European Opportunity

Currently in Europe, SMEs have extremely limited access to financing for Sustainable Energy Assets (SEA) projects

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European Opportunity

Currently in Europe, SMEs have extremely limited access to financing for Sustainable Energy Assets (SEA) projects; namely energy efficiency (EE), demand response (DR), distributed renewable generation (DER) and electricity storage. Considering that SMEs (Small and Medium-sized Enterprises) represent almost 100% of the EU’s non-financial business economy[1], this means that a significant opportunity to save money, CO2, and jobs, remains untapped.

Despite political pledges and financial incentives, there is a critical financing gap for sustainable energy projects, in particular for SME sized projects such as building management, lighting and thermal control, efficiency systems and solar panels, that require an investment below €1.5 million. The vast majority of ERA projects require investments of €30,000-500,000.

The high upfront costs of project valuation lower the ability of institutional and private investors to invest in energy efficiency projects and hit small to medium enterprises particularly hard. Without ready access to finance, neither the green economy, nor energy efficient projects can be established.

From a “financing” perspective, more stifling still for market growth, banks and institutional investors such as EEEF, consciously avoid investments in projects driven by small to medium sized ESCOs, as their smaller size is considered an added investment risk. The bias toward large projects driven by well established larger firms means that approximately 85% of the market is out of reach and largely underserved by financial institutions.

The main barriers to these projects therefore include difficulties in project valuation, such as a lack of a standardised valuation tool, difficulties in project optimisation, where EU regulations on SEA are highly complex and fragmented across Member States, a communication gap between contractors and investors, leading to a lack of trust, and a lack of standardisation in the process used for management of energy performance risks.

The SEAF project addresses the “financeability and attractiveness of sustainable energy investments” through a response to the Call for proposals, “H2020-EE-2015-3-MarketUptake”. The project makes investment in SEA accessible to SMEs through a streamlined software platform that enables independent project valuation, insurance and design standardisation. Expected results include €100 million of investments in SEA from the SME sector, and primary energy savings of 18-45 GWh/a over the course of the project duration.