificates – White Certificates – EU ETS – Structural Funds o Cogeneration Bonus – Casa Verde – EEFF and RoSEFF


SO LET'S BEGIN!







WHY SUSTAINABLE ENERGY?


WHY SUSTAINABLE ENERGY?

Safe, clean and sustainable – a major challenge for the 21st Century • Meeting needs for heating, cooling, electric power and transportation

• without causing harmful repercussions for future generations

• displacing fossil fuels – on which we are today overwhelmingly dependent

The good news is that we understand the problems of fossil fuels... • cost – we need to dig deeper and travel further to find oil, coal and gas

• geopolitics – as lowest cost fossil fuels are far from energy markets, can lead to crises and conflicts

• environment – as evidence mounts of negative impact the health of both humans and our planet

... and we know the solutions to lower our fossil fuel dependence • energy efficiency – doing more with less

• renewable energy – capturing inexhaustible resources from the sun, earth, wind and water

• behavioural change – finding ways to avoid energy use without adversely impacting quality of life.


WHY SUSTAINABLE ENERGY TRAINING?


... a lending opportunity for banks

An investment opportunity for companies...

WHY SUSTAINABLE ENERGY TRAINING?

Practical approaches to meet our day-to-day energy needs • Enabling companies and their financiers to identify solutions that work

• We discuss equipment–based investment decisions that typical companies face today

Commonly–used financial and technical solutions

• Financial solutions – balance sheet financing, project financing, third-party financing

• Technical solutions to power, equip, light, heat and cool factories, offices and buildings to

• We do not cover uncommon, emerging or intangible solutions... ... for example, tidal energy, fungus-based fuels and telecommuting are not covered in this course

Helping banks to meet their customers emerging needs

• Opportunity for companies to lower production and operating costs through sustainable energy

• Opportunity for manufacturers and suppliers of sustainable energy products to sell more

• Opportunity for banks to help these companies meet their business needs through financing


WHAT IS ENERGY EFFICIENCY?

Doing more with less



Nobody really wants energy (a kWh) – we want energy services

• Warm buildings during the winter / cool buildings during the summer (A happy workforce!)

• Industrial production lines that produce quickly, efficiently at lowest possible cost

• Power to run all our machines, tools, equipment, lighting, gadgets and vehicles

Typical energy efficiency investments include:

• For buildings – boilers, heating systems, cooling systems, lighting systems, thermal insulation of the

walls and roof, double–glazed windows and doors.

• For industry – better production lines, replacement machines, electric motors, controls, ovens,

heaters, chillers, compressors, cogeneration of heat and power, sophisticated control systems,

industrial boilers and much more – as well as all of the buildings–related investments listed above – as

industrial production also takes place in buildings!



Energy Efficiency is compatible with raising industrial production levels

• Specific Energy Consumption (S.E.C.) is an important indicator for manufacturing industry

• It means energy consumption per brick – or per loaf – or per widget manufactured

• If industrial production doubles and the energy bill stay the same, then S.E.C. has improved by 50%.

• For some industries, this can make a substantial impact on lowering production costs.

Energy Efficiency is not the same as Renewable Energy

• 'Muddling' these concepts is extremely common

• Energy Efficiency is about finding ways to do all the things we want to do using less energy

• Renewable Energy is about finding ways to capture naturally occurring energy resources.


WHAT IS RENEWABLE ENERGY?




FIRE

Solar thermal

Solar photovoltaic

EARTH

Biomass, biogas, bio-fuels

Geothermal energy

WIND

Wind power

WATER

Hydroelectricity

Tidal energy


Earth • Biomass - biological materials that grow in the ground, such as crops, straw, wood. • Biogas – from biomass, including animal waste; and bio-fuels – biodiesel and bio-ethanol • Geothermal energy. There are two basic types – hot water from deep underground wells that

has been heated by naturally occurring magma and low-temperature ambient warmth near the surface that is captured using ground-source heat pump systems.

Fire • Solar thermal – typically meaning solar hot water, but also solar heat (e.g. for crop drying). • Solar photovoltaic (PV) – meaning solar electricity

Wind • Wind power – is increasingly popular as turbines costs fall, reliability rises and electricity prices rise

Water • Hydroelectricity – there are two kinds of hydro power stations – using dams which capture water

and release it onto turbines in a controlled way; and run–of–river which capture the natural flow. • Tidal and wave powered electricity production also fall into this broad category.



Some renewable energy sources are 'pure renewables' • such as solar energy and wind which produce no emissions at all;

Others are 'carbon neutral' • such as biomass, which absorbs CO2 in growing and later emits CO2 when burned, in a natural cycle.

Others are 'quasi renewable' • such as heat pumps – which require electricity (typically from the power grid) to work the pump

These distinctions are not always important for an investor • Except where they impact the economics of the investment... • ... as are highlighted in the detailed renewables sections of this training course



The economic value of RES is linked to how it may be used • RES economics are impacted by the cost of the conventional energy source it displaces • Generally, RES that displace high cost sources like electricity or motor fuels are higher value products

Heat • Through combustion – e.g. burning logs, pellets, other biomass for heating and hot water

• Through solar gain – most typically solar collector on the roof

Electricity • Normally known as RES-E in the energy industry • Power production – hydroelectric, wind and photovoltaic • Cogeneration of heat and power from bio-energy (biomass, biogas, biofuels)

Motive power • Bio-fuels are now mainstream – for example, all diesel sold in the EU contains some biodiesel • Increasingly sophisticated bio-fuels – e.g. for aviation – are on the way. • Economic solar-electric vehicles are still some way in the future.


SE, BANKS AND THEIR CLIENTS NEEDS

Demand for

investment

financing for

Sustainable Energy

growing fast in

Romania


SE, BANKS AND THEIR CLIENTS NEEDS

Business clients of banks need Sustainable Energy solutions • Not only to 'get ahead'... but increasingly just to 'remain competitive'...

• ... as competitors – in Romania and abroad – are adopting sustainable energy

Non-business clients (e.g. municipalities) also want to invest • to meet environmental targets and/or minimise energy costs and or meet political objectives

• such as thermal rehabilitation of apartment blocks – which has become politically 'fashionable'

Banks need to able to service customers financing needs • Understand how to use existing financing products –to finance sustainable energy

• Develop new financing products – for significant new areas of business

• Develop enough technical understanding to be able to take a financing decision

• (This training course is designed to help banks to understand their clients sustainable energy needs!)


SE, BANKS AND THEIR CLIENTS' NEEDS What financial decision-makers need to know about...

Energy Efficiency • Many investments feature a clearly identifiable and often short term positive financial return.

• Financial savings from lower energy bills provide a revenue stream to service the loan.

• Monthly energy cost savings persist (continue to save energy/money) after the loan is repaid.

• May also feature non–energy benefits – such as increased productivity, better quality and other

benefits associated with replacing older machines and production lines.

• There are often non-financial benefits – such as warmer, more comfortable, better lit, more

productive and overall better working environment for employees.

Renewable Energy • Typically a more capital–intensive, longer term investment than energy efficiency

• Becomes increasingly profitable over time, as energy costs rise but 'free energy' remains free



1. Why Sustainable Energy?

o What is Energy Efficiency? What is Renewable Energy? o Why banks and their clients need to understand sustainable energy






TYPICAL ENERGY EFFICIENCY INVESTMENTS

Many companies have lots of

economically attractive energy

efficiency investment

potential

Far fewer recognise this potential, and

act upon it.


TYPICAL ENERGY EFFICIENCY INVESTMENTS

Economically attractive EE investment opportunities... are everywhere! • Most companies have them – but far fewer recognise, or act upon, this cost–saving potential.

• An energy audit – or even a simple ’walk–through' by an EE engineer can identify 'low hanging fruit’

Typical EE investments are reviewed in this course • Lighting – energy efficient solutions for outdoor and indoor systems

• Machines – ranging from simple motors to entire industrial production lines and their components

• Hot Stuff – how boilers ovens and furnaces can represent energy saving opportunities

• Cool Stuff – covering cooling, chilling, freezing and air conditioning

• Buildings – keep them warm in the winter and cool in the summer – at minimum energy costs

• Energy Management Systems – relatively low–cost, extremely effective management tools

• Cogeneration – why producing your heat and power can be a compelling investment opportunity

• Heat Pumps – we shed some of the mystery that surrounds heat pumps


LIGHTING

All businesses need light!

Most businesses can:

1. save energy

2. save money

3. improve lighting quality

by investing in low–energy lighting solution


One of the simplest, most cost effective ways to save energy

LIGHTING – L.E.D.

LED lights have become the default ‘energy efficient solution’ • LEDs – or Light Emitting Diodes – are tiny solid–state low-voltage DC electronic devices

• LED lamps up to hundreds of individual LEDs can replace almost any traditional lamp.

• Costs – higher unit cost than low–cost solutions such as Sodium Vapour lamps.

• Benefits – electricity savings of 50–90%, high quality light, very long lifetimes, environment friendly

Economics – when considering replacing a lighting system, consider • Lamps, fittings, maintenance and electricity costs over 15 years

• Compare multiple ‘short–lifetime’ lamps against fewer or a single ‘long–lifetime’ lamp

• Electricity costs, including outlook for future electricity prices

• Maintenance costs – including personnel cost of replacing lamps in difficult to reach places

• Intangible benefits that may lead to better productivity – such as better lighting for employees


LIGHTING – L.E.D.

LED lighting is now the default Energy Efficient Outdoor Lighting Solution


Sodium

Note that the traditional way of comparing lighting technologies - 'Lumens per Watt' (L/W) – does not work for LED lighting. LED provides lighting that humans see better - with lower L/W. For details, read about LEDs and scotopic vs photoptic vision.

LED

Images reproduced with the kind permission of Kardings – www.kardings.com

LIGHTING – CONTROLS Sophisticated

lighting

controls can

cut lighting

costs by

30% – 80%!


Even a simple day-night control can slash energy costs!

LIGHTING – CONTROLS

Day/night sensors (simple) • Low–cost ‘on off’ devices, which respond to the presence of daylight.

Lighting intensity sensors (sophisticated) • Regulate according to ambient light, using lower cost photodiodes or more costly photoconductors.

Daylight control systems (more sophisticated) • Opening and shut blinds and add electric lighting as required, to meet defined lighting parameters.

Presence sensors (a.k.a. ‘occupancy sensors) • Motion detectors with control units that switch lights on and off.

• Technologies - Passive infrared (PIR), or more expensive ultrasonic sensors that 'see' around corners

• Good for spaces that are used intermittently such as copy rooms, rest rooms

Dimmers (simple or sophisticated) • May be manual, or tied into automated daylight control systems.

• Note: not all lamps are dimmable – so check before you invest!

• SX


LIGHTING – CAPTURING THE SUN

Sunlight through the window... • ... is the most common form of ‘no energy lighting’

• We will assume that you already familiar with this technology!

Light pipes (light tubes) are not so well known!

• Brings sunlight into the heart of buildings

• For rooms that must otherwise be lit artificially during the day

• Lights dark rooms in deep in the heart of large office buildings

• Lights dark areas of factories - far from the windows

• The tubes use highly reflective materials.

• A diffuser spreads ‘natural sunlight’ into the room.

• Associated with health and productivity benefits of 'natural light'

SX


Images reproduced with the kind permission of Monodraught – www.mondraught.com – and NaturaLight – www.naturalight.ro

LIGHTING – CASE STUDIES Efficient Lighting – a bright idea!


L.E.D. = Low Electricity Bills – Q.E.D. Electrotel of Alexandria makes low and medium voltage electrical equipment

• Replaced low efficiency lamps with L.E.D. lighting • Also insulated production building, solar-assisted hot tap water • Overall energy savings 37% (68% for the L.E.D. component!)

Financed using an EEFF credit of 557,000 Euro

Sunshine deep in the heart of the factory! Mirfo of Târgu Jiu manufactures machine tools and welded sub-assemblies

• Modernized a boring machine and two overhead cranes • Introduced an innovative natural day-lighting system (pictured)

- bringing energy savings, health and productivity benefits • Overall energy savings – 39%

EEFF credit of 329,000 Euro from this 411,000 Euro investment

MACHINES


Replacing machines can bring

substantial energy savings

It is sometimes even cost

effective to replace an entire

production line rather than

continue to use old, energy-

inefficient technologies and

techniques.

ELECTRIC MOTORS 70% of

electricity use

by industry in

the EU is for

electric

motors!


ELECTRIC MOTORS

70% of electricity use by industry in the EU is for electric motors! • Source: EC Regulation 640/2009 with regard to eco–design requirements for electric motors.

Identifying a better new motor is easy - all are energy efficient! • ‘Standard efficiency’ (IE 1) motors were banned in the EU from 16.06.2011, so all new motors are:

• ‘High efficiency’ (IE 2) – avg. 89.4% efficient; or

• ‘Premium efficiency’ (IE 3) – avg. 91.0% efficient.

Rule of Thumb: Replace old and oversized motors immediately! • It’s always a good investment, and usually pays back very quickly

• Consider 'premium efficiency' motor – but look at the economics – as may or may not be worthwhile

• Consider cost difference of 'premium' vs' 'high'; load profile; electricity costs – and calculate savings.

• If a motor is for regular or continuous use, 'premium efficiency' may be a worthwhile investment;

• If a motor is used occasionally, economics of a cheaper, 'high efficiency' model may be better.

• SX


ELECTRIC MOTORS A Variable

Speed Drive

can

dramatically cut

electricity use

by an electric

motor


+ VSD

ELECTRIC MOTORS WITH VSDs

VSDs can lower electricity use of electric motors by 20 - 70% • Variable Speed Drives regulate the speed and rotational force (torque) of a motor • Low–cost, simple and robust technology. • Drives the motor at a speed that matches the need

Very simple concept • A motor without a VSD – takes as much electricity that it can! • A motor with a VSD – takes only the electricity that it needs!

Rule of Thumb: If the load is variable, use a motor with a VSD. • Always a good investment, and usually pays back very quickly • Consider installing VSDs for electric motors within pumps, agitators, fans, crushers, centrifugal

compressors, grinders, mixers, lifting and handling equipment, conveyors and more...

Adding a VSD is far more important than the selection of the motor • There is only 1.6% efficiency difference between 'high efficiency' and 'premium efficiency' motors... • ... but the electricity savings from fitting a VSD can be huge


ELECTRIC PUMPS Replacing

oversized

pumps is a

simple and low-

cost way to

lower electricity

bills


ELECTRIC PUMPS

Replacing pumps is a simple, low cost way cut electricity bills • A pump is a device used to move fluids such as liquids, gases or slurries by mechanical action. • Part of our everyday lives in businesses, buildings, households and industries.

Pumps use an enormous amount of power • Typically in the range of 10% to 20% of national electricity demand of EU countries is for pumps • So one of the most important technologies in terms of improving energy efficiency.

Checklist for lowering energy consumption from pumps • Service existing pumps (simple, low cost) • Review the entire fluid system, to pinpoint and eliminate pinpoint the system inefficiencies • Reduce unnecessary demand for the pumped fluid • Check pump capacity – If oversized, replace • Pump throttling controls – install variable–speed drives • Impellers – If less efficient, change impeller • Pump motor – if inefficient, replace with high or premium efficiency motor. • Typical electricity savings – 30% – 50%


INDUSTRIAL PRODUCTION LINES (and their component parts)

Industry

accounts for

one third of

global energy

use and almost

40% of CO2

emissions


INDUSTRIAL PRODUCTION LINES (and their component parts)

Energy efficiency is rarely the driving force for investment in machinery • Production lines are replaced or improved to enhances competitiveness, raise productivity etc... • ... but it is also a tremendous opportunity to save energy.

A production line usually contains multiple energy-saving opportunities • Boilers – ovens – kilns – compressors – machines – chillers – motors – heat recovery... • ... in some cases, even replacing the entire production line can be worthwhile

Energy audits are good way to identify cost–effective investments. • May be a formal study, or a simple walk–through by an engineer who specialises in energy efficiency • Companies should not assume that their internal engineers will recognise energy saving potential

Lower production costs and energy efficiency go hand in hand • Remember Specific Energy Consumption (lower production costs per brick – per loaf – per widget). • A well–designed EE investment often both raises production levels and lowers SEC.

Mind set – industrial capital investments are energy–saving opportunities! • Replacing any machine = energy efficiency investment opportunity!


INDUSTRIAL PRODUCTION – CASE STUDY


Energy-efficient extruders Indra of Târgu Mureş, who manufactures plastic foils:

• replaced one of its five extruders.. • ...lowering specific energy consumption by 42%

EEFF credit of 360,000 Euro from 400,000 Euro investment

Energy-efficient moulding machines Sterk Plast of Constanţa, who manufactures household plastic items:

• bought an injection moulding machine and blow moulding machine • payback – less than two years. • monthly energy savings more than costs of servicing the loan

Financed using an EEFF credit of 345,000 Euro.

AGRICULTURE & FORESTRY, FOOD & DRINKS

A simple investment like

a new tractor can bring

substantial diesel fuel

savings and productivity

gains for farmers


AGRICULTURE & FORESTRY, FOOD & DRINKS

Agricultural and forestry sectors • Agricultural crops, rearing animals and related sectors such as food processing • Forest harvesting and related sectors such as wood processing • Investments include better tractors, thermal insulation of agricultural buildings, better drying systems,

heating systems for greenhouses, better irrigation systems and more

Food and drinks processing sector • including related sectors such as milk, soft drinks, wine and beer • a wide range of energy efficient ways for cooking, drying, cleaning, processing and handling raw, semi

processed and processed foods.

Energy Efficiency and Renewable Energy investments go hand in hand • The Agricultural sector also features a range of Renewable Energy investment opportunities. • Agricultural waste and energy crops for biomass, bio-fuels and biogas production • These topics are covered in the Renewable Energy section module of this training course.


AGRICULTURE – CASE STUDIES

Blooming energy savings Fresh Flowers of Lehliu Gară, Calaraşi – is Romania’s largest tulip grower

• replaced the greenhouse heating system • built a better-insulated cold storage unit • achieved 28% energy savings


Hatching some energy savings Avicola Găeşti from Bucureşti, an egg producer

• replaced its feeding, ventilation, cooling and air inlets systems, • upgraded the lighting system and • installed new egg collection and control systems,

lowering energy consumption per egg by 63%. Used an EEFF credit of around 1.1 million EURO


FOOD SECTOR – CASE STUDIES


Sweet energy savings... Lemarco Cristal of Urziceni, Ialomiţa – a sugar processor – invested in:

• a steam plant, a conveyor system, a packaging plant... • a water system a compressed air system, capacitors • ... bringing 37% energy savings

EEFF credit of 1.3 million Euro

Crunchy energy savings! Pufulete of Buşag, Maramureş – produces corn puffs coated with oil and salt

• retired two older extrusion machines • bought a new, larger, more energy-efficient model... • ... so energy use ‘per corn puff’ fell by 44%

EEFF credit of 180,000 Euro

DRINKS SECTOR - CASE STUDIES

Savouring the economic benefits of energy efficiency Vincon, a winemaker used the EEFF for a wide range of items in 10 working locations, such as:

• wine pumps, winemaking machines, pneumatic presses • a heating-cooling installation, bottle blowing machine • … averaging 56% energy savings.

The investments were financed with an EEFF credit of around 1.2 million Euro

A sparkling case of energy efficiency Bucovina carried out two energy-efficiency related investments

• replacing an ozone generator • modernizing a bottling line • environmental emissions fell by around 22%

The company used an EEFF credit of 342.000 Euro


WOOD PROCESSING SECTOR – CASE STUDIES

Cutting the bill Robinia, Oradea - who cuts and sells timber - used the EEFF to replace an old log cutting machine:

• wood cutting capacity rised substantially • while lowering electricity consumption by 69%.

This investment was fully-financed with an EEFF credit of 150 000 Euro.

Grinding, milling, shaping and beyond... Plimob, Sighetu Marmatiei made a range of energy-saving improvements:

• a new milling machine for combining parts • replacement of the exhaust installation with an advanced sealing system • a new mortising machine for chairs • fully automated robotic varnishing in an electrostatic field

The investment was financed using an EEFF credit of 738.000 Euro


HOT STUFF AND COOL STUFF

Perhaps the most ‘obvious’ energy–saving

investments

are

where combustion takes place.

and

where freezing or chilling take place


BOILERS


Boilers are... everywhere!

Most buildings have a boiler

Many manufacturing industries

also use boilers for process heat, hot water and/or steam

BOILERS – HOW TO SAVE ENERGY

Change the old boiler or burners - as efficiencies can be as low as 55% • A new conventional boiler is up to 94% efficient – and a condensing boiler up to 105% efficient • Modern, sophisticated burners are a low cost alternative to replacing a large boiler

Insulate or refurbish large industrial boilers. • Can use huge quantities of energy – so a small % saving can bring huge financial savings

Switch fuel • From high-cost electricity to natural gas; or from gas to very low–cost, sustainable wood

Fit solar collectors to hot water systems • Lowers fuel needs throughout the year, and may eliminate them during the summer.

Use infra–red gas heaters instead of boiler-based heating • Heat people and objects – so good for localised areas of large buildings such as industrial halls

Install cogeneration – so no longer need a boiler • Generate your own electricity with a unit that exhausts heat as a 'free' waste product

Insulate the building, and install a smaller boiler • As an oversized boiler wastes energy and money


OVENS, KILNS, FURNACES – ENERGY SAVING

Install automation and handling devices

• Increase the throughput of baked materials without raising energy use • This solution can work for food, ceramics, bricks, glass... whatever

Insulate and optimise the oven or kiln

• this is a specialist area of engineering, which normally requires a study... • ... but the financial rewards can be very high.

Consider changing the technology entirely • Replace flame based metalworking technologies with modern plasma or laser systems • Can bring enormous productivity and energy saving gains


FORGING AND CASTING – CASE STUDY


OVENS, KILNS, FURNACES – CASE STUDIES

A hot way to save energy Metalul Mesa of Salonta, who makes forged steel parts and specialist tools

• installed an inductive heating technology... ... to replace old, inefficient gas furnaces like this one • and replaced old air compressors with a single new compressor • achieving energy savings of more than 70%

Financed with an EEFF credit of 86,000 Euro

A simple-and-effective way to bake some energy savings Pion of Mediaş, Sibiu bakes cakes, pastries, cookies, sweets and wafers

• replaced a conventional wafer baking line with an automatic one... • lowering energy consumption per wafer by 64%

Financed using a 239,000 Euro EEFF credit.


COOLING, AIRCON, CHILLING, FREEZING


Many industries and buildings

need sources of cold water and cold air, which can be

‘energy hogs’.

There are frequently economically attractive low–

energy cooling solutions

COOLING, AIRCON, CHILLING, FREEZING

Heat can produce cold!

• Waste heat can be a most cost–effective source of cooling.

Heat creates cold using absorption chillers

• So when an engineer identifies a need for cooling, the first thing to look for is a low–cost source of heat – ideally waste heat – and transform into cold

• Even producing heat for cooling using natural gas can be more cost–effective, environmentally friendly solution than electric cooling solutions.

Electricity creates cold using compression chillers

• Generally a less energy efficient, more costly way to chill

• p


+ A =

REFRIGERATION AND FREEZING

Refrigerators and freezers typically run 24 hours/day, 365 days/year • Can represent huge opportunities to save energy and money • Older refrigerators and freezers can be very energy inefficient

Commercial energy efficient appliances are hard to identify • ‘Caveat emptor!’ – there is no standard way of identifying an energy efficient commercial appliance! • Supermarkets and food processors can be ‘fooled’ into unwise investments • Low cost refrigerators and freezers can turn out to be ‘energy hogs’.

Domestic energy efficient appliances are easy to identify • EU energy labelling legislation has taken the risk out of buying small appliances • A+++ refrigerators and freezers consume only 40% the energy of an A class model

The future... • Energy efficiency labelling has been extremely successful in raising appliance performance standards • EU announced plans to extend labelling from domestic to commercial appliances... • ... but plans are at an early stage – are likely to take several years to implement


AIR CONDITIONING

Air conditioning, building insulation and shading go hand-in-hand

• Insulation and windows = warm in winter and cool in summer • Can make a bigger impact on cooling bills than the choice of air conditioner • Shading – blinds, jalousies, natural shading – all help to minimise cooling costs

Industrial air conditioning • Split variable speed (inverter) air conditioners are most energy-efficient • For a more efficient model, look for these technical characteristics:

• Energy Efficiency Ratio cooling function of at least 5.63... • Coefficient of Performance (COP) heating function of at least 5.68.

Domestic air conditioners… note that ‘A rated’ is not the best!

• Ratings of up to A+++ were introduced in 2011… • … but in 2012, it was difficult to find anything higher than ‘A’ in Romania

SX


COOL STUFF – CASE STUDY

If it’s cold – it’s an opportunity to save energy A cool way to save energy Kubo Ice Cream Company, who makes ‘Amicci’ Ice Cream

• retired a freon-based cooling system... • ... and introduced an ammonia-based cooling system • yielding both environmental benefits and energy savings

EEFF credit of approx 1.1 million Euro


BUILDINGS


Warm in the Winter

Cool in the Summer

Investing in improving the energy efficiency of buildings

BUILDINGS


Investment in thermal rehabilitation 'comes of age' Hundreds of apartment buildings in Romania are being insulated

BUILDINGS

Pre-1990 buildings can be very energy inefficient • Were constructed with little regard for energy efficiency • Even after 1990, energy prices remained low... • ... too low to make investment in improving the building envelope economically attractive.

... but all this has changed... • In recent years the cost of heating (and cooling) buildings have risen dramatically • There has been an explosion of demand for insulation products • 'Termopan'* windows and doors and polystyrene insulation are now big business

Insulating buildings is now a substantial business opportunity • And hence a potential lending opportunity for banks.


* The Romanian word 'termopan' is used rather than the typical English expression for sealed glazing units which is 'double-glazing'. This expression can be misunderstood in Romania, where old windows typically consist of 2 x separate single-glazed frames.

JARGON BUSTER!


Thermal Resistance

Thermal Transmittance Thermal Conductivity

Insulation and glazing engineers talk about conductivity,

resistance, transmittance, 'R values' and 'U values'.

Here is a plain language

investor's guide to the technical jargon!

JARGON BUSTER! (insulation and windows)

Thermal Conductivity – which may be expressed as λ (lambda) • Polystyrene with the poorest insulating properties has a λ of around 0.044 W/mK • Polystyrene with excellent insulating properties a have a λ of around 0.031 W/mK • Very high quality building insulation board has a λ as low as 0.022 W/mK • So better insulating products achieve a lower λ

Thickness (cm) is important! – as 10cm insulates twice as well of 5cm of the same material

Thermal Resistance • Depends on both thickness (cm) and thermal conductivity (W/mK) • This is the ‘R Value’ (m2K/W) • Better–insulating products have a higher ‘R Value’ • Suppliers of wall insulation usually refer to the 'R Value'

Thermal Transmittance • Also depends on the thickness (cm) and thermal conductivity (W/mK) • This is the ‘U Value’ (W/m2K) • Better–insulating products have a lower ‘U Value’ • Suppliers of termopan glazing usually refer to the 'U Value'


JARGON BUSTER! (insulation and windows)

... continued So now we know all the key terms

• Thermal Conductivity – which may be expressed as λ (lambda) – is measured in W/mK • Thickness – which is important – is measured in cm • Thermal Resistance - the ‘R Value’ – is measured in m2K/W and used by the insulation industry • Thermal Transmittance – the ‘U Value’ - is measured in W/m2K and used by the termopan industry

'R Value' and 'U Value' are the same thing from a different perspective! • 'R' value is tells us how well a material prevents heat transfer • 'U' value is tells us how well a material allows heat transfer • 'R value' is the inverse of the 'U value' – so R = 1/U • 'U value' is the inverse of the 'R value' – so U = 1/R

And what are the units? • W is a Watt; m2 is a square metre; K is temperature using the Kelvin scale.


BUILDING INSULATION

Lower energy bills are not the only benefit of building insulation!

Cost–benefit analysis – Costs can be high • Costs of building renovation can be high • Energy cost savings typically 10% to 50% – which is a very large range… • … so some investments repay quickly – others take many years

Cost-benefit analysis - Benefits are multiple • Winter heating cost savings • Summer air conditioning savings (insulation ‘keeps the cold in’ too!) • Raises the market value of the building – probably by much more than the cost of the works • More comfortable, better lit, happier, more productive workforce • Avoided maintenance costs associated with dilapidated buildings

Insulation, heating and cooling should be considered at the same time • Heating and cooling needs change when a building has been insulated • Draughty, poorly insulated building need bigger heating and cooling systems • After insulation, existing heating systems may be oversized – so less energy efficient!

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BUILDING INSULATION

Insulation – how much insulation should be fitted? • There is no straight answer to this, but investors should remember three things • 1. Don't under–insulate!

• You insulate once in a lifetime, and labour is a significant costs – so don't 'skimp' on insulation. • 2. Don't over–insulate!

•Too much insulation can cause condensation and damage the building. • 3. Seek professional advice!

The choice of insulation materials – quality matters • Do not delegate to a turnkey contractor with an economic incentive to choose the cheapest • Example - 10cm of highly–specified expensive polystyrene is better than 15cm of cheap polystyrene

Choice of ‘Termopan’ windows and doors – workmanship matters • Beware of poor quality, badly specified, poorly fitting units – which save less energy • Beware of small, poorly equipped local assemblers of 'reputable', well-known window brands. • Keywords – look for Low–E glass; argon gas; number of chambers should be at least 4 • Find a reliable, experienced contractor – as windows have to be fitted correctly


BUILDING INSULATION

Industrial buildings – insulation issues are a little different • It can be impractical/undesirable to adequately heat all of a very large heavy industrial building... • ... especially if large parts of the building are normally unoccupied • ... and also if there are many entrances that are regularly used

Localised heating in very large buildings • Insulated sandwich panels are a low–cost, rapid energy saving solution • Can partition off areas of buildings to be heated • May use heating sources suited to small areas of large buildings – such as infra-red gas heaters

Roof lights (skylights, scuttles) • Large roof lights let more light, but let heat escape - so invest in well–insulated products.

Insulated roller doors, air curtains and more... • Finding the optimal solution for a large industrial building really requires a buildings energy audit


BUILDING INSULATION – CASE STUDIES

Modernisation and energy efficiency go hand-in hand Hotel Olanesti became the very first hotel to use the EEFF in:

• thermal insulation of the building envelope, • a solar–assisted hot water system, • replacing the burners of two boilers • switching from light fuel oil to natural gas.

The company signed a 663 000 Euro EEFF credit.

Electrifying lower energy savings Electroprecizia, manufacturer of electric engines and electric and electronic equipment for vehicles:

• modernized the external lighting system • thermal rehabilitation of the production building, • achieving 48% energy savings

The company used a 1.2million Euro EEFF credit


BUILDING RENOVATION – CASE STUDY


SHADING


A simple and natural way to lower cooling costs for

buildings

SHADING

Shading is the simplest way to lower a building's cooling needs! • Directly contributing to the insulation of the facade of a building, and also managing natural light. • Well–designed systems block direct sunlight but admit enough indirect/diffused light for illumination • The energy saving potential of this inexpensive technique is often overlooked.

Blinds and jalousies stop and reflect sunlight before it reaches glazing

Window film is another relatively low–cost form of shading • May be suitable for south–facing windows of buildings that are cooled are summer days. • Permanently lowers solar gain – so lower cooling bills in summer – but higher heating bills in winter! • Cooling savings may exceed additional heating costs... but get an energy audit before investing • See European Window Film Association – www.ewfa.org

Plant trees to shade south–facing windows! • Simple, natural, effective shading solution! • Nature even kindly removes the leaves for you every autumn… allowing winter sunshine through!


http://www.ewfa.org/

EMS AND BEMS


Energy Management Systems

and

Building Energy Management Systems

BUILDING ENERGY MANAGEMENT SYSTEMS

BEMS are integrated computerised systems with specialist software • Known as BEMS (Building Energy Management Systems) or BMS (Building Management Systems) • BEMS is used if system manages only energy – e.g. heating, ventilation, cooling and illumination. • BMS is used if system also manage non-energy systems such as access control and video surveillance

Hotels are a popular application of BMS • Keycards for rooms turn off the lights and t.v. - but allow the refrigerator to keep running!. • Rooms are climate controlled when occupied – but not when empty • Air conditioners turn off automatically when the window is opened

Large buildings – offices, shopping centres – may benefit from a BMS • Shopping centres, offices... or any large building can benefit from installation of a well–designed BMS

A well-designed BMS may cut a building's energy bills by 10%


INDUSTRIAL ENERGY MANAGEMENT SYSTEMS

EMS can lower energy consumption across an entire factory

• Similar in principle to a BEMS – precisely monitor and optimise energy consumption... • ... but for motors, pumps, ovens, heaters, compressors, coolers, chillers and other industrial facilities.

EMS are tailor–made systems, typically comprising: • Metering and measuring devices – to determine exactly how energy is being used • Optimisation and control devices – to change how energy is being used • Management techniques like ‘monitoring and targeting’ – to find new ways to save energy • Specialist EMS software – to manage the system

Economics of EMS/BMS works differently than for other EE investments • EMS/BMS can impact an entire factory or building – not just a single energy consumer. • 10% energy savings may be a modest percentage as compared to other types of EE investments... • ... but can represent huge savings, as it may apply to an entire facility or building


COGENERATION


Cogeneration – or

Combined Heat and Power (CHP) – is the production of

electricity and heat in a single process.

A well designed CHP unit the

right location can cut electricity and heat costs by almost 40%

Industrial cogeneration units may arrive in – and operate from – a

shipping container, from where they can service an entire factory.

CHP CAN BE A VERY ATTRACTIVE INVESTMENT

To understand cogeneration economics... • ... it is necessary to first understand a little about the electricity system.

Amazingly, some 70% of primary energy to make electricity is lost! • Meaning lost in transformation in the power station and network - before it reaches your power socket • Of course, the power generators and distributors have to make a profit... • ... so the 30% that arrives has to be extremely expensive.

Electricity produced on–site in cogeneration avoids this kind of loss • Typically, the plant is fuelled using natural gas and the latest technologies; • There is no transmission – so no transmission losses; • The power companies are not involved – so all the economic benefits are internal.

The ‘cherry on the cake’ is the exhaust heat

• Instead of being lost at a remote power station – it may be used locally • Steam or hot water feeds into the investors factory or building– eliminating the need for boilers • It is – effectively – free heat.


CHP CAN BE A VERY ATTRACTIVE INVESTMENT

Economics of CHP • Not all industrial sites and buildings are suitable for CHP... • ... but for sites with the right profile, CHP can be a compelling investment opportunity

Characteristics of a good CHP investment opportunity • Demand for heat should be as constant as possible throughout the year • The extent to which that demand varies, from day to day and hour to hour, should be low • A local need for power is desirable but not so relevant – as power may be sold into the grid.

Rule of thumb – how to determine if CHP is a worthwhile investment • 8,760 hours of heat demand per year (24 hours x 365 days) – VERY attractive – up to 40% savings! • 6,500 hours of head demand per year – likely to be a good investment opportunity • 4,500 hours per year – may be worthwhile, but don’t expect stratospheric financial returns. • 4,000 hours per year and below – less likely to be an interesting investment opportunity


SEVEN FACTS ABOUT COGENERATION

1. Most CHP systems use natural gas • But may also use liquids, refinery gases, landfill gas, biogas, biomass, agri-waste, forest residues...

2. There are two main CHP technologies • Gas turbines (larger) and gas engines (smaller)

3. Tri–generation – means electricity, heat... and cooling • An absorption chiller typically sits above the unit, converting heat to cold

4. Industrial CHP is typically operated from a shipping container • Financiers like this – as if the client defaults on a loan, can drive away and use elsewhere

5. Typical applications include • Pharmaceuticals, paper, brewing, ceramics, brick, cement, chemicals, food, textile, minerals • Commercial buildings - hotels, airports, offices, malls. Public hospitals, universities, district heating.

6. User inexperience is the main technical risk • A CHP unit is, after all, a small power station, so usually not a core business of the owner

7. An economic downturn is the main economic risk • Anything that prevents all the heat being needed can undermine the economics of the investment


CASE STUDIES – (CO)GENERATION


Combined heat and power investment brings 30% energy savings Chimcomplex of Oneşti, Bacău – is a major chemicals plant

• replaced grid-based power and a conventional steam boiler... • ... with a cogeneration unit and a heat recovery boiler

his 10 million Euro investment included a 2.5 Euro EEFF credit

Power investment saves 55,000 tons of CO2/year OMV–Petrom’s site at Oprişeneşti, Braila has high-sulphur well gas

• A power generation investment • The ESCO SE-GES installed a power plant to use the gas... • ... make electricity to help meet OMV-Petrom’s power needs

SE-GES financing included a 1.1 million Euro EEFF credit

W?

XX

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HEAT PUMPS


A heat pump simply moves heat from A to B

The pump is just one component of

a large system of pipes etc.

Many people confuse ground-source heat pumps and geothermal energy

'Ground source' refers to the ambient temperature a few metres below us – which is broadly similar all

year round, and broadly similar wherever we happen to be.

'Geothermal' refers to warm water heated by hot magma deep in the earth – which only occurs in

some places, such as Oradea.

SX

... and to confuse matters further you will often find Ground Source Heat Pumps described in literature Geothermal Heat Pumps. Also, the Sustainable Energy community likes blog about whether Heat Pumps should be defined as Energy Efficiency measure or a Renewable Energy measure! There is no definitive 'correct' answer!

HEAT PUMPS

There are several types of heat pumps

Ground source heat pumps move underground heat into a building. • To help warm the building during the winter • To help cool the building during the summer • This is what most people mean when they talk about a heat pump system

Other kinds of heat pump systems are sometimes used in industry • Air source heat pump moves warm air (summer) or cold air (winter) from A to B • Water source heat pump moves heat or cold found in water from A to B

Example • a machine in a factory exhausts a lot of hot air (point A) • hot water is needed somewhere else in the factory at (point B) • … an ‘air to water heat pump system’ can move it from A to B • … avoiding need to heat water at point B, so saving energy and money

• SX


HEAT PUMPS There are two basic types of Ground Source Heat Pumps

• Horizontal systems – which require a LOT of land, but don’t need a very deep hole • Vertical systems – which require a VERY deep hole in the ground

Economic considerations • Heat pumps work best for building that have to be both heated and cooled • Much higher capital costs than electric heating and cooling… … but much lower operating costs

Installation is complex and sensitive to good design – so technical risk. • a well–designed system can provide low–cost heat/cooling for many years • a badly designed system can be a costly mistake.

The technology is 'fashionable' – so ‘market inexperience’ risk • a lot of new dealers have appeared who sell but have no experience of installation • so buyers should choose the supplier/installer carefully.

The ‘ground source heat exchanger’ is a major cost of the system • This is a rather intimidating technical term… … for what is actually just a very long plastic pipe!


HEAT PUMPS

Ground Source

Vertical systems need a VERY deep hole in the ground!


HEAT PUMPS

Ground Source

Horizontal systems need a LOT of land!


HEAT PUMPS

Other types

• Air–to–Air

• Air–to–Water

• Water–to–Air

• Water to-Water

• Ground-to-Air

• Ground-to-Water


Heat pumps save money by moving heat to cold areas and cold

to hot areas.


1. Why Sustainable Energy?

o What is Energy Efficiency? What is Renewable Energy? o Why banks and their clients need to understand sustainable energy






TYPICAL RENEWABLE ENERGY INVESTMENTS

Renewable Heat and Combustion • Solar • Biomass • Biogas • Biofuels • Geothermal

Renewable Electricity (RES–E)

• Wind • Solar PV • Hydroelectricity

+ Economic evaluation of RES-E • What to look for in a feasible investment


SOLAR HOT WATER AND SOLAR HEATING

Solar thermal collectors

capture heat – usually for hot water systems

May also produce warm air – e.g.

for drying crops

Do not confuse Solar Thermal (heat) and Solar PV (electricity)

• ‘Solar collectors’ = solar thermal • ‘Solar panels’ = solar PV



There are two 'mainstream' solar hot water technologies • Vacuum tube systems

• Most effective… and most expensive (but still quite cheap!) • A system in Romania may meet around 60% of annual hot water needs.

• Flat plate systems • Cheap, and only really work well during the summer… • ... so deal for vacation properties

Solar systems do not meet 100% of hot water needs • Must be tied into conventional hot water systems (electric, gas, wood etc.) • On warm days – the solar system may deliver 100% of energy needs • On cool days – solar cannot deliver required temperatures – need conventional boiler too • But even on cool days, the conventional boiler costs less to run… • … as water enters the system partially warmed by the solar collectors • So a ‘solar hot water system’ is usually a ‘solar assisted conventional hot water system’



Economics of solar hot water are simple • Technical risk is very low - technologies are established, proven, robust

• Solar systems are normally attached to conventional systems, so there is no risk of under–sizing and being left without a source of hot water.

• Typical annual performance is predictable - we know where the sun shines, and how much sunshine to expect in a typical year – so it is possible to rapidly calculate typical annual performance.

Typical applications are in buildings and industry

• Domestic hot water applications (washing) • Hotels – particularly those with high summer occupancy such as Black Sea resorts • Industry – especially the food industry – which has large warm water/cleaning needs

Other kinds of solar thermal systems – are not mainstream technologies • Concentrated solar power (CSP) systems reflect the sun’s rays to create heat... ... and sometimes are even used to create steam with which to make electricity.


BIO-ENERGY

If it grows,

and it

burns, it’s

Bio-energy


Biomass, Biogas, Bio-fuels

BIO-ENERGY

An ancient, simple, environmentally-friendly idea...

• Mankind has been burning biomass to keep warm since discovering fire

• 'Carbon neutral' – as bio-energy absorbs CO2 when it grows, and emits it when it burns... in a cycle


BIO-ENERGY

An ancient, simple, environmentally-friendly idea...

• Mankind has been burning biomass to keep warm since discovering fire

• 'Carbon neutral' – as bio-energy absorbs CO2 when it grows, and emits it when it burns... in a cycle

supported by

A modern, complex logistical chain, subsystems, processes, technologies • Growing crops; or collecting waste; or rearing animals • Harvesting or collection • Drying or processing • Transport • Storage • Combustion or conversion into other fuels such as pellets, briquettes, biogas, biodiesel, bioethanol • Utilisation of non–energy by–products.


BIO-ENERGY - TYPES

'Primary biomass' – forest and agriculture products • Firewood • Agricultural crop waste – corn husks, straw, sunflower seed shells etc. • Energy crops – grown specifically for biomass – willow, poplar, coppice, miscanthus

'Secondary biomass' • Processed wood – like briquettes, pellets, sawdust • Waste from industries like food, drinks, wood processing and paper

'Tertiary biomass' • Animal waste, animal manure, municipal solid waste

Biogas • To run boilers, or even cogeneration plants

Bio-fuels • Liquid fuels – used as motor vehicle fuels (biodiesel, bio-ethanol) or in boilers instead of fuel oil


BIO-ENERGY – WHO USES IT, AND HOW?

Households firewood (logs) • Household heating, water heating, cooking – still the most common form of bio-enegy use • May be used in an inefficient ‘sobe’ stove, or in a modern, efficient stove • Labour–intensive (need to fill up the wood stove or wood boiler)

Wood briquettes or wood pellets • Typically used by wealthier households or by businesses • More expensive fuels, but less labour intensive and more efficient combustion

Combustion by agriculture and industry • Specialised boilers, or standard boilers with specialised burners, for agricultural waste

Conversion into high–value products – biogas, electricity, bio-fuels • Animal waste and other biomass in anaerobic digesters become biogas • Biogas or biomass can be used to fire combined heat and power units • Bio-ethanol – e.g. from corn or sugar cane – is quite similar to gasoline • Biodiesel – e.g. from sunflower oil (or other crops, or animal waste) – for use in motor vehicles

• SX


BIO-ENERGY – PROS AND CONS

Advantages of biomass • Local, often low cost resource – widely available in much of Romania • Can be very cheap – usually much cheaper than using oil, natural gas or electricity • Environmentally friendly ‘carbon neutral’ energy source • Some biomass can be processed into high–value products (wood pellets, biogas, biofuels)

Disadvantages of biomass

• Bulky – has to be collected and transported from the field; • Large storage areas needed; • Some combustion technologies are complex (for more unusual crop waste); • Risk of escape or unpleasant odours; • Fear of negative impacts to rare species, wildlife and ecosystems; • Negative effects of dust residue to surrounding flora and fauna.


BIO-ENERGY – MAIN FINANCING RISKS

Biomass • Agricultural risk (bad harvest) • Risk of high transport costs if local availability of biomass changes. For example, an economic

assumption that sawdust is a cheap local waste product can be undermined if someone else buys up all the local sawdust to make briquettes.

• Fire risk – as fuel must be stored somewhere. • Environmental – "globally good"(carbon neutral), but "locally bad" (smoke, smell, dust) • Health risks – from particulates and partial combustion.

Biogas • Complex chemical processes involve multiple risks (see biogas page)

Biofuels • Risk is similar to that of any complex, capital intensive investment • Risk is mitigated by legal regulations for biodiesel to be added to automotive diesel... • ... so there is a ‘guaranteed’ worldwide market.


BIOMASS – CASE STUDIES Carbon-neutral technical solution Ardealul of Carei, Satu Mare refines edible oils and animal feed meal

• replaced two old steam boilers... • ... with a new sunflower seed shell-fired steam boiler • achieved 17% energy savings


Wood-fired ovens Moripan Alex, a manufacturer of bakery products:

• Retired two of four older small LPG-fired bread ovens • Installed a new, larger, wood-fired bread oven to replace the two

ovens that have been retired; • Installed an LPG-fired steam boiler to serve the new oven and the two

remaining small ovens.

The company used a 70 000 Euro EEFF credit to implement this investment


BIOMASS – ECONOMICS OF ENERGY CROPS

Economics of

growing

Miscanthus

as an

Energy Crop


For illustration - to show how the economics may work -

(Figures quoted are very approximate)

BIOMASS - ECONOMICS OF 'ENERGY CROPS'

An ‘Energy Crop’ is grown specifically for use as bio-energy • not agricultural by–product (waste product)

Advantages of energy crops: • May grow specific crops that are ideal for defined local applications or processes:

• For example, ‘energy willow’ is typically grown to use in small power plants (5-10 MW) • Other crops are good for other applications – such as making briquettes or pellets.

• May ensure large–scale local supplies with uniform characteristics • Some energy crops are well suited to land that is not suitable for agricultural crops

Energy crops are a ‘rich farmers’ crop • A ‘poor farmer’ needs revenue from selling the annual harvest to survive • A ‘rich farmer’ can afford to grow crops that do not generate immediate income... • ...and perhaps invest in processing the crop to add to its value.

Willow, poplar, coppice and miscanthus are typical energy crops



Investment • 2 200 Euro per hectare for Miscanthus root, plus land and farming costs.

Return • Year 1 – no harvest! • Year 2 – perhaps 10 to 12 tonnes / hectare • Year 3 – up to 25 tonnes / hectare • Year 4 and beyond – 25 tonnes/ hectare

Simple value • Sell the crop for around 30 Euro/tonne; or • Use to meet own energy needs – displacing need to buy oil/gas/coal/fuel

Added value potential • Option 1 – Briquettes – invest another 20 Euro/ton and sell for 100 Euro/ton; or • Option 2 – Pellets – invest another 50 Euro/ton and sell for 150 Euro/ton


For illustration - to show how the economics may work -

(Figures quoted are very approximate)


NEWSFLASH Romanian energy regulator ANRE has

1. Defined 'Energy Crops'

2. Decided that electricity from energy crops will be awarded an

Extra Green Certificate

for each MWh of electricity produced!

For details, please visit www.anre.ro


BIOGAS

Biogas plants

convert waste into

flammable gas,

displacing

high–cost

natural gas

or LPG.


BIOGAS

Biogas can comes from: • agricultural waste such as animal waste from farms; • industrial waste such as effluent from breweries; • municipal waste from landfills or wastewater treatment plants.

A biogas plant consists of • A pit to collect and prepare materials • A digester (a.k.a. fermenter) – in which anaerobic digestion converts biomass into biogas* • A storage tank for the gas • A boiler (or cogeneration plant) where the gas is burned

Biogas can be difficult to finance • The principle is simple – but biogas plants are complex investments (the chemistry is complex) • Relatively high capital costs... ... albeit typically offset by very low operating costs • Various kinds of risk


* Landfill gas investments do not need a digester

BIOGAS

Principal risks of investing in biogas • Creating a suitable environment in the fermenter, so anaerobic digestion takes place/is optimised • A stable supply of materials at a known/consistent composition and quality is essential. • Continuing local availability of raw materials • Complex processes, aggressive (corrosive) chemicals • Investments are potentially dangerous - explosive gases at high pressure! • Safety plans, lightning protection, explosion and evacuation risk must all be considered.

Risk may be mitigated with careful planning, comprehensive studies.

Despite the risk, biogas can be a compelling investment opportunity • Potential for a high rate of return when displace high–cost natural gas or higher cost LPG • High rate return when used in boilers • Very high rate of return when used in cogeneration • Attractive environmental subsidies for bio-energy (Green Certificates or the Cogeneration Bonus)


BIOGAS – CASE STUDY COMALAT CASE STUDY – BUT PLEASE CHANGE ‘BANCA COMERCIALA ROMANA LOANED 257 900 EURO FOR COMALAT’S INVESTMENTS’ TO ‘COMALAT BORROWED 257 900 EURO FOR THIS INVESTMENT’ PLEASE CHANGE ‘THE COMPANY IS ELIGIBLE’ TO ‘THE COMPANY RECEIVED’X IT SHOULD BE THE FULL VERSION – AND COVER THE ENTIRE PAGE INCLUDING HEADERS Y


GEOTHERMAL ENERGY

Naturally occurring deep

underground warm/hot

water, heated by magma,

typically found in Romania at

temperatures of 60–110°C..


- Geothermal hot water is found beneath 'geothermal

areas' such as Oradea. It should not be confused with low temperature ground–source energy for heat pump

systems – which may be found almost anywhere .

GEOTHERMAL ENERGY

Romania has the 3rd highest technical geothermal potential in Europe... • A small amount is used – mainly for district heating and therapeutic hot baths in western Romania • 5,500 households in Oradea and the entire town of Beius are heated using geothermal energy. • Snagov, Otopeni and Baloteşti all have geothermal potential.

... but commercial potential is low • More district heating and more tourism (baths) may be possible • Potential applications - growing plants in greenhouses, drying crops, process like milk pasteurizing • But this is only really interesting for a large consumer near the head of a productive well.

Market barriers can deter even the most determined investor • Exploiting existing wells is difficult – barriers include identifying sites, fees for well owners, fees for

the landowners, fees for adjacent land owners and state royalties for the geothermal water. • Drilling new wells is high–risk – comparable with petroleum exploration – with the added

disadvantage that ‘the prize’ is not oil, but only warm water


WIND POWER

Wind power has arrived!

Installed capacity in Romania is growing rapidly

'Planned' investments far exceed capacity of the network to accept

the power.

Wind has become a substantial lending opportunity for banks


Once considered expensive and unreliable, wind power is now a

mainstream technology.

WIND POWER – FINANCING

Large-scale wind farms are typically financed as Special Purpose Vehicles

SPVs by equity investors can be hard to finance • Need partial bank financing (project finance) • Typically don't find financing – but sell the wind project instead

SPVs by established energy companies are easier to finance • CEZ, ENEL, EdP, GDF SUEZ, Iberdrola and OMV all have all found financing for wind investments • May use combination of own financing, balance sheet financing, guarantees and project financing • Can also demonstrate deep energy sector expertise/involvement – which lowers financing risk

Established power companies have a strong incentive to invest in wind • Fossil-fuel based suppliers need to acquire Green Certificates (GCs) – and face three options:

1.Pay very high fines to OPCOM for failing to acquire GCs; or 2.Buy high–cost GCs from generators of RES–E (wind, bio, PV or hydro); or 3.Receive 'free' GCs – by generating RES–E themselves on a large scale.

• Large hydro is state-owned, large-scale PV is still emerging – so wind farms are the practical solution


WIND POWER – FINANCING

Small–scale grid-connected wind power • Attractive for farmers/companies (in windy locations!) who can use all/most of the power produced. • The revenue sources are:

1.Revenue from avoided cost of buying electricity (which can be high) 2.Revenue from sales of any surplus electricity produced (which can be low) 3.Revenue from Green Certificates (or future feed-in-tariff if installed capacity is

WIND POWER – CASE STUDY


EBRD's Sustainable Energy Finance Facilities now operate in more than

20 countries

For details, please visit www.ebrdseff.com

Romanian SEFFs do not finance wind energy

investments – so here is a case study from

MIDSEFF one our 'sister' EBRD SEFFs

in Turkey

WIND POWER – CASE STUDY


USAK wind plant in Turkey: • Total investment – 50 MEUR; of which

• MIDSEFF financing – 40 MEUR

• Pay Back Time – 6.4 years

• IRR – 15.5% For details, please visit... • MIDSEFF site - www.midseff.com

• EBRD's site for all SEFFs - www.ebrdseff.com

SOLAR PV

Solar Photovoltaic systems

generate electricity

For own use – or sale to the grid

Do not confuse

Solar Thermal (heat); and Solar PV (electricity)

• ‘Solar collectors’ = solar thermal • ‘Solar panels’ = solar PV


Installed capacity of solar PV is growing rapidly in Romania.

SOLAR PV - HOT INVESTMENT

Six Green Certificates for Solar PV!

An investment could pay back in less than four years! Of several PV technologies, only two are 'mainstream'

• Polycrystalline Silicon, and Thin Film technologies. • Costs of both are falling sharply… • … but neither is even close to 'economic' yet – without subsidies...

There are very large subsidies for PV at present • Currently six Green Certificates for each per MWh of PV-based power • See slides on impact of GCs on Renewable Electricity for explanation and commentary • 'On paper' – PV is now an extremely attractive investment... • ... if the current* subsidy and regulatory regime remains stable


*Autumn 2012

SOLAR PV – COMPONENTS OF A SYSTEM

Polycrystaline Silicon panels • 80% of the market • tried–and–trusted, reliable technology – but heavy • more efficient at converting sunlight to power – so requires less space • If space is an issue, may be the better choice

or Thin Film panels • 20% of the market • newer technology – more lightweight • less efficient at converting energy to power – so require more space • if weight is an issue, may be the better choice

Other investment components • Simple rack – or a sophisticated 'azimuth tracker'... which follows the sun • Inverter – which converts DC power from the panels to AC for the grid or building • Studies, authorisations, grid connection


SOLAR PV – RISKS AND MITIGANTS

Risks • High capital investment that cannot repay from revenue from sales of electricity alone • Economics absolutely dependent on environmental subsidies (Green Certificates) • Lack of operational experience, lack of qualified personnel • Inadequate transmission and distribution network – investors concerned about connection to the

power transmission or distribution network • Political risk that environmental subsidies may be withdrawn or reduced.

• Internationally – many countries have withdrawing/lowered support for PV • Romania – six GCs for PV are often quoted to be 'too high' – so it may be just a matter of 'when'.

• Regulatory risk of new mandatory grid-related charges

Mitigants • Very well–proven technology, reliable, easy to install, minimal maintenance • Easy to predict how much power will be generated – annual sunshine levels are well documented • Regulatory right to sell renewable electricity • Extremely rapid return on investment… because of Green Certificates

122 Dec. 2012 RoSEFF - EU EBRD Romania SME Sustainable Energy Finance

financing sustainable energy - events/roseff... · 2013. 3. 22. · o cash flow – dcf – npv –...

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