Policy Pathways Brief: Joint Public-Private Approaches for Energy-Efficiency Finance
Financing major investments in energy efficiency projects is a challenge for all sectors of the economy. Vast cost savings are failing to be realised due to limited technical expertise in identifying energy efficiency opportunities combined with inadequate financial knowhow and restricted access to capital.
The International Energy Agency has identified four critical factors to guide policy makers in realising these savings opportunities by creating the enabling environment for a range of partnerships with the private sector where capital, and technical and financing skills are readily available.
Policy pathway to enabling Public-Private Financing of Energy Efficiency projects:
- One size does not fit all. Structure an agreement that is suited to local legislative, regulatory, institutional, financial and energy services market conditions.
- The public-sector partner should determine the implementation steps and manage the implementation process, while the private-sector partner takes the lead in implementation. The agreement should be structured such that partners can make adjustments as necessary to meet objectives and respond to market changes to ensure delivery of services.
- An independent third-party organisation should evaluate the public-private partnership design and implementation to assess factors affecting performance, its success in meeting objectives and the key lessons learned.
- The degree to which the public-sector partner is willing and able to mitigate project risks will define the private partner’s ability to mobilise project financing. The public-sector partner should carefully consider the degree of risk that it will be required to accept relative to the value of service delivered.
The full Policy Pathway offers guidance in enabling the financing of energy efficiency projects through public-private partnerships and provides case studies from around the world. The report and other Policy Pathways documents can be downloaded here.