Promoting renewable energy in the built environment through innovative business models
On assignment of the ‘Implementing Agreement on Renewable Energy Technology Deployment’ (RETD) of the International Energy Agency (IEA), ECN has examined new business models for implementing renewable energy in the built environment. The aim of the RE-BIZZ project was to offer policy makers and market parties insight in how new, innovative business models and policy measures can stimulate the deployment of renewable energy and energy savings in dwellings and buildings.
In this study, ECN analysed various business models and described examples from practise. Different models with an energy service company (ESCO) have been examined, which are widely applied in Germany and Austria, particularly for energy saving in public buildings. Other examples include: financing PV for dwellings through the local authorities and payback through the property tax, as implemented in Berkeley, USA; incentivising the market for solar boilers in Tunisia, financed with a loan and paid back through the energy bill; and the market introduction of micro-CHP in Japan by enabling households to lease these installations from manufacturer Volkswagen and energy company Lichtblick. Policy instruments such as feed-in tariffs for renewable energy and energy saving obligations for energy suppliers are also addressed.
The study shows that business models enable a life cycle approach in which building owners can spread the investment cost of renewable energy technologies or energy saving measures across the life span of these measures, allowing costs to be covered by benefits. In large buildings, ESCO models can be a solution to barriers such as high upfront investments and access to capital. Dwellings and small utility buildings are better served by loans through local authorities or financial institutions and payback through the energy bill of energy suppliers. In the rental sector a solution needs to be found for the fact that the investment costs are paid by the landlord and the benefits of a lower energy bill go to the tenant. In social housing, this can be solved by adjusting legislation such that the rent may be increased after implementing energy saving measures, similar to the adjustment of the home valuation system in the Netherlands.
The business models will only lead to accelerated deployment of renewable energy or energy saving in the built environment if the measures are cost-effective. If the payback time is too long, the costs of financing or the costs for involvement of an energy service company may also be barriers. Measures that are not cost-effective may benefit from a combination with policy instruments such as feed-in tariffs and subsidies to make the business model work.
The study can be downloaded on the ECN website.
In the framework of this study, ECN conducted a number of interviews with Dutch banks. Banks are interested in new business models, but they often consider concrete cases to be too risky and not interesting from a financial point of view. The business valuation of financing energy saving can be increased by guarantees from the government. An article on this subject is available on the website of ECN.
For more information, please contact Marijke Menkveld, telephone: +31 224 564017 or by e-mail: firstname.lastname@example.org.