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This has raised the question of whether alternative funding strategies could be able to attract
more private capital for energy-efficiency
investments. Investments in building energy
efficiency do not only require a long investment horizon but bear also particular risks.
First, there are technological risks which result
from unprofessional refurbishment and give
rise to uncertainty in respect to the expected
energy savings. Energy price risks are due to
the uncertainty of the development of prices for
energy which determine to a large extent the
return on energy efficiency investments. There
are also housing market risks that reflect the
ability and/or willingness of renters or investors
to pay for the energy efficiency of a building;
investment costs might therefore be passed on
only partly. Furthermore, there are also financing
risks which are due to the special character of
energy-efficient investments. First, the probability of default is tied to a specific investment
project and, second, it is usually not the financial
return from the project that counts in obtaining
financing but the creditworthiness of the borrower and the property value.
The technical complexity, the particular risks and
the long duration of investments in energy efficiency make them less attractive for the classical
loan business, despite for some specialists like
the German Bausparkassen which disburse loans
for energy efficient refurbishment at favourable
rates however, only for private owner-occupiers.
Therefore, governments of many countries support investments in building energy-efficiency
with subsidized loans or a financing guarantee
very often in combination with some direct
investment subsidy. However, government-supported loans are also structured like traditional
mortgage loans so that the loan collateral and
creditworthiness of the borrower are of prime
importance for the approval of the loan. That is
why this type of programme might not reach
all investors; Germany is not the only country
where despite a sizable government-supported