The European Bank for Reconstruction and Development Bank (EBRD) is preparing to introduce a new energy efficiency finance model for Turkey’s public sector that will fund energy performance companies (EPCs) who will collaborate for energy savings with the public institutions, Turkey’s deputy head at the EBRD told Anadolu Agency on Friday.
The bank will provide loans to the EPCs who are tasked with guaranteeing a prescribed degree of savings resulting from these efficiency investments in public institutions, Sule Kilic, deputy head for Turkey at the EBRD explained.
The EBRD’s five-year strategy for Turkey, announced two weeks ago to mark the 10th year of the bank’s operations in the country, centers on energy efficiency investments, along with renewables. The bank has already funded 3 gigawatts of installed capacity in wind, solar and geothermal projects — equivalent to 7% of the total installed renewable capacity across Turkey.
Turkey’s National Energy Efficiency Action Plan, launched by Turkey’s Energy and Natural Resources Ministry in early 2018, outlines a roadmap targeting savings of $30.2 billion by 2030 by investing $10.9 billion in a several different sectors, especially in the industrial and construction sectors.
Kilic highlighted that public institutions have a very high potential for savings as part of this plan.
To benefit from funding, Turkey’s Energy and Natural Resources Ministry asked that public buildings, whose energy consumption exceeds 250 tons of oil equivalent, calculate the buildings’ average consumption and monetary value in 2016, 2017 and 2018 and submit the findings to the energy ministry by March 2020.
The buildings will need to save at least 15% from January 2020 to December 2023 compared to the calculated average consumption of the building in 2016, 2017 and 2018.
“If we take the example of a heating or electricity bill of a public building; the EPC will make all the necessary efficiency investments for the building with the loan provided from the bank [EBRD]. The public institution and the EPC will make a contract, part of which will involve the EPC’s guarantee of a savings amount each month. However, the public institution will pay this savings amount to the EPC to repay the loan,” she explained.
– Public-private energy efficiency cooperation
The new finance model, which is already in use in Europe and other countries, will be the first time it is executed in Turkey.
“We can define this as a new model of public-private collaboration in energy efficiency investments,” Kilic said.
However, to launch it in the country, some legislative amendments are required so public institutions are allowed to make such contracts with the EPCs.
She explained that the contract between the EPC and the respective public institution will run for an agreed period, say five years, during which time the public institution will fully pay off the loan monthly, avoiding the need for an upfront repayment from public funds.
She also stated that when put into practice; a new market would arise for EPCs.
– Similar model could be applied for gas storage projects
Kilic said the same model could be applied to Turkey’s underground gas storage facilities, which are critical to the country’s energy security.
The EBRD no longer funds carbon projects but could focus on a financial mechanism for floating liquefied natural gas (LNG) and regasification units (FSRU) in Turkey, she said.
As the public sector cannot make all the necessary investments, she explained that some private sector players are planning to build the much-needed underground gas storage facilities, which would enhance energy security, would allow more competitive prices and eliminate dependency on long-term gas contracts.
She suggested that the role of Turkey’s Petroleum Pipeline Company (BOTAS) would be pivotal for the success of such a finance model.
“To be able to finance the private sector players planning to invest in gas storage or FSRUs, BOTAS should guarantee them the use of a certain capacity of their storage so they can earn and repay the loans,” Kilic explained.
Turkey, with around 50 billion cubic meters (bcm) of annual natural gas consumption, plans to have a storage capacity of 11 bcm thanks to the investments from BOTAS.
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