Even if multiple financing models have proven to be successful, many more political decision-makers and market players need to be convinced of the viability of the financing models for energy efficiency in order to accelerate the rate of multiplying the investment projects to their necessary levels (estimated €100 billion annually to reach the EU 2020 goals).
The CITYnvest pilot region GRE Liège started this process in 2014 and a first example of an ‘inspirational conference’ to convince the entire value chain can be watched here. Erika Honnay, project director of RenoWatt explains the importance of convincing stakeholders and ensuring political commitment: “Long term political commitment at the highest level of the public entity is crucial in launching a model for energy efficiency. In order to keep the long-term engagement from administrations, municipality technicians and all stakeholders, a strong commitment from the leaders of the municipalities is needed. This will assure uninterrupted decision process and progress.”
How to prepare the ground for the decision-making?
In order to facilitate the decision-making process at the municipal level in accordance with the timeframe, each decision has to be anticipated at least 3 months in advance. Meetings have to be organized with the relevant representatives in order to explain and discuss each point in detail. Those meetings might be linked to financial, technical or legal aspects. We have to make sure that the points are perfectly understood and that unchallenged information can go through the related departments, reaching all the stakeholders. The highest level of the public authority involved in the project has to be perfectly aware of the points discussed in order to defend it and lead to a formal decision.
A public facilitator should always prepare a fully detailed report at the attention of municipality’s authorities. They have to convince Town Council to fully adopt and endorse the project. Here are the main arguments to convince political decision makers:
Financial arguments
The key financial arguments to convince municipal authorities are the following:
- The project profitability and return on investment based on the Net Present value (NPV) methodology. All the figures and the ranges of investment for a specific public entity have to be clearly identified. It is essential to convert the costs and the revenues for the years to come in the Euros of a given year (1 EUR in 2030 does not have the same value as 1 EUR in 2017). The investment amount and energy savings are actualized based on the inflation, the expected increase of the energy costs, the interest rate of the loans, and the opportunity value of the capital. See Toolkit One Stop Shop annex 8 for an example.
- Energy savings argument: The reduction of energy bill is an easy-to-understand metric that can be used to communicate with citizens.
- Cash-flow: Most municipalities use loan or third-party financing that generate monthly reimbursement of capital and interest. The energy savings can take several years to cover this additional spending. The time needed for the project to register a positive cash flow is an important argument for municipalities: the quicker the cash flow of the project becomes positive, the better.
- The national or regional government can also provide incentives to renovate municipal buildings. For the pilot region Liège in Belgium, two regional levers will be used: subsidies covering nearly 20% of the investment and the ability for the municipalities to take on extra loans beyond budgetary boundaries.
Ecological arguments
- Being perceived by citizens as a pioneering ecological-friendly city is important for the image of the municipality. It demonstrates that the municipality ensures the well-being of its citizens and a good territorial development. Several benefits of refurbishment compared with demolition can be identified: reduction of landfill disposal, greater reuse of materials, reuse of infill sites and existing infrastructure and reduction of new buildings on flood plains. Municipalities can lead by example and show they do the required renovation to meet European targets:
- Member States of the European Union are committed to achieve the 20/20/20 goals: 20% reduction in CO2 emissions, 20% renewable energy and 20% energy savings between now and 2020. The response to climate change involves energy retrofitting of the building stock.
- Each Member State shall ensure that, as from 1 January 2014, 3 % of the total floor area of heated and/or cooled buildings owned and occupied by its central government is renovated each year to meet at least the minimum energy performance requirements retrofitting. Municipalities can show that they lead by example even without a specific EU requirement for renovation of public buildings owned by local governments.
Patrimonial arguments
Retrofitting buildings allows to maintain historical buildings and to combine ancient and modern architecture. It enhances the architectural heritage of the city. In energy retrofitting works, insulation (walls, roof and especially windows frames) is the most visible part of the process. Those works offer a patrimonial added value. Beside the asset gain, the visibility of the renovated buildings also promotes the actions taken by the authority towards its citizens.
Promoting local employment
Energy performance contracting models are offering an excellent opportunity to promote local employment. Energy retrofitting in Europe could generate the mobilisation/creation of more than 2,000,000 jobs in Europe. In the case of Energies POSIT’IF program, 1M€ invested in insulation works creates 26 additional full-time positions and 1M€ invested in renewable energy creates 6 additional full-time positions. In the case of Renowatt (GRE-Liège), 1M€ invested retrofitting work creates 17 local jobs. A special attention has to be paid to the social and ethical terms of the contracts, for example to limit subcontracting to 2 levels.
Political action
The renovation of buildings offers a good visibility of the actions taken by the elected representatives and an efficient use of public money. Municipalities can “Lead by example” and educate their staff in order to reduce the energy consumption of the buildings.
Take into consideration in your planning the decision-making process of municipalities
A deep knowledge of the constraints and the ways of working of the municipalities is crucial at every step of the project:
- Before launching the project: Large retrofitting projects should not be launched before an election period. An elected representative might launch the project and not be elected afterwards. There is no insurance that his successors will be committed in the retrofit program.
- During the preparation phase: in order to facilitate the decision-making process at the municipal level in accordance with the timeframe, each decision has to be anticipated at least 3 months in advance.
- During the validation phase: a validation calendar has to be perfectly respected at the municipal level in order to engage investments in such a project. This calendar has to be integrated in all the tendering processes (making sure to get enough spare time in order to face any unexpected circumstances - political life is not a long quiet river…).
Typical timing to validate a decision in Belgium is the following:
- Send memo to the municipal council (mayor and deputy mayors) – Week – 4
- Validation during the communal college meeting – Week – 2
- Validation during the town council – Week 0
- Reception of formal validation letter – Week +1
Communication, communication and communication, at all levels of the municipalities
It is also essential to be permanently in contact with the actors involved, as everybody needs to work in parallel in order to be as efficient as possible. It’s also crucial to identify the right interlocutors at each level (political, financial, legal, technical). In administrations, there might be a lack of communication between different services. It’s also part of our job to make sure that they all work on the project at their own level, having all the relevant information. In such projects, demanding a lot of actions and availability from the administration agents, the human factor is also very important to set a constructive, confident and motivating relationship with your interlocutors.
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