Context
Euro Property Assessed Clean Energy (EuroPACE) is a scalable on-tax financing model to support the deployment of energy saving and generation technologies to European households and the EU’s clean energy transition.
The scheme is inspired by the successful US PACE scheme that was introduced in 2008, which resulted in over USD4.7 billion in funded projects, over 200,000 homes over the past four years.
Private capital is deployed as upfront financing to homeowners which is repaid through an additional special “assessment” payment on its property tax bill for a specified term.
Stakeholders involved
- EU
- Global New Energy Finance (Netherlands)
- Center of Scoail and Economic Research (Poland)
- Joule Assets Europe (Italy)
- Climate Bonds Initiative (UK)
- Ajuntament d’Olot, Energy Agency of Extremadura, Ente Vasco, Up Social (Spain)
Problem
- Energy efficiency investment are not attractive as it comes with high transaction costs as projects are small and relatively long payback period.
- Lack of technical and legal standardisation of projects prevents securitisation of energy efficiency assets (loans or equity).
Innovation
- Market-Based Approach: 100% financing through private and public capital to reduce reliance on grants and subsidies.
- De-Risking Energy Efficiency investment: The long-term repayment obligation (up to 25 years) is attached to the property not the owner. Remaining debt is transferred to new owner upon sales.
- One-stop shop home renovation process: Providing all technical advice, support, training, verification and financing services.
- Standardisation: Projects can be aggregated and securitised as green bonds.
Results and impact
- By 2025, EuroPACE is expected to deliver the three following impacts.
- Social impact: EuroPACE contributes to community regeneration by making homes and apartments buildings more livable, attractive and through engaging with local stakeholders. EuroPACE has the potential to bring retrofit and improve over 300,000 homes and and benefit Europeans that are in energy poverty (approx. 50-125 million people) by lowering their energy bills.
- Environmental impact: EuroPACE can reduce the energy consumption of residential buildings by improving insulation, heating and cooling equipment and more. By 2025, the project intends to save 3.5M MWh/year which is equivalent to more 1.8M tons of CO2 savings.
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Economics Impact: EuroPACE can help revitalise local economies through an injection of €5BN capital in local economies and the creation of over 45,000 jobs across the EU27. Every €1 m investment is expected to generate 18 jobs (direct and indirect) in Spain.
Key lessons learnt
- Collaborating with multiple homeowners via utilising a standardised solution is effective in reducing costs rather than targeting individual homeowners.
- The economics of EuroPACE is best suited for countries that experience energy bill hikes in the winter (northern European countries) and low energy bills (Mediterranean countries).
- As EuroPACE relies on homeowners who are able to secure finance on favourabe terms, this program may not be applicable for social housings which have access to cheap funding.
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