into the future - energy efficient mortgages? - dublin 24.11.2016
TRANSCRIPT
From blueprint to build, the Home Performance Indexrepresents a first in Irish residential development
certification. For developers and buyers the HPI is atrusted seal of assurance based on crucial indicators,because both makers and takers need to know that
their house is a home.
National scheme operator
For the investor
One simple label backed by over 30 verifiable technical indicators
Risk assigned to correct level in chain of supply
Works seamlessly with Irish Building control and planning system
Mitigates risk across a range of indicators from location to build quality
Co-Creating Ireland’s National Renovation Strategy V.2
Marion Jammet, Business Development Manager, IGBC
#BuildUpon
1. National Renovation Strategies
#BuildUpon
2. The Consultation Process
3. Mobilising private funds
#BuildUpon
Low interest loans (green loans)
Building Performance Leases
Mobilising private funds in the non-
residential sector (ESCOs model, etc.)
The ENERFUND project
«An ENERgy Retrofit FUNDing rating tool»
Facilitating Energy Efficiency Investments
24 November 2016, Dublin
This project has received funding from the European Union’s Horizon 2020 programme
under Grant Agreement No 695873
Michael Hanratty, Energy Action Ltd.
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Public
Awareness& Trust
Trustworthy
Retrofit Opportunities
Funding
Schemes& Incentives
Deep
Renovation
Problem Identified
There are gaps that must be addressed to enabledeep renovation of buildings
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Project Introduction – Overall goal
The ENERFUND tool will rate and score deep renovation opportunities – like a creditscore used by banks to rate clients.
The tool will include parameters such as:
•BER/ DEC data
•number of certified installers, government grant schemes etc.
By providing a rating tool for deep renovation opportunities – both private and publicbuildings –
• funding institutes can provide targeted loans,
• retrofit companies can identify sound opportunities,
• municipalities can promote targeted incentives and the
• public's trust for retrofitting will be enhanced.
ENERFUND will focus on retrofit of apartment buildings, commercial buildings and public buildings
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Project Partners- 12 countriesNO ORGANISATION COUNTRY
1 Cyprus University of Technology Cyprus
2Centre for Renewable Energy Sources and
SavingGreece
3
National Institute for Research and
Development in Construction, Urban Planning
and Sustainable Spatial Development
Romania
4 Cyprus Energy Agency Cyprus
5 ECB – Energy Centre Bratislava Slovakia
6 Severn Wye Energy Agency UK
7 Sustainable Energy Development Agency Bulgaria
8 Jozef Stefan Institute Slovenia
9 Aalborg University Denmark
10 Valencia Institute of Building Spain
11 SERA energy & resources e.U Austria
12 Energy Action Ltd Ireland
13 ENERMAP Ltd Cyprus
14 Energies 2050 France
15Ministry of Regional Development and Public
AdministrationRomania
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INDICATIVE PARAMETERS – TO BE DEFINED DURING THE PROJECT
OK Credit Rating Good Credit Rating OK Credit Rating
“E” Building “F” Building “G” Building
High Occupancy Medium Occupancy Low Occupancy
5% VAT on retrofit 19% VAT on retrofit 0% VAT on retrofit
Mountainous Area City Area City Area
No pro-active actions Pro-active Mayor Pro-active Mayor
No Training Courses Available Training Courses Available Training Courses Available
Product Certification Scheme Product Certification Scheme No Product Certification Scheme
An ENERFUND example
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INDICATIVE PARAMETERS – TO BE DEFINED DURING THE PROJECT
OK Credit Rating Good Credit Rating OK Credit Rating
“E” Building “F” Building “G” Building
High Occupancy Medium Occupancy Low Occupancy
5% VAT on retrofit 19% VAT on retrofit 0% VAT on retrofit
Mountainous Area City Area City Area
No pro-active actions Pro-active Mayor Pro-active Mayor
No Training Courses Available Training Courses Available Training Courses Available
Product Certification Scheme Product Certification Scheme No Product Certification Scheme
An ENERFUND example
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EPISCOPE Mapping Tool for Northside of Dublin (Residential)
40,000 plus BERs aggregated to Small Area level
http://energyaction-static.s3-website-eu-west-1.amazonaws.com/index.html
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Fuel Poverty Map
Fuel Poverty Indicator is based on BER rating of E1, E2, F or
G and a Deprivation score of 8,9 or 10.
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Now at the Consultation Stage for design of the ENERFUND tool
• Questionnaires in all 12 countries to:• Energy Suppliers / Energy Service Companies• Banks, investment companies• Property Managers
• What information/ datasets would you recommend usto include in ENERFUND tool? – to drive more retrofitactivity and more financial investment
• We hope you can inspire us with your ideas!
Disclaimer:
The sole responsibility for the content of this publication lies with the authors. It does not necessarily reflect the opinion of the
European Union. Neither the EASME nor the European Commission are responsible for any use that may be made of the
information contained therein.
For any questions:
Contact Person: Michael Hanratty([email protected])
IHER Energy Services/ Energy Action Ltd.
Project Details:
Website: www.enerfund.eu
Twitter: @enerfund
Facebook: /enerfund
Thank you for your attention
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WHY A PAN-EUROPEAN APPROACH?
Buildings are responsible for 40% of EU energy consumption
Buildings are responsible for 36% of CO2 emissions in the EU
75-90% of EU building stock is predicted to remain standing in
2050
Improving EE of buildings could reduce EU energy consumption
by 5%-6% and CO2 emissions by 5%
EU has set itself an overall 20% energy savings target by 2020
and is now considering increasing this to a 30% target by 2030
Scale of investment needed to meet the 2020 target is estimated
at €100 billion per year – European Commission has underlined
need for private investment
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OBJECTIVE & UNDERLYING BUSINESSES CASE
Increased loss
mitigation capacity
Enhanced LTV via green value
Lower probability of default
Reduced capital charges
The ultimate objective is a pan-European private bank financingmechanism, based on a standardised approach, to encourage energyefficient improvement by households of the EU’s housing stock by wayof financial incentives linked to the mortgage, and in this way supportthe EU in meeting its energy savings targets.
Underlying business case
Independent from, but complementary to, public funds or tax incentives
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ENVIRONMENTAL IMPACT OF HOUSING IN THE EU
EU Total Emission Fuel Combustion in 2012: 3495.2 Mt**Source: Eurostat
Industry, 25%
Transport, 32%
Households, 27%(295.9)
Services, 14%
Agriculture and Fishing, 2% Other, 0%
Breakdown Energy Consumption in the EU in 2013 (MTOE*)
EU Total in 2013: 1103.8 Mtoe*Source: Eurostat
Energy Industries, 40%
Manufacturing Industries and
Construction,15%
Transport, 25%
Residential, 12%(410.4, )
Breakdown of CO2 Emissions in the EU Fuel Combustion Activities in 2012 (MT** of CO2)
*million tons of oil equivalent: a unit of energy defined as the amount of energy released by burning a tonne of crude oil**million tons
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UNDERLYING MARKET CHARACTERISTICS IMPACTED BY EE
Retrofitting impacts positively on property value ensuring wealth conservation & loss mitigationby preventing “brown discount”
EE leads to a reduction in the impact ofenergy costs to income, reducing borrowers‘probability of default
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UNDERLYING INCENTIVE CHAINBorrowers: Preferential interest rate and/or addition retrofitting funds Increased property value due to retrofitting, ensuring wealth conservation Lower running costs of the building
Lenders: Energy savings result in a lower PD due to increased disposable income Increased risk mitigation capacity as increase in property value reduces LGD Lower capital requirements for energy efficient mortgages Protection of loan portfolio against brown discount
Investors: Response to increasing investor demand for investments with sustainable aspect Diversification of investor portfolio & protection against brown discount Incentivises segregation of existing green assets Increased risk management in terms of credit, asset & performance risk
SMEs: Additional funds provide a flow of capital into the real economy Supports SMEs activity in the retrofitting sector
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FURTHER ASPECTS Valuation Profession: EE is strong potential value driver & risk factor and integration of EE in valuations &
credit risk assessment could transform current lending practices Whilst conventional market-based valuation methods are fit to account for EE
features in valuations, there is limited quality rental & sales evidence to allow valuersto accurately determine incremental value impact
Initiative could be help to overcome this by building up evidence base and explicitly instructing banks and valuers to request, collect & make use of additional data
Consumer Behaviour: Initiative can also influence consumer behaviour by encouraging good energy
behaviour, thus reducing energy consumption (energy bills) Academic literature demonstrates potential for energy savings of up to 20% via
targeted behaviour
Better Risk Management: Lower Credit Risk: Due to reduced PD and LGD Lower Asset Risk: Due to “green value” and protection against “brown discount” Lower Performance Risk: Due to robust assessment of EE improvement ensuring
lower energy consumption and ”green value”
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METHODOLOGY - FINANCING MECHANISM Key challenge: to incentivise energy efficient investment in existing dwellings, which
constitute bulk of EU housing stock
Based on a set of EE indicators, lenders could offer: New Builds: Discount in interest rate for new builds with energy rating A+/A or B; Existing property: Discount in interest rate according to improvement in energy
rating of property between D and A/A+
A A+
Energy Efficient Mortgage
x%
H G F E C B
x%-∆𝐶 x%-∆𝐵x%-∆𝐴+
x%-∆𝐴
x%: mortgage interest rateEE delta: ∆𝐴+> ∆𝐴> ∆𝐵> ∆𝐶
Conventional Mortgage
D
Existing property D -> A+
x%-∆𝐷
New build B -> A+
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METHODOLOGY - ENERGY EFFICIENCY INDICATORS
EU standard: Delta in Energy Performance
Certification
Consumption Indicator: Delta in
Energy Bill/OccupantsDemand Indicator*
*One possibility: The EE Directive (2012/27/EU ) foresees an ‘energy performance contracting’ which is a contractual arrangement between the beneficiary and the provider of an EE improvement measure, verified and monitored during the whole term of the contract, where investments (work, supply or service) in that measure are paid for in relation to a contractually agreed level of EE improvement or other agreed energy performance criterion, such as financial savings.
Three pillar approach to certification of actual energy performance:
The metrics and value will bring the mortgage industry in-line with the EU on energy
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IT Data warehouse Platform
• Mortgage data line by line
• EE data levels unit by unit
• Funding instruments adopted
• Enhance asset liabilities management
• Increase market transparency
METHODOLOGY - DATA WAREHOUSE
At the heart of Initiative is a comprehensive “dataset” on actual financial performance of existing mortgages according to their energy rating.
Data gathered will be processed and analysed in order to understand the impact of EE on borrowers’ PD and on LGD.
Results of the analysis will be made available to the public free of charge. Longer-term intention is to compile this extensive dataset in a common &
central “data warehouse” to clearly register and record link between property, energy rating & loan performance, so that these assets can be identified for “green” funding purposes, for example.
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Energy Efficient passport for buildings
• For building owners
• Recognised throughout the EU
• Value and clarity of the improvements installed in the building
• Non-performing loans mitigation
• Improving market transparency
METHODOLOGY – BUILDING ENERGY PASSPORT
An EE building passport could propose a tailor-made, ready to implement actionplan to the building owner, based on an affordable audit
It could include tailor-made improvement recommendations and therefore actas an important communication instrument for EE mortgage product itself
It would be meant as a holistic tool covering all aspects of buildings It would accompany the building over its life time The passport would ensure that energy improvement considerations are well
integrated each time works are undertaken in a building Having a passport would be a prerequisite to obtain an energy efficient
mortgage
European Mortgage FederationEuropean Covered Bond Council
Rue de la Science 14A, 2nd Floor - B-1040 Brussels - Belgium
www.hypo.org [email protected] [email protected]
@EMF_ECBC EMF-ECBC
Next Steps
Tuesday, 29th November: Upskilling of the Construction industry 2
Thursday, 1st December: Setting the Right Standards
Tuesday, 6th December: Financial Incentives - Tax & Grants
Tuesday, 13th December: Public Procurement Rules and Deep Renovation
#BuildUpon