FINANCING ENERGY EFFICIENCY IN MALTA AND ITALY

Event organised by the Executive Agency for Small and Medium-sized Enterprises (EASME) in the

frame of the Sustainable Energy Investment Forums contract funded by the Horizon 2020

programme of the European Union

22 November 2018

St Julians, Malta

Financing Energy Efficiency in Malta and Italy

Page 1

Table of contents

Background to the event ............................................................................................................ 2

Welcome speech ........................................................................................................................ 3

Plenary session 1: European and national policy context ........................................................... 4

European policy in support of energy efficiency investments .................................................. 4

Mobilising the financial sector on energy efficiency ................................................................ 5

Support available from the European Investment Bank .......................................................... 7

State of play of energy efficiency financing in Malta ............................................................... 8

1A. Making energy efficiency attractive for the financial sector ................................................ 10

Introduction to the Maltese context ....................................................................................... 10

The Energy Efficiency Financial Institutions Group (EEFIG) Underwriting Toolkit and the De-

Risking Energy Efficiency Platform (DEEP) .......................................................................... 11

Overview of renovation financing in Italy ............................................................................... 12

1B. Renovation of public buildings ........................................................................................... 14

Renovation of public buildings through energy performance contracting in Italy ................... 14

Finance for energy efficiency measures in Maltese public buildings ..................................... 15

How to develop a market for ESCOs in Malta ....................................................................... 16

2A. Home renovation................................................................................................................ 17

Overview of the energy performance of the housing stock in Malta ...................................... 17

A bank experience on home renovation loans ...................................................................... 18

One-stop-shop for home renovation: barriers and opportunities ........................................... 19

2B. Energy efficiency in industry and SMEs ............................................................................. 20

Financing energy efficiency opportunities in industry and SMEs .......................................... 20

How to encourage the uptake of energy audits recommendations from SMEs ..................... 21

How to support investment in energy efficiency in the business sector ................................. 21

Closing plenary session ........................................................................................................... 23

Short reports from parallel sessions by Moderators .............................................................. 23

Conclusions of the day by European Commission and Maltese Government ....................... 24

Financing Energy Efficiency in Malta and Italy

Page 2

As part of the "Smart Finance for Smart Buildings" initiative, the European Commission is

organising a series of “Sustainable Energy Investment Forums” to enhance the capacity of and

co-operation between public and private stakeholders to develop large-scale investment

programmes and financing schemes. The SEI Forums will consist of more than 30 events in up

to 15 Member States in 2016-2019; information on past and upcoming events can be found on

the SEI Forums webpage.

BACKGROUND TO THE EVENT

The Energy Union Framework Strategy puts energy efficiency as one of its five dimensions and

states it is to be treated as an energy source in its own right. The ambitious Paris Agreement

also underlines the importance of energy efficiency. Investments in energy efficiency have

proven to be one of the most cost-effective ways to support the transition to a low-carbon

economy. Not only does it help the EU in turning its climate ambition into action, it also brings a

number of significant benefits for European citizens and companies in terms of sustainable

growth, more jobs, security of supply, lower energy bills, environment and health.

To realise the full potential of energy efficiency, public funds will not suffice and private

financing will have to be unlocked at scale. In that context, energy policy should create more

favourable investment conditions, encourage demand for energy efficiency and help consumers

undertake energy efficiency investments more easily.

This event shared best practice from Malta and Italy as well as further countries on how energy

efficiency investments can be financed. This included the use of private funds and innovative

financing instruments, notably in the building and industry sectors.

All presentations and recordings from the event can be found at:

https://ec.europa.eu/info/events/sei-forum-events/financing-energy-efficiency-malta-and-italy-

2018-nov-22_en

Financing Energy Efficiency in Malta and Italy

Page 3

WELCOME SPEECH

Ian Borg, Minister of Transport, Infrastructure and Capital Projects, Malta

Under the Maltese presidency of the EU, energy efficiency was high on the agenda, including

negotiations for the revised Energy Efficiency Directive and Energy Performance of Buildings

Directive.

There is room for more synergy between the finance sector and the construction sector to

improve the energy performance of the building stock. In Malta, average building energy

consumption is half of the EU average. Heating levels are typically low and air conditioning is

only used for a few months. The main energy load is electrical plug load. This is not down to the

buildings themselves, but to geography. There is much improvement that could be made to the

building stock.

Previous improvement support schemes have been somewhat disjointed or piecemeal

initiatives designed to tempt the general public to improve the energy performance of buildings.

There have been subsidies provided for glazing improvement and renewable energy

generation. These subsidies were intermittent, and projects were mainly supported by these

public funds. There was awareness that they would not be enough without additional private

support.

Banks are starting to offer advantageous rates for green loans. Banks are investing part of their

capital in energy efficiency. Energy efficiency is not yet a feature by design though. The

improvements needed go beyond just renewables and low energy lighting. Designs need to

build in high performance materials and make use of natural light. The lifetime cost of operating

buildings should be considered.

Architects need to be brought into this debate, it is recognised that action on new build is

important, an usually easier than retrofitting. Older buildings are more challenging, yet they

cannot be ignored. Interventions on public schools and homes for the elderly have shown that

Near Zero Energy Buildings are possible. Low energy prices have disincentivised energy

Financing Energy Efficiency in Malta and Italy

Page 4

efficiency, in part, as payback periods have lengthened. This doesn’t mean there isn’t still an

opportunity.

A new authority for construction and buildings is being crated within the Ministry. This will bring

together activities that have been separated up to now. This new Agency will monitor and

regulate construction, and will look at performance of buildings through their lifetime, including

fire safety and lifelong living adaptations. The drive will be to develop structurally sound and fit

for purpose buildings.

There is a need to develop indigenous methods suitable for Malta’s context. This will help to

foster the transition to more energy efficient buildings.

The Ministry of Transport, Infrastructure and Capital Projects is committed to this Agency

helping the transition from the current position to a more sustainable future.

PLENARY SESSION 1: EUROPEAN AND NATIONAL POLICY CONTEXT

Chair: Professor Luciano Mule’ Stagno, Institute for Sustainable Energy,

University of Malta

European policy in support of energy efficiency investments

Paolo Tosoratti, Directorate-General for Energy, European Commission

There has been a 46% increase in weather related disasters in recent years. Economic losses

rose by 86%. Climate change is impacting. Banks across the EU area are heavily exposed to

climate risk, almost 50% of their portfolios. We need quick action to decarbonise. The

implications of the IPCC’s latest report mean achieving net zero by 2050. This should be linked

to the Paris Agreement and the UN 2030 agenda which includes the 17 Sustainable

Development Goals.

The EU started action early with the Clean Energy for All Europeans package, which brought

forward 8 legislative proposals. The package was clear that putting energy efficiency first is

crucial, in addition to strong action on renewable energy generation. Full implementation of

Financing Energy Efficiency in Malta and Italy

Page 5

Clean Energy for All Europeans would result in a 1% GDP increase and 900,000 additional

jobs.

Ecodesign and energy labelling is one of the frameworks. This legislation has helped to remove

the worst energy performing products and stimulate choice towards best performing products.

45 regulations covering 30 products are in place and the existing regulations have delivered

around half of the EU wide 2020 target for energy efficiency. This package of measures has

been a success story. The low hanging fruit has been picked, now the focus shifts to where the

remaining energy saving potential is – in the buildings and transport sectors.

In July 2018 a new Energy Performance of Buildings Directive was published. In Italy, three

quarters of buildings are inefficient, and many are over 50 years old. There are 18 million jobs

in the construction sector.

To help prepare for the future, a building smartness indicator is being prepared. Significant work

is also underway to push for e-mobility. Malta would be a perfect place to use Electric Vehicles

without “range anxiety”. There will be a pre-disposition in new build buildings and in deep

refurbishments for car charging points to be installed. This is in part in preparation for vehicle to

grid interaction, but also due to the drop in the cost of Electric Vehicles (EVs). Within 5-6 years

it is expected that the lifecycle cost of EVs will be similar to fossil fuel vehicles.

Europe’s building renovation rate is very low, around 1% depending on country, and in some

cases the renovation depth is also too shallow. It is necessary to combine all kinds of

refurbishment work with energy efficiency improvement. The revised Energy Efficiency Directive

targets an EU wide 32.5% efficiency improvement by 2030.

The EU’s action plan on financing sustainable growth highlights two key elements for the

financial sector. Firstly that environmental factors have to be incorporated into lending decision

making. Secondly that standards and definitions are required for “green” investment, hence a

taxonomy is being developed.

This activity is supported by the Smart Financing for Smart Buildings initiative, with activity set

out under three pillars:

I - More effective use of public funds – Focused on improving financing mechanisms, capacity

building and the development of platforms at national level to attract more private investment.

II - Aggregation and technical assistance – Focused on stimulating demand to reach critical size

and the use of Technical Assistance at national and regional level, including one stop shops.

III - De-risking investment – focused on changing risk perception of energy efficiency

investment. There are two key products here, firstly the DEEP database, launched in November

2016 alongside the legislative proposals and containing real world data on several thousand

renovation projects, which provides investors with useful data. Secondly, an underwriting toolkit

for investors to analyse costs and benefits of investing in energy efficiency.

Mobilising the financial sector on energy efficiency

Martin Schönberg, United Nations Environment Finance Initiative (UNEP FI)

Financing Energy Efficiency in Malta and Italy

Page 6

There is an investment gap on energy efficiency and a recognised need to treat it as

infrastructure. Financial institutions are recognising the need invest more are develop new

schemes and approaches.

There is significant untapped energy saving potential. The annual energy productivity bonus

resulting from a comparison between actual 2016 GDP and the notional level of 2016 GDP had

energy intensity stayed the same is USD 2.2 trillion, with buildings representing the largest

untapped potential.

The EU’s work on a taxonomy for green investment is a driver for action and will help drive

investors to work towards a net zero carbon economy. This work is driving increasing attention

by financial institutions. According to the International Energy Agency, global annual energy

efficiency investment needs to increase by a factor of 8 to meet a 2 degrees temperature rise

pathway.

The volume of energy efficiency investment is significant and is approaching that for renewable

energy. The rate of improvement has accelerated and stands at 2% improvement every year

currently. This needs to rise to 3% per year.

There are four main challenges in energy efficiency:

I. Complexity: While renewable energy is mainly financed by project finance, for energy

efficiency the financing structures often go across asset classes.

II. Deal size: Small ticket size means that aggregation of projects is needed.

III. Embedded transactions: Energy efficiency investment is mostly integrated into other

transactions, such as real estate refinancing. There is a need for identification and

tagging of energy efficiency components in transactions.

IV. Coordination: Common frameworks need to be developed for project developers,

investors, financiers and project hosts.

Energy efficiency is a nascent market and should be initiated with concessionary finance, the

effect of which can then be leveraged, with the market then moving to a shared risk approach

and ultimately to shared standards. There will be higher engagement of private finance as the

Financing Energy Efficiency in Malta and Italy

Page 7

market grows. Standardisation of complex transactions will also be needed, and is a key

component of developing this market.

UNEP-FI have partnered with the European Commission on the Energy Efficiency Financial

Institutions Group. Their De-risking Energy Efficiency Platform (DEEP) and Underwriting Toolkit

(Value and Risk Appraisal Guide) are key outputs.

UNEP-FI have also led the development of the G20 Energy Efficiency Investment Toolkit. This

provides a collaborative architecture for policy-makers and financial institutions.

To realise the untapped energy efficiency potential, we need the private sector, insurers and

banks on board.

Support available from the European Investment Bank

Christoph Lassenberger, Fund and Structuring for Italy, Malta, Western Balkans,

European Investment Bank

In 2017, the European Investment Bank (EIB) financed €19.4 billion of climate action. €5 billion

of this went to energy efficiency. Of that energy efficiency lending, 70% goes into buildings and

an increasing share into industrial energy efficiency.

As others have noted, there are well identified barriers to financing energy efficiency. One of

these is the “split incentive” between tenants and landlords as to who pays for and who benefits

form energy efficiency improvements. There are now though innovative transactions taking

place in the Netherlands to try to overcome the split incentive barrier. Benefits of energy

efficiency to tenants are shared with the property owner in social housing. More generally, there

is a need to increase capacity within banks to finance energy efficiency.

EIB support not only lending, but also blending of funds and technical assistance advice.

On lending, EIB typically support classical investment loans of at least €20-25 million in size.

Blending work puts EU structural funds together with other sources of funding. For example in

Malta, EIB are working with the national government on an SME support initiative. The Smart

Finance for Smart Buildings support goes in the direction of blending too. The Private Finance

for Energy Efficiency PF4EE programme is also being implemented together with the European

Commission. This programme can provide a loan to an intermediary, together with a risk

sharing element, to encourage that intermediary into areas of financial support that they have

previously considered to be too risky. It includes an expert support fund, to boost technical

Financing Energy Efficiency in Malta and Italy

Page 8

expertise within the intermediary, to adapt their own internal setup or to make them more prone

to issue energy efficiency finance and to improve outreach to clients. The Smart Finance for

Smart Buildings instrument is a guarantee, where the European Investment Fund will provide a

guarantee, there may be another EFSI (Juncker plan) guarantee, plus a first loss layer.

On advising, the ELENA fund has been key. The idea behind this is to provide technical support

when it comes to defining investment projects. More than 60 contracts are in place, totalling

over €110 million of funding and supporting projects in over 20 countries. Associated

investments on the ground are estimated to be in excess of € 4billion.

State of play of energy efficiency financing in Malta

Daniela Grech, Planning & Priorities Coordination Division, Ministry of European

Affairs, Malta

Malta’s Partnership Agreement for the 2014-2020 period established three funding priorities for

EU funds, of which sustaining an environmentally-friendly and resource-efficient economy is

one. €54.5 million are earmarked for this area, a shift from 9% under the 2007-2013 period to

12% of overall funds now. Under the 2007-2013 Operational Programme, all funds were

committed and used.

So far, since 2014, under this programme area, €21 million has been committed, mostly on

renewable energy projects. These include a scheme on PV in the domestic sector, support for

efficient streetlighting and some public building retrofit. €15 million euro is going into setting up

a financial instrument. Malta is interested in the Smart Finance for Smart Buildings instrument,

and an ex-ante assessment has been undertaken, to gauge demand and look into the need to

adapt existing measures. Surveys have been undertaken within the domestic building and

commercial sectors.

The main findings of the ex-ante study show that GDP is growing faster than the EU average

although, at €22,700, is still lower than EU average. It is however expected to continue to grow

in the coming years and has already increased by about 52% in the 2009/2016 period. The

number of enterprises has increased by 25% between 2011 and 2016, however the size of the

enterprises remains very small, with 97% still being made up of micro-enterprises.

Malta has one of the lowest levels of energy consumption per capita across the EU. The

household and service sectors account for about 80% of energy consumption. The population

Financing Energy Efficiency in Malta and Italy

Page 9

typically live in cold houses during winter and cooling in summer is limited to particular rooms.

There is market failure in the energy sector. The PV sector was only really kickstarted after

public sector support was made available. Energy Efficiency is not perceived as a priority, but if

it is promoted, there is a lot of potential in this area.

A potential investment demand in energy efficiency of €117 million has been estimated for the

coming years (2018 – 2023). The corporate sector is expected to be the main contributor to this

demand, through the development of energy efficiency initiatives to both to improve buildings

and machinery. The residential sector is also expected to contribute with energy saving

initiatives in residential buildings. Demand is also anticipated from the public sector, to

implement energy efficiency initiatives on buildings (energy audits are ongoing) and for public

infrastructure (e.g. street lighting systems).

The high level of collateral required by recipient SMEs has been identified as a barrier to

financing energy efficiency improvements. Financial instruments can work alongside existing

support schemes and should be used to reduce the grant dependency of energy efficiency and

renewable energy initiatives.

€15 million will have been made available before the end of 2018. Discussions are ongoing on

state aid concerns and how to implement a financial instrument. Funding agreements can then

be signed and then expressions of interest for intermediary banks will be issued.

Financing Energy Efficiency in Malta and Italy

Page 10

1A. MAKING ENERGY EFFICIENCY ATTRACTIVE FOR THE FINANCIAL SECTOR

Chair: Oronzo Daloiso, EASME, European Commission

Introduction to the Maltese context

Jonathan Scerri, Ministry of Transport, Infrastructure and Capital Projects, Malta

Energy Efficiency is an often overlooked aspect in Maltese energy policy. The topic struggles to

become a priority on the agenda of the prominent actors in the field. From an industry

perspective it’s very hard to make people invest in energy efficiency, as they prioritise

productivity. The payback period for energy efficiency investments is considered to be too long

and the view is that investing into productivity will always pay back more quickly. From an

energy production perspective, Malta’s situation has improved. Pricing has been the main driver

to improve energy efficiency.

From an infrastructure (and buildings) perspective, energy efficiency has not been so much of a

concern. Malta has the lowest target in the EU, due to the context and the climate. The priority

is on renewable energy generation.

Another barrier, which is not specific to Malta, but is more evident, is the size of the projects,

which are too small to be financially attractive. The investment required for projects to be

implemented are too high in comparison to the benefits. An ambitious aggregation strategy is

needed in order to scale up investment in energy efficiency.

There is lots of room for improvement, but each sector should be addressed with its

particularity.

Financing Energy Efficiency in Malta and Italy

Page 11

The Energy Efficiency Financial Institutions Group (EEFIG)

Underwriting Toolkit and the De-Risking Energy Efficiency

Platform (DEEP)

Mark Scicluna Bartoli, Bank of Valletta, Malta

The Energy Efficiency Financial Institutions Group (EEFIG) was established in 2013 by the

European Commission Directorate-General for Energy (DG Energy) and United Nations

Environment Programee Finance Initiative (UNEP FI). It created an open dialogue and work

platform for public and private financial institutions, industry representatives and sector experts

to identify the barriers to the long-term financing for energy efficiency and to propose policy and

market solutions to them. It has engaged 120 active participants from 100 organisations.

In February 2015, EEFIG presented its report "Energy Efficiency – the first fuel for the EU

Economy: How to drive new finance for energy efficiency investments" which provided a

significant advance in the understanding and knowledge about the issues of energy efficiency

financing. Its recommendations for both the buildings and industry sectors are still being

addressed by EEFIG, the European Commission, the G20 and many others. The report made a

number of recommendations on areas including underwriting for debt and equity investments,

risk assessment and related capital requirements for long-term energy efficiency investments,

addressing barriers to expanding the green mortgage market and examining the use of

factoring funds for Energy Performance Contracts.

EEFIG’s second phase was largely based on two main deliverables. Firstly in November 2016,

EEFIG's De-risking Energy Efficiency Platform (DEEP) was launched with over 7,800 projects

in an open-source, pan-EU database to improve the sharing and transparent analysis of

existing energy efficiency projects in Buildings and Industry. Secondly, in June 2017, the EEFIG

Underwriting Toolkit was launched. The toolkit is aimed specifically at financial institutions that

are looking at ways to design better financial products for energy efficiency investment projects.

It is essential to reach out to the financial community to be active in addressing our low-carbon

energy transition. This is particularly important for energy efficiency, where financial institutions

Financing Energy Efficiency in Malta and Italy

Page 12

have traditionally had less exposure and capacity to analyse the creditworthiness of energy

efficiency measures. The energy efficiency challenge also requires significant investment. Thus,

it is essential that the financial community be fully committed and fully ready. EEFIG is only

one, but an important, way of getting the financial institutions fully involved.

A follow up initiative "EEFIG 3.0" will be rolled out in 2019. There is a need for sectoral

stakeholders to continue discussing issues with the financial community, the Commission and

UNEP-FI. There cannot be a reliance on legislation alone. It is fundamental that non-legislative

initiatives such as EEFIG bring stakeholders together.

Overview of renovation financing in Italy

Angelo Peppetti, Direzione Strategie e Mercati Finanziari, Italian Banking

Association (ABI)

In Europe, lending to the private sector is growing again, this growth is especially fast in the

case of Italy, which is above the EU average rate since the beginning of 2016.

However, in Italy, the ratio of mortgages to GDP remains below the EU average (21.9 vs 45.7).

Additionally, only 5% of these loans are taken for renovation, as against 74% of them being

taken for purchasing in 2018. Based on these figures, ABI has come up with several aspects

that should be prioritized in order to increase the use of residential mortgages for renovation:

fiscal drivers (reducing expenses), cultural drivers (raise awareness), improving the real estate

«quality» (and «market value» for future investments), positive macroecomic impacts (access

to credit), savings from lower utility bills (more money available).

With these considerations in mind, the Energy Efficient Mortgages Initiative, under which

umbrella the EeMAP and EeDaPP initiatives runs in parallel, is based on the realisation that: (i)

banks, in financing the purchase of homes, can play a game-changing role in supporting the

EU’s energy savings targets, by bringing energy efficiency into the conversation between banks

and consumers and (ii) it is essential to gather and access large-scale data relating to energy

efficient mortgage assets (loan-by-loan) for the purpose of risk analysis through an

accompanying data protocol and portal.

The idea is to incentivise and channel private capital into energy efficiency investments by way

of preferential conditions linked to the mortgage financing mechanism, which is entirely

independent from, but complementary to, public funds, tax incentives and utility rebates. The

Financing Energy Efficiency in Malta and Italy

Page 13

data protocol and portal will enable large scale recording of data relating to energy efficient

mortgage assets, allowing for continuous tracking of their performance.

The ultimate success of the initiative rests on two assumptions, which have already been

recognised across a series of market and academic studies, and which will be further

substantiated via the EeMAP and EeDaPP Initiatives. The first assumption is that improving the

energy efficiency of a property has a positive impact on property value, reducing a bank’s asset

risk. The second assumption is that energy efficiency borrowers have a lower probability-of-

default as a result of more disposable income in the household due to lower energy bills,

reducing a bank’s credit risk.

Financing Energy Efficiency in Malta and Italy

Page 14

1B. RENOVATION OF PUBLIC BUILDINGS

Chair: Andrew Deacon, Climate Alliance

Renovation of public buildings through energy performance

contracting in Italy

Dario di Santo, FIRE

The Energy Performance Contracting (EPC) market in Italy is well developed and is moving

towards Nearly Zero Energy Buildings. Italy has implemented a standard for the certification of

Energy Service Companies (ESCos).

One of the main issues is the lack of resources and know-how on how to use EPC (for the

public sector). Incentive schemes in Italy are designed to use EPC, with either an ESCo or the

end-user providing financing. Measurement and verification of savings and performance is an

important topic and has been one of the main barriers to progress. FIRE decided to promote the

IPMVP protocol and have translated this into Italian. This measurement and verification protocol

is now being specified in EPC tenders.

Energy agencies have developed skilled facilitation teams and under the Horizon 2020 funded

GuarantEE scheme, project promoters are being identified.

There are 940 ESCos in Italy, most are small organisations created to benefit from white

certificate (Energy Efficiency Obligaiton) schemes and many don’t have the capability to deal

with large public tenders.

In the public sector, the types of interventions are typically large and holistic, including

cogeneration, trigeneration, renewable energy and lighting. A survey conducted in 2016

showed that around 60% of public authorities were using performance contracts, but only 10%

were using EPC. The feeling was that more reliable monitoring and verification is needed to

increase the appeal of these contracts. Contract size is usually below €500k and often below

€200k. 5-15% energy savings from baseline are typical.

From examples from the Marte region, Padova and Bologna, the complexity of the offer, the

need for reliable monitoring and verification and the ability to demonstrate results had emerged

as key learnings.

Financing Energy Efficiency in Malta and Italy

Page 15

Finance for energy efficiency measures in Maltese public

buildings

Diane Cassar, Malta Intelligent Energy Management Agency (MIEMA)

Research undertaken as part of the Interreg-Med New Finance project has shown that there are

more than 9,000 public buildings across Malta and Gozo. Historical building issues are key

when thinking about renovation in Malta. The project has established an enabling platform for

exchange between public authorities and financial institutions.

Maltese public buildings typically use lots of limestone and insulation is not popular. There is

scope to improve the energy performance of the building stock and the majority of buildings

could benefit from financing for energy renovation. Projects are usually funded through the

public budget and this may not be enough alone in the coming years.

Results from 26 interviews from public authorities across the EU had investigated main barriers

to greater action in this sector. The main issued raised was the lack of standard procedures,

especially for smaller buildings. Other issues included the lack of regulation for EPC and the

lack of capacity.

ESCos don’t really exist currently in Malta and it will be important to lay the ground for what will

come in future.

A new project, STEPPING, is building on the previous work. Pilot studies on 3 schools in Malta

are being conducted, 1 in Gozo and the local councils association building in Malta. An

investment plan will be developed to allow them to undertake an EPC. Building envelope only

projects are proving difficult and renewable energy generation is being built in to make the

business case work.

Financing Energy Efficiency in Malta and Italy

Page 16

How to develop a market for ESCOs in Malta

Norman Zammit, President of the Chamber of Engineers

Malta’s energy mix is comprised of gas LNG and an interconnector, plus black start machinery

(diesel fired turbines). By 2050, Europe is aiming for net zero emissions, considerable rapid

progress will need to be made. 2018 saw a 4% increase in energy demand.

On public building renovation, an ESCO won’t typically finance the energy efficiency measures

themselves. Barriers to action include product offers being ahead of the curve for investors and

other decision makers. Banks expect standardisation and volume might be lacking. Energy

efficiency solutions have to be structured to resemble standard lending. Banks will not

necessarily adapt just for this sector, so offers have to be adapted accodingly.

For Malta, the the ESCo definition may have to be re-dimensioned. The definition could include

utility companies, building equipment manufacturers. It would be easier to start an ESCo as a

subsidiary of a larger organisation and then work to grow the market. Renewable energy policy

also needs to diversify from PV, with offshore wind and solar and marine turbines being

considered. As demand is still going up, there are additional demands on energy generation.

There are opportunities for further research on building demand side control. There are some

large construction projects coming, these will provide an opportunity to look into ESCo activity.

The key issue is ownership and financing of risk.

Financing Energy Efficiency in Malta and Italy

Page 17

2A. HOME RENOVATION

Chair: Roberta Vella, Ministry of Transport, Infrastructure and Capital Projects,

Malta

Overview of the energy performance of the housing stock in

Malta

Vincent Buhagiar, Faculty for the Built Environment, University of Malta

A study was carried out on a typical housing block to determine whether energy efficiency

measures could be replicated in similar governmental housing blocks to reduce the energy bills

of the tenants while improving their thermal comfort. Typical Maltese buildings tend to suffer

from extreme heat during the summer while maintaining adequate temperatures during the

winter months.

A case study in Ta’ Giorni area was carried out to determine the building performance during a

period of one year. The building was thought to be cool during the summer months due to being

relatively close to the sea. During the duration of the study, the attitude of the tenants towards

thermal comfort was also noted. While in recent years, air-conditioning systems have become

more affordable, running costs are still an issue. From the results, it could be noted that heat

transfer to the outdoors is significant, together with heat being lost from the window frames.

These factors led to the bedrooms, located on the north side, to be very cold resulting in poor

thermal comfort.

A considerable time lag in heat transfer could be noted, due to the thermal mass of the building

envelope. Insulation increased the effect of thermal inertia in the building, reducing the heat

entering the building. The building was retrofitted with a number of measures to determine

which of these factors are beneficial to the current and future apartment buildings. The original

window apertures were replaced with double glazing frames. Insulation boards were attached

directly to the internal walls with adhesive. Retrofitting of the roof was also part of the project,

to eliminate excessive heat in the top floor. Ventilation was integrated as part of the project to

maintain healthy humidity levels. It was imperative that the data collection was maintained after

the retrofit was completed to determine the effectiveness on the overall thermal comfort.

Financing Energy Efficiency in Malta and Italy

Page 18

A bank experience on home renovation loans

Edward Grech, Consumer Finance, Bank of Valletta

While an Energy Performance Certificate (EPC) is necessary to sell a property, it is felt that it

does not have a weighting on the price of the building. Few developers are marketing energy

efficient measures in their buildings, as they may be perceived to increase the cost of the

property, reducing its potential to be sold. Having a property with a high EPC rating should have

added value on the price and such properties should not be treated equally alongside other

properties which do not have these features. Otherwise, the EPC will continue to be an added

expense.

Currently, banks cannot distinguish whether the equipment to be bought is energy efficient or

not without taking into consideration the running costs. If the equipment to be bought requires a

higher initial capital cost with minimal running costs, the loan can be repaid over a shorter

period of time based on the same initial capital. If banks were to have technical expertise with

regards to energy efficiency loans, the banks would be more willing to offer higher loans

depending on the return on investment. Currently, personal loans are offered for equipment,

upgrading the personal property with insulation and more. To entice the interest of the public,

these have lower interest rates than motor vehicle loans.

An increase in the uptake of energy efficiency measures could be facilitated by providing direct

financing to equipment retailers without the need for the buyer to apply for a bank loan. To be

implemented, the cost savings in the loan mechanism are to be included as part of the

repayment and thus the customer could be offered a higher loan.

Financing Energy Efficiency in Malta and Italy

Page 19

One-stop-shop for home renovation: barriers and opportunities

Marco Devetta, Sogesca

The one-stop-shop was introduced and led by the municipality of Padova. Across Italy, until

recently, a significant portion of the energy bill could be attributed to heating. Nowadays,

cooling is becoming more significant due to the temperatures being recorded through the

summer months.

A number of Energy Service Companies (ESCOs) are being set up to bridge the gap between

the building tenants and the energy provider. The first task to be carried out is data collection

throughout the condominium, to determine the measures to be undertaken during the energy

refurbishment. It is essential to emphasize the term energy refurbishment, as the municipality

will only provide the necessary funds to carry out energy audits if the building will be refurbished

to reduce the energy costs. Following analysis of the data collected during the investigation

period, the works are carried out by the ESCO, without any involvement from the tenants. The

return on investment would be based on the savings from the new technology installed in the

condominium. After the works are completed, the tenants would still pay roughly 95% of the

energy bill amount prior to the upgrade. The difference between the 95% bill and the new

reduced bill would be the repayment to the ESCO. ESCOs are chosen by public tender. To

start the works, a private-private contract will be signed between the ESCO and the

condominium.

These projects have an added value for citizens, as they benefit from free energy audits,

increased knowledge related to energy efficiency, fixed heating costs, reduced CO2 emissions,

improved thermal comfort and increased value of the property. The improved thermal comfort in

the building also leads to better health of the occupants.

Financing Energy Efficiency in Malta and Italy

Page 20

2B. ENERGY EFFICIENCY IN INDUSTRY AND SMES

Chair: Charles Buttigieg, Malta Water and Energy Agency

Financing energy efficiency opportunities in industry and SMEs

Rene Saliba, Malta Development Bank

Malta Development Bank (MDB) are acting as a catalyst for sustainable development and

inclusive and sustainable growth. The Bank performs a promotional role and has a remit to

support the private sector, particularly SMEs, including through credit enhancement. In more

detailed phases of work, the Bank can provide Venture Capital and advisory services.

There is a €180 billion annual investment gap across the EU to meet clean energy targets and

for Malta, more energy efficiency and renewable energy projects are needed. The MDB makes

use of multiple funding sources, and will on-lend, through intermediary banks, to SMEs and

individuals and infrastructure projects.

It is possible to combine funds at financial instrument level. These could combine EU structural

funds with Development Bank co-financing and could provide a guarantee fund to underwrite

commercial banks. A €10 million guarantee fund can leverage to €50 million of investment.

Structural Funds can be used to reduce the cost of interest payments and to make loans softer.

MDB can blend at project level too, blending EFSI and structural funds as other EU Member

States have done.

Financing Energy Efficiency in Malta and Italy

Page 21

How to encourage the uptake of energy audits

recommendations from SMEs

Karl Herrera, Malta Enterprise

Malta Enterprise has made available financial support schemes to help make business more

profitable and to make them more efficient. Take up is not as high as expected. Private

companies will typically go for a new production line before investing in energy efficiency. Malta

Enterprise are working to make energy efficiency more known and to increase consideration of

these investments.

Investment aid is available specifically for highly efficient co-generation and can support plant

upgrades as well as new plant. Financial support can also be provided for schemes in

manufacturing systems, lighting, heating and cooling in the hotel sector. An application for this

funding line would require a link to an energy audit.

How to support investment in energy efficiency in the business

sector

Geoffrey Saliba, Malta Business Bureau

Financing Energy Efficiency in Malta and Italy

Page 22

EU energy saving targets are an important driver for action. While the 2020 targets are

achievable technically, they may not be economically feasible. New energy efficiency measures

will be needed, so additional financial support is very welcome.

There are four key barriers; the economic environment, the legislative environment, capacity

and financing.

On the economic side, it is important to catch businesses at exactly the right time when they are

thinking about renovating. Decision making cycles on this can be over a 10-15 year time period.

Operations and buildings may be separated strategically, but not operationally. Energy

Efficiency audits are in their infancy in Malta. It would be good to raise the bar on audits across

Malta. There are around 70 energy auditors in Malta, with an excellent technical understanding

of energy efficiency, return on investment etc, but when it comes to why end users should act,

then they struggle. Presenting the business case for energy efficiency is a key skill. Not all

companies might be willing to pay for an energy auditor.

On financing, greater variation in terms of financial product offers is needed and length of

payback is an important consideration. 7 years might be considered long for Malta. Malta has a

diversified industry/SME sector, including for example injection moulding, currency printing,

steel polishing and marble cutting, so any financial instrument should try to accommodate

multiple sectors’ needs.

There is a need to look at the EU targets. If Malta focuses only on the “lucrative” shorter

payback measures, then it won’t hit EU targets. To reach the targets Malta’s energy and

buildings community will have to venture well outside of their comfort zone.

Internal capacity within business varies greatly. The second round of Energy Efficiency

Directive audits are due at the end of 2019. These will gather a lot of useful data. 2019 would

therefore also be an ideal year to launch a financial support instrument. Larger businesses will

have to decide at the end of the year which improvement measures to adopt, and financial

support might help them to decide how to proceed.

Financing Energy Efficiency in Malta and Italy

Page 23

CLOSING PLENARY SESSION

Chair: Professor Luciano Mule’ Stagno, Institute for Sustainab le Energy,

University of Malta

Short reports from parallel sessions by Moderators

1A. Making Energy Efficiency Attractive for the Financial Sector

Chair: Oronzo Daloiso, EASME, European Commission

Energy Efficiency has so far not been a priority for banks because savings don’t always

pay back the loans, but the potential is there.

Blending of different funds can be complex and State Aid implications are not always

readily understood and can be a barrier

Financial incentives to create demand could be linked with those for renewable energy

generation

Awareness raising and capacity building in the financial sector has an important role to

play

1B. Renovation of Public Buildings

Chair: Andrew Deacon, Climate Alliance

There is an important distinction to draw between public buildings and public authority

buildings in terms of ownership and occupation

There is a need to build knowledge and capacity among building owners, occupiers and

managers in order to drive demand for energy efficiency improvements

While overall renovation has a high profile, all public funds should include energy

renovation as a key area to be addressed

There is a lack of standardized procedures, this is a key barrier to action for Malta

Renewable energy generation can be integrated into energy renovation projects on

public buildings in order to improve the business case for action

Building performance benchmarking has an important role to play, and could be a first

step towards target setting for renovation performance improvements

Financing Energy Efficiency in Malta and Italy

Page 24

2A. Home Renovation

Chair: Roberta Vella, Ministry of Transport, Infrastructure and Capital Projects,

Malta

There is potential to improve energy consumption in social housing by educating tenants

in alternative methods to achieve thermal comfort. A multitude of measures can be

integrated (such as double glazing, roof insulation and ventilation to keep humidity levels

in check).

In Malta, the EPC rating is not given any weight in the price of property. Banks cannot

distinguish between one measure and the next in terms of energy saving in renovations.

Thus if there was technical input, banks would be more willing to provide higher loans

with respect to energy efficiency measures

The ESCO concept is interesting and a useful example from Italy (PadovaFIT) was

shared.

2B. Energy Efficiency in Industry and SMEs

Chair: Charles Buttigieg, Malta Water and Energy Agency

While energy may not be the topmost issue for industry and SMEs, support schemes

exist and there are further opportunities for energy efficiency improvements in the sector

in Malta

The timing of introduction of schemes is important as businesses may have a limited

time to decide to take forward energy improvements

Schemes to build knowledge and awareness are also important, these can be linked to

energy management systems.

SMEs should also get support for the development of energy improvement

applications/schemes.

Conclusions of the day by European Commission and Maltese

Government

Paolo Tosoratti, Directorate-General for Energy, European Commission

Climate and energy is bringing a paradigm shift in the way we work and the way that

we think about buildings. This is the case at many levels and work is needed at all

levels and to continue to exchange experiences and views. There is a need to continue

awareness raising with all stakeholders. Conditions to leverage investments will then

follow. We have to think differently and promote different values. Thermal comfort from

a well-insulated apartment is one positive value to promote.

Jonathan Scerri, Ministry of Transport, Infrastructure and Capital Projects, Malta

There is not enough demand for energy efficiency and it seems that currently that

renewable energy is more attractive. Energy efficiency comes lower down the agenda.

There are though a number of things that could be done to raise its importance. These

include greater awareness raising, making better use of demonstration buildings that

are available and making lifetime and lifecycle costs more apparent. Energy efficiency

brings improved quality of life. People often speak about cost, but there are some

unquantifiable benefits that result from energy efficiency. Building improvements also

Financing Energy Efficiency in Malta and Italy

Page 25

translate into health benefits. We do know how to make our buildings more energy

efficient, but we need to raise interest among the public to reach our targets. The

technology is there, the funding seems available, but the Ministry want to close the

circle by increasing demand.