Download Ben Frier EST - Carbon Action Network

Energy Saving Trust:
Delivering the Green Deal
Ben Frier – Local Delivery Manager
What are we trying to finance?
Return on investment over 25 year period with
householder as the investor investing their own money
Returns for energy efficiency
Loft ~45%
Cavity wall ~30%
Solid wall, internal; 4-9%
Solid wall, external; 0-3%
Returns for solar PV FIT
6-8% index linked
Previously proposed
returns for RHI
6% solar thermal
12% other
Whole house
5-7%
23 May, 2017
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Role of Local Authorities
Aligned Incentives
De-risking
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Jobs
Fuel Poverty
CO2 reduction targets
Landfill reduction
Own estate contracts
Social housing
Marketing support
Planning
Waste contracts
Local
Authority
Convening power
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Project initiation
Procurement
Local initiatives (LEPs etc)
Community leadership
Project pipeline
Scale
Finance provision
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Revenue accounts
Grants – UK and EU
Prudential borrowing
Credit enhancements
23 May, 2017
3
LA Green Deal options
Concept
Going live
Carbon proactive
Public Sector
model
Partnership with
private sector
(finance/ delivery)
In-house
model
Public Private
finance model
Marketing/
Facilitation role
Retrofit
Guarantee Fund
Minimalist
Provide
marketing
support
Outsource
finance and
delivery
In house
Work with
private sector
Leave to central
government and
the market
1. Leave it to the Market:
Market view on financing the GD
Energy suppliers and retail firms don’t want to finance the Green Deal
off their balance sheets
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Balance sheets committed to other programmes
High cost of capital of 8-10%
Challenge of providing for fixed rates for 25 years
Confidence needed in achieving scale in order to recover start up
costs
• Confidence in delivery to existing consumer base
The Green Deal is not well suited for retail banks and mortgage lenders
• Long term fixed rate finance not attractive
• High system start up costs
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The Green Deal Finance Company
• PWC
• Banks
• Energy
Companies
• Building
firms
£?
Refinance
programme
Key Issues:
Finance
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Banks
Will it be at scale?
Will GIB finance?
Will banks provide?
What will be the cost of capital?
Green Deal Providers
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GIB
Householders
2. Fund pays GDP
3. Pays fund over
upto 25 years
Green Deal Provider
1. Measures delivered to
property
What restrictions from banks?
Access to ECO?
What obligations to local jobs?
What obligation to long term
service?
• What credit risk restrictions?
• Measures restrictions
• No solar PV or RH
Operations
• Who will pay for set up?
• Who will operate?
General promotion of the Green Deal
market
TGDFC
Finance vehicle(s)
GDP 1
GDP 2
GDP 3
GDP 4 etc
Framework of approved
GD providers which
could be run by anchor
authority or County for
all District/ Boroughs
Local authority
broad
marketing
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General promotion of the GD market
TGDFC
(2)
Finance vehicle(s)
GDP 1
GDP 2
GDP 3
GDP 4 etc
Borough 6
Borough 1
Borough 4
Borough 7
Borough 3
Borough 2
Borough 5
A variation in the model has authorities choosing a preferred Green Deal Provider for its area
Leave it to the market: General promoter
Strength
Weakness
• Passive approach;
carries no financial
risk
• Need to be attractive
areas in which GDPs
will operate
• Limited funding
needed and no
procurement costs
required
• Does not take
advantage of strong
LA positioning
Dependency
• private sector
providing necessary
momentum with
GDPs
• TGDFC or energy
supplier/ retail led
models
• No direct economic
development
opportunities or
drivers for local jobs.
• Ability to attract ECO
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2. LA as a marketer
Finance vehicle(s)
TGDFC
GDP 1
Referral fee
GDP 2
GDP 3
Marketing & Surveying
Organisation
GDP 4 etc
Marketing for a panel of
GDPs
LA investment into
own programme or
third party vehicle
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LA as marketer/facilitator
Strength
• Straight forward
framework to
implement
• Capital investment
limited to start up
costs
• Can be repeated
and a number of
local authorities
could work in
concert
• Low balance sheet
issues
Weakness
Dependency
• Limited scope for
broader outcomes
• Need to procure and
agree finders fee
• Potential dispute
with operators over
identification of
customers
• Potential for adverse
publicity if approved
providers are
ineffective or if
equipment does not
perform
• Potential for GDPs
to cherry pick
• Set up of TGDFC or
other finance vehicle
• Strong GDP network
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3. LA as large scale Green Deal
provider
Anchor LA (+
partner LAs)
LA/ Bank finance
Finance vehicle
Delivery partner
Refinance once track
record in place
TGDFC
Marketing
Delivery (via panel of installers)
Presentation title insert here
23 May, 2017
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LA as Green Deal Provider
Strength
• Long-term financial
risk taken by
private financiers
• Delivery Partner
responsible for
making it work
• Potential to create
jobs and local low
carbon sector
• Smaller LAs can
join
• Delivery in your
area
Weakness
• First loss risk
• High set-up costs
(but can be
recovered)
• Scale required to
achieve critical
mass to access
capital markets.
Dependency
• Birmingham City
Council
procurement
process
• Working with
partner LAs
• Issue of
governance
• Bank fees if bank
finance used
23 May, 2017
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Examples
Birmingham
Newcastle
• Cabinet decision in April 2011
– Initial programme of 15,000 private
and social houses valued at £100m
– Option to extend to 60,000 houses
and £400 million
• Cabinet decision in July 2011
– Recognised need to work with
neighbouring authorities to achieve
scale
– Open up to North East councils
– Reverting in January for procurement
decision
• OJEU and PQQ issued in Sep 2011
• 22 West Midland local authorities in
total on the contract
• Now covers non-domestic stock
• 11 other public sector organisations
including housing associations and
police/fire
• Valued at £275m with option to
extend to £1.5b
• Strong support from North East councils
– 4 committed in total
– Financial and legal advisors procured
– Project governance and procurement
programme being established
• Back to Cabinet – 25th Jan
– Approval to start procurement of a
delivery partner
– Approve, in principle, use of LA finance
23 May, 2017
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West Sussex multi-tier model
WSCC
Finance
Anchor authority
• Provide start up finance
– Districts repay via joining
fee or;
– Householders repay via
Green Deal payments
• Run procurement
programme
– Districts named as
partners
• Manage future re-financing
Domestic
Districts and boroughs
• Contribute housing stock
• Asset-matched investment
Contract
Delivery partner
Public sector nondomestic
Managing Green Deal Options
Option to consolidate
around working model
2011
LA as Green
Deal provider
LA as marketer
LA as general
promoter
2012
2013
2014
2015
Can start now
Clarity on
private sector
capability
Clarity on
market
delivery
23 May, 2017
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What do you want? What will you put
in?
Outcomes
LA as large scale GDP
LA as marketer
General promotion
Resource/Risk/ Control
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EST LA support – to date
Green Deal options appraisal and business case
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Greater London Authority (on behalf of 33 London Boroughs)
Association of Greater Manchester Authorities (10 authorities)
Nottingham City Council
Business case for a preferred Green Deal model
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Birmingham City Council
Newcastle City Council
West Sussex County Council
Capacity Building workshops
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Sustainability West Midlands (33 authorities)
Building an evidence base
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Green Deal and FITs measures potential, ECO subsidy, economic impacts, CO2
saved
Used by LAs and Registered providers
23 May, 2017
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Contact
Ben Frier
Local Delivery Manager
07961 271587
[email protected]
Vicky East
Green Finance Manager
0207 654 2477
[email protected]