Financing Energy Efficiency in Residential Buildings Experiences from Germany Model for India?

Horst Schwrer Asian Urban Forum 2011 November 17, 2011

Promoting EE in housing KfW in Germany

Funding and On-lending system
Capital market Funding Bank Interest subsidy Individual homeowner Interest rate depending on efficiency standard

Loan (maturity e.g. 30 years)

Loan (maturity e.g. 30 years)

Refinancing

German Government

Margin for credit risk and handling 0.75%

Promoting EE in housing KfW in Germany

Promotional Scheme for new construction

Estimated Primary Energy Demand in kWh/(m*a)* ca. 66-39* ca. 50-30* ca. 36-22*

Subsidized loans, partial repayment relief, grants

KfW-70

KfW-55

55 % of NL 40 % of NL

KfW-40

NL = New Building Energy Need Level according to German Energy Conservation Ordinance *Actual value varies, depending on the reference building as per Energy Conservation Ordinance
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Better conditions of financial schemes

70 % of NL

Promoting EE in housing KfW in Germany

Results

Year

Budget Loan Subsidies Commitments

(million ) (million )

CO2reduction
(1000 tons p.a.)

Housing Units
(in 1000)

Investments
(million )

2007

850

3,336

568

204

5,127

2008

1,300

5,127

767

280

8,552

2009 2010

2,035 1,337

8,677 8,746

1,452 1,049

617 953

17,724 21,330

Constraints to Energy Efficiency in Residential Buildings

Sectoral aspects

- no or unsufficient minimum standards available - no or unsufficent knowledge of and trust in saving potential (technology) by home owners and architects/developers - robust energy performance assessment tool not available
Organisational aspects

- multiple ministries and public agencies dealing with the residential building sector - single owners of condominiums have to be convinced to act together - complicated decision making processes in large condominium units - complex organisation of building processes in large scale units
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Constraints to Energy Efficiency in Residential Buildings

Financial aspects

- limited or no incentives for client to promote EE residential buildings - banking sector has interest, but limited market/product knowledge - high efforts and transaction cost during market introduction
Personal aspects

- a multitude of single individuals have to align their living behaviour - concerning heating habits (temperature, comfort factor) - no chance to force them, no guarantee that they will contribute the way expected

Promoting EE Buildings in India

Results-based Tool and Label
Joint Assessment Tool developed by Fraunhofer Institute and TERI, India
- Based on the whole-building-approach

(Flexibility)
- Robust energy performance assessment

(Comparability) - Easy to use by architects and auditors (Scalability)

- Easy to compare different EE design,

material and technology combinations (Optimization)

- Basis for Energy Efficiency Label

(Communication)
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Promoting EE Buildings in India

Energy Efficient New Housing Programme

Loan (Eur 50 million) and Technical Assistance (EUR 1.5 million) to the National Housing Bank (NHB) as apex bank to refinance sub-loans for buyers of energy efficient new urban apartments
Highest energy savings potential in new apartment blocks for middle

income residents: 46-51% depending on climate zone - out of which 20-36% Building Envelope 16-22% Appliances
Investments to achieve up to 40% savings financially attractive at 5 yr.

payback (Average FIRR 25%)

Preconditions for feasibility: - optimization of whole building design at planning stage - early contact to advise architects/developers - robust energy performance assessment tool - training of auditors and energy advisors
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Promoting EE Buildings in India

Promotional Programme Status

Early stage of implementation: Agreements signed 12/2010, first

disbursement 07/2011, TA tender ongoing

Five residential housing developments located in the composite

climate zone being evaluated: 23 individual buildings assessed and optimized with the Fraunhofer/TERI assessment tool Energy efficiency certificates under preparation by TERI: Covering 17,000 apartment units to be built in the next 5 yrs with Savings of up to 2000 kwh p.a. per apartment; and Expected total savings of 22,000 tCO2 p.a.
Fraunhofer/TERI tool is being amended for the hot-dry and warm-humid

climate zones (by November 2011)

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Promoting EE Buildings in India

Promotional Programme Next Steps & Challenges

Next steps under the Programme TA: Establish the Energy Efficient Housing brand and label in the Indian market Train energy auditors and architects in the energy assessment of new residential buildings with the Fraunhofer/TERI tool Achieve EE assessment and certification endorsement by public and private institutions Continuous Challenges to the Promotional Programme: No mandatory minimum EE standard for residential buildings Multiple ministries and public agencies dealing with the residential building sector Lack of sustainable financial incentives to promote EE residential buildings

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Promoting EE Buildings in India

EE in Public Buildings and other Infrastructure

Energy Efficiency Services Limited (EESL) set up as Super-

ESCO by the Indian Government to support development of the EE and ESCO market in India
Envisaged functions of EESL :

- facilitate preparation, financing and implementation of EE projects for public buildings, municipal infrastructure (e.g. street lighting), etc. - promote private ESCO market (sub-contracting for implementation) - provide consultancy and capacity building for stakeholders - support implementation of central and state government schemes
Pilot Loan (EUR 50 Mio) and TA (EUR 1,5 Mio)

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THANK YOU!
For more information, please contact: Horst Schwrer Head of Sector and Policy Division Urban Development

Claudia Loy, Head of Energy Sector and Policy Division

Silke Hermes, Senior Project Manager KfW Development Bank, Energy - Asia, silke.hermes@kfw.de +49 69 7431 9786
KfW Office Building Westarkade, Electricity Consumption: 98 kWh/p.sqm/p.a.
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