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BSPC-Working Group on „Green Growth and Energy Efficiency“ Berlin, 12th of October 2012 Olaf Weber, KfW. Financing of the German Energy Turnaround. Covered issues. KfW: more than 60 years p romotional bank of the Federal Republic of Germany. - PowerPoint PPT Presentation
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Bank aus Verantwortung
Financing of the German Energy TurnaroundBSPC-Working Group on „Green Growth and Energy Efficiency“
Berlin, 12th of October 2012
Olaf Weber, KfW
2German Energy Turnaround / 12/10/12
Covered issues
1 A brief view on KfW
2 Huge investment needs for the German energy turnaround
3Which sources are available to finance the German energy turnaround?
4 Good practise in promoting energy efficiency by KfW
5 Lessons learnt
3German Energy Turnaround / 12/10/12
KfW: more than 60 years promotional bank of the Federal Republic of Germany
› Shareholders: 80% Federal Republic 0f Germany, 20% all federal states
› Founded in 1948
› Headquarters: Frankfurt am Main
› Branches: Berlin, Bonn and Cologne
› Representative offices: around 70 offices and representations worldwide
› Balance sheet total at end 2011: EUR 494.8 billion
› Financing volume 2011: EUR 70.4 billion
› Around 4,763 employees (2011)
› Best rating: AAA/Aaa/AAA
› Global Finance Magazine: KfW in 2012
„Safest Bank of the World“
4German Energy Turnaround / 12/10/12
House – bank - principle in Germany No branch network of our own
File loan applicationwith their regular bank
before start of investment
Enter into the loan agreement and
disburse the loan
If approved, customer‘sbank forwards
application to KfW
Refinances the loan at favourable refinancing
interest rates
Customer'sbank
Customer
5German Energy Turnaround / 12/10/12
A bank with a wide array of functions
We promote development
Promotion of developing and
transition countries
International business
We promote Germany
Promotion construction
of new housing and modernisation
as well as education
Promotion SMEs, as well as
renewables, energy efficiency, innovation
Promotion of municipal projects
Domestic promotion
We ensure internationalisation
International project and
export finance
Promotion of environmental and climate protection
Business area Mittelstandsbank
Business area Privatkundenbank
Business area Kommunalbank
Business area Export and Project
Finance
Business area Promotion of
Developing and Transition Countries
6German Energy Turnaround / 12/10/12
•Promoting sustainable projects
Particular support is given to projects which make a positive contribution to sustainability goals. Co-financing is only provided for projects whose impacts on the environment and social conditions are manageable.
•Investing money sustainably
Own funds and investments are responsibly invested under sustainability aspects.
• Sustainable business operations
High standards and goals for environmental protection in our own buildings; remaining emissions rendered CO2 neutral through compensation projects in developing countries.
http://nachhaltigkeit.kfw.de/
Bank aus Verantwortung How is KfW translating responsible banking ?
7German Energy Turnaround / 12/10/12
The German Energy TurnaroundAmbitious challenges ahead
Annual investment required in Germany
until 2020:
at least EUR 27 bn.
8German Energy Turnaround / 12/10/12
Priority to Renewable Energies
● Increasing the share of renewables in gross final energy consumption up to 60 % (2010: 11 %)
● Increasing the share of renewables in the gross electricity consumption up to 80 % (2010: 17 %)
● Massive uncoordinated expansion of solar and wind energy generation; delays offshore
● Additional fossil power plants for reserve capacity
● EU-ETS with week incentive effects
● Securing supply of „critical raw materials“
● Participation of affected citizens and municipalities
● EUR 135 bn. until 2020INVESTMENTS
CHALLENGES
GOALS
9German Energy Turnaround / 12/10/12
Urgently Needed:Power Grids and Storage Capacity
● Integration of renewable energy into existing power generation infrastructure
● Innovation in storage technologies and smart grids
● Massive expansion of grids (under stress) and storage capacities (scarce)
● Provision of sufficient long-term financial funds required to avoid a slowdown in investment
● Promotion of research & development, promotion and rapid approval of best practice projects
● Securing supply of „critical raw materials“ ● Acceleration of planning- and approval procedures● Participation of affected citizens and municipalities
● Up to EUR 90 bn. until 2030INVESTMENTS
CHALLENGES
GOALS
10German Energy Turnaround / 12/10/12
Inevitable but neglected: Fostering Energy Efficiency
● Reduction of primary energy consumption by 50% ● Reduction of electricity consumption by 25%● Increasing energy productivity by 2.1% p.a.
● Almost 100% decarbonisation of production, consumption and mobility required:
● Financial incentives ● Information and consulting for households and
companies.● Waking up the sleeping giant by fostering energy
efficiency in the building and heat sector● Adjustment of energy demand through extended
usage of smart metering
● Up to EUR 23 bn. until 2020 (for reduced electricity consumption and increased use of renewables for heat production)
INVESTMENTS
CHALLENGES
GOALS
11German Energy Turnaround / 12/10/12
Composition of electricity price for German households
24
33
2,7
19,5
0,26,5
13,7
Concession levy for localauthorities
CHP contribution
Renewable electricitycontribution
Electricity tax/VAT
Grid levy
Operating meter / measurement/ accounting
Generation and distribution
K
12German Energy Turnaround / 12/10/12
Sources to finance the energy turnaround IElectricity tariffs
› German industry pays the second highest electricity tariffs among the „industrialized“ states in Europe with 6-12 ct/kWh
› Due to intensive competition no further state induced increase of taxes or contributions for the energy turnaround is possible
› Quite the contrary: there are a lot of exemptions to energy taxes for energy intensive companies
Industry
› Consume only a quarter of the whole electricity consumption
› Energy taxes and contributions raised at 126% since 1998, while costs for generation, transport and distribution decreased at 9%
› Yellow press: „Does the Energiewende impowerish us?“
› Average tariff now 25 ct/kWh
Households
› The strategy to let pay mainly private households and companies with a relativly low electricity demand for the energy turnaround isn´t further overall accepted; e.g. actual increase of the contribution for renewable electricity which will rise from 3.6 ct/kWh to 5,3 ct/kWh next year
› On the other hand high elictricity prices are an incentive to save energy and vice versa
13German Energy Turnaround / 12/10/12
Sources to finance the energy turnaround IIFederal budget
› To stabilize the EURO it is absolutly necessary to reduce debt in the federal budget. Nevertheless there is still a large stream of state money e.g. for R&D. Although the above mentioned exemptions or reductions of taxes or contributions are state aid.
Break on debt
› To increase the transparency of state expenditure for the energy turnaround the government established an energy and Climate Funds. The fund should obtain its money from selling certificates for emission rights in the framework of the European Emission Trade System. Yearly funds-revenues should raise from 2.18 bn € in 2013 to 2.6 bn € in 2016.
Energy and climate Funds (EKF)
› There is a certain over-lapping. The German electricity tax is already a component of the electricity price, even VAT.
› EKF calculates with an average certificate price of 10 €/t CO2-emission in 2013. The current carbon market pays only 7 €/t.
› State aid must be conform to EU competition law.
› One state intervention results in another.
14German Energy Turnaround / 12/10/12
Sources to finance the energy turnaround III KfW
Triple-A-Rating of KfW bonds
KfW reduces interest rates by ist own earnings additionally
› KfW's rating results mainly from the very good credit quality and the explicit, direct guarantee of the Federal Republic of Germany. Thus securities from KfW are just as safe as German government bonds Our clients profit from KfW´s extraordinary favourable funding („Flight to quality“).
› Particulary in our energy efficiency programmes we offer „signal interest rates“ up from 1%
15German Energy Turnaround / 12/10/12
KfW action plan „Energiewende“
› Construction of new energy-efficient homes and the energy-efficient refurbishment of older residential buildings
› Energy efficiency in corperates
› Municipal efficient energy supply, energy-efficient urban lighting, energy-efficient refurbishment of municipal non-residential buildings, integrated energy neighbourhood concepts and refurbishment manager
Boosting already existing programmes
› KfW Programme Offshore Wind Energy for the establishment of 10 wind farms off the German North and Baltic Sea coasts
› KfW Energy Turnaround Financing Initiative. Direct loans for large commercial German and foreign enterprises and large-scale investment projects in the areas of energy efficiency, innovative projects in the areas of energy saving, energy generation, storage and transmission as well as the use of renewable energies.
Creating new programmes
16German Energy Turnaround / 12/10/12
Initiative: Energy efficiency in SMEs
Federal Department of Commerceand KfW
Loans at low interest rates
Grants for advice
17German Energy Turnaround / 12/10/12
Grants for advice on energy efficiency
Detailed adviceInitial advice
60% grant
Up to 1.600 EURconsulting fee
Preciseenergy saving
concept
80% grant
Up to 8.000 EUR consulting fee
Searching energy saving potentials
Application through local partners (e.g. chambers of commerce or energie agencies)
18German Energy Turnaround / 12/10/12
KfW energy efficiency programm for private corperates / contractors and free lancers
Energy efficient modernisation of the production system
incl. ancillary units
Energy efficient cogeneration of heat and power
Energy efficient construction and rehabilitation
of commercial buildings
Planning and professional supervision
by technical expertsImplementation of an
energy management system
Brownfield investments: energy savings must be
at least 20% compared to the
average consumption of the last three years
Greenfield investmentsenergy savings of no less than
15% required compared to the average of
the respective industry
19German Energy Turnaround / 12/10/12
Terms of KfW energy efficiency programm
Financing up to100% of costs
Risk adjusted interest rates
Backed by normal banking securities
Grace period up to 3 yearsFixed interest rates and
loan durationup to 20 years
Up to 25 mn EURcredit amount
Our current offer for a duration and a fixed interest rate of 5 Years:
starting with 1 % effective yield p.a.
20German Energy Turnaround / 12/10/12
EU-directive on energy efficiencyReduction target
› The conclusions of the European Council of 4 February 2011 emphasised that the 2020 20 % energy efficiency target as agreed by the June 2010 European Council, which is presently not on track, must be delivered. Projections made in 2007 showed a primary energy consumption in 2020 of 1842 Mtoe. A 20 % reduction results in 1474 Mtoe in 2020, i.e. a reduction of 368 Mtoe as compared to projections.(Preliminary note, No. 2)
› Each Member State shall set an indicative national energy efficiency target, based on either primary or final energy consumption, primary or final energy savings, or energy intensity. Member States shall notify those targets to the Commission in accordance with Article 24(1) and Annex XIV Part 1. When doing so, they shall also express those targets in terms of an absolute level of primary energy consumption and final energy consumption in 2020 and shall explain how, and on the basis of which data, this has been calculated. (Article 3, Energy efficiency targets, No.1)
EnergyConsumption(kWh)
Consumptionlevel beforethe project
Consumptionlevel beforethe project
Absolute savings
Specific savings
Production(units or EUR)
Trendline 1: Situationbefore project
Trendline 2: Situationafter project
Absolute and specific energy savings
22German Energy Turnaround / 12/10/12
Example supermarketKfW - energy efficiency programm
Supermarket:
Modernisation of heating, air conditioning, cooling system und control technique
Investment: 390.000 EUR
Requirement for KfW-eligible brownfield investments:
20 % energy saving compared to the average consumption of the last three years
Confirmed energy savings by the energy adviser:
• 389 MWh respectively 33%
• avoided CO2: 78 t /a
Confirmed energy savings by the energy adviser:
• 389 MWh respectively 33%
• avoided CO2: 78 t /a
24German Energy Turnaround / 12/10/12
KfW as a trendsetter: „KfW-Effizienzhaus“
›Energy standards are laid out in the Energy Conservation Ordinance (Energiesparverordnung/EnEV).
›The label „efficient KfW-home“ refers to this Energy Conservation Ordinance
›„KfW Effizienzhaus 85“ means that the building will consume 15% less energy than this ordinance demands
›Higher incentives for achieving higher energy standards (1% interest rate in general, but different repayment boni up to 12,5 %
Energetic refurbishment is a crucial component of the German energy concept
› roundabout 39 Mio. flats still need to be energetically renovated,
hereof 24 Mio. in a comprehensive way
› The average efficiency of these buildings is three times worser
than the recent standard for new buildings
KfW-promotion of energetic refurbishment in residential buildings
KfW-EH 40
Refurbishment
KfW-EH 100KfW-EH
115KfW-EH
70KfW-EH
85KfW-EH
55 KfW-EH
Denkmal
New building
EnEV: 100
25German Energy Turnaround / 12/10/12
KfW’s contribution in 2011 to energy saving, jobs, the national budget and climate protection
Example: KfW programmes for
“Energy efficient construction and rehabilitation“
1 EUR of public money triggering 12 EUR
in private investments(1,5 to 18,3 bn €)
Reducing GHG
emissions
by 0.6 m tCO2
› Extrapolated energy savings over the average useful lifetime of the buildings promoted in 2011 are 1.550 GWh
› Discounted present value of energy savings of the buildings promoted in 2011 is about 4,165 bn €
› Evaluated by IWU, Darmstadt, and BEI, Bremen
Direct tax return flow=2,9 bn €
Securing 246,900 jobsfor one year
26German Energy Turnaround / 12/10/12
Technical know how complements our financal know how
•KfW disposes of own technical experts in the field of energy
• the Federal Republic of Germany and KfW once founded the German Energy Agency (dena)
•dena provides technical and related economic know how to the German public
•KfW also takes a share in the Berliner Energieagentur, one of more than 30 regional energy agencies in Germany. Please have a look to the Energy saving partnership in Berlin:
http://www.berliner-e-agentur.de/en/projects/energy-saving-partnerships-berlin
27German Energy Turnaround / 12/10/12
How to conduct successfully an energy turnaround? Some key factors from the perspective of a promotional bank
Stakeholders lack technical and economic information which e.g. energy agencies can provide
Energy turnaround needs mainly long term investments thus there is a necessity to provide favourable long-term financing
Target groups need tailor made promotion
Give absolute priority to energy efficiency and R&D (no regret policy)
Standards facilitate orientation
Try to measure the output of activities (EU-Directive)
28German Energy Turnaround / 12/10/122828
Further Information about KfW-promotion of renewable energies and contact data
Olaf Weber KfW Bankengruppe
Director Palmengartenstraße 5–9
KfW Bankengruppe 60325 Frankfurt am Main
Germany
Fon +49 69 7431 7398
Fax +49 69 7431 3582
http://www.kfw.de
Further information
Contact
Bank aus Verantwortung
Thank you for your attention!