Publication date: March 2017
There has been a common struggle across many programmes worldwide to create sustainable private sector markets that are effective in reducing energy demand. Energy efficiency markets continue to face challenges across the supply chain. Smart public programmes are essential to overcome them and to leverage the private finance needed for deployment at scale.
This report outlines best practice for achieving that. It is based on an assessment of 10 case studies, interviews with leading practitioners, evaluations of past programmes, and the Carbon Trust’s own 15 years of experience delivering large-scale energy efficiency programmes.
• Six questions should be asked when designing any energy efficiency finance programme:
- What is the target market?
- Are there any drivers for action?
- Is there a supply chain?
- What are the barriers?
- What solutions can address the barriers?
- How can change be sustained?
• For any programme to be effective, it is critical that:
- the target market is clearly defined and well understood;
- fundamental drivers for action are in place, and if not, efforts are made to strengthen them;
- the supply chain to deliver energy efficiency is mapped, and if needed, action is taken to build its capacity;
- barriers across the supply chain are analysed comprehensively and prioritised;
- programmes are developed which target barriers systematically, with financial and technical solutions implemented in concert; and
- steps are taken so that once public support ends, the supply of, and demand for finance for energy efficiency continues.
• Too often, programmes have been designed which address only some of the challenges, or on a short term basis only, leaving important barriers deeply entrenched. A narrow focus on finance needs to be replaced with a more holistic approach to ensure a sustainable legacy.
With the key findings in mind, the report makes three core recommendations:
- Business cases for investment need to be strengthened by strong policy frameworks with the right economic and regulatory drivers. Influencing these needs to be a key objective.
- More resources should be devoted to technical assistance than has historically been the case. Activities such as awareness-raising, pipeline generation and de-risking are essential to create sufficient demand and commitment.
- Upskilling, equipping and accrediting suppliers and technical advisors is also critical to creating a sustainable, scalable and bankable pipeline, as they have the greatest inherent incentive to identify, appraise and deliver viable projects. Ultimately, to stimulate sustained private sector investment, programmes need to be designed that help create a market of projects with attractive rates of risk and return for financiers, including long-term finance to match the project payback period, structured in an accessible way, so that they invest in energy efficiency of their own accord.