1. Energy Saving Trust:
Options and opportunities for local
authorities
Justine Prain – Associate Consultant
7th
December 2011, Utrecht

2. Why act now?
Investing in a time of cuts
•Reducing council costs and improving efficiency
•Economic benefits derived from local scheme set up and delivery
•Protecting consumers against rising energy prices
•Security of supply
•Carbon benefits
•Opportunity to lever in funds from the private sector
Localism
•Building more sustainable and resilient communities
•Generation and maintenance of local jobs
•Improving housing to tackle fuel poverty, promote health and well-being
•Big Society – supporting local solutions

3. Local authorities enabling of finance
Aligned Incentives De-risking
• Jobs
• Fuel Poverty
• CO2 reduction targets
• Landfill reduction
• Own estate contracts
• Social housing
• Marketing support
• Planning
• Waste contracts
Convening power
• Project initiation
• Procurement
• Local initiatives (LEPs etc)
• Community leadership
• Project pipeline
• Scale
Local
Authority
• Revenue accounts
• Grants – UK and EU
• Prudential borrowing
• Credit enhancements
Finance provision

4. Changes to the housing retrofit Sector
2011 2012 2013
Economic
Activity
Warm front
CERT
CESP
Green Deal & ECO
Feed in tariff
Renewable Heat
Incentive
Warm zones
Renewables Grants Tariffs

5. What is Green Deal?
• A regulatory framework enabling companies to offer
householders and SMEs:
• accredited advice and energy assessment of homes
• home energy efficiency improvements at no up-front cost
• reassurance that work is of a high standard
• the ability to pay via energy bills over the long term (for example, 25
years), making use of the money saved on fuel
• only to pay whilst they remain in that property
• backed up by a new Energy Company Obligation
• a number of consumer protections including requirements on
warranty, guarantee, disclosure and redress

6. GreenDealECOPrinciples of the Green Deal

7. Previously proposed returns for RHI
6% solar thermal
12% other
Whole house
5-7%
What are we trying to finance?
Return on investment over 25 year period with householder as the investor
investing their own money
Returns for energy efficiency
Loft ~45%
Cavity wall ~30%
Solid wall, internal; 4-9%
Solid wall, external; 0-3%
Returns for solar PV FIT
4.5% index linked
Note; assume 3% growth in energy prices
Source; Camco, EST; Marksman Consulting Analys

8. LA Finance options
Leave to central
government and
the market
In house Work with
private sector
Provide
marketing
support
Outsource
finance and
delivery
In-house
model
Partnership with
private sector
(finance/ delivery)
Marketing/
Facilitation role
Retrofit
Guarantee Fund
Public Private
finance model
Public Sector
model
Concept
Going live
Minimalist
Carbon proactive

9. Local authority
Utility
Installer
Bank/ Finance
Pension scheme
Private equity etc.
Local authority
housing
LA appoints and leases air
space above their own
properties in return for rent
Utility pays FiT to
installer OR bank
Installer finances workTenants receive free
electricity from installed
technology
Outsourced ‘rent a roof’ model

10. Bank finance
Guarantee fundInstaller
Installer receives
Finance from
bank at
lower rate
Central Govt/
Grant/
Other funding
Local authority/
Property owner
Local authority
Contracts created for
retrofit works
Guarantee
contract
provided
to the banks
Finance for guarantee
fund from LA and other
sources
Contract about the management
and operation of guarantee fund
Retrofit Guarantee Fund

11. Local authority
Property owner
Green Deal provider
Referral
team
LA promotes
benefits of retrofit work
Property
owner seeks advice/ shows
interestReferral made to
provider
Provider completes
assessment and works
Local authority may
receive finders fee from
Provider
LA facilitator/ Marketeer

12. LA trade co.
UtilityProperty owners
OpCo agrees works where
necessary with occupier
PWLB provides finance
to LA through prudential
borrowing
LA finances OpCo through
loans
Utility pays FiT OR Green
Deal payment to OpCo
Local authority
Public Works
Loan Board
LA forms a wholly owned
trading company that
undertakes the operational
role of the project
LA finance and delivery model

13. Banks
Finance vehicle
Delivery partner
PWLB
Property owner
Local authority
Utility
LA lends to FV
SPV contracts with OpCO
for works
Delivery partner
carries out retrofit
works
Bank(s) lend to FV
PWLB provides finance
to LA through prudential
borrowing
Utility pays FiT OR
Green Deal payment
OR Eco obligation
to SPV
Occupier pays for works
through utility bill
LA public/private model

14. Strengths and Issues
Rent-a-roof
Retrofit guarantee
fund
LA facilitator
LA finance and
deliver
LA public/private
model
Option
• No LA finance required
• Low amount of LA finance
• No LA finance required
• In control of desired
outcomes
• In control of desired
outcomes
• Ability to scale
• Solar PV only
• Need retail banks on board
• Long term fixed rates
difficult to obtain
• Reliant on private sector
GDP for all outcomes
• Financial and operational
exposure
• Costs to revenue account
• Difficult to scale
• Financial exposure
• Need LA partnerships to
get scale
• Reliant on delivery partner
Strengths Issues

15. LA Green Finance options
LA
Options
Review
Business case process
LA data
gathering
Adjust
model
Stakeholder
engagement
Write up
findings
Cabinet
decision
Aim: To support LAs understand the different finance models available to them to
support the delivery of large scale eco-retrofit
Includes: Features and benefits/ Risk and Issues/ LA examples

16. EST Green Finance Procurement
Framework
• March 2011 - EST issue OJEU contract for finance consultancy support:
– to Local Authorities and Housing Associations to assess their finance needs and objectives, as
well as structuring finance and operational solutions for them.
• April 2011 – EST appoint OJEU contractors to:
– deliver support on a project by project basis.
– respond to requests with proposals and costs within 5 working days.
• EST appointed contractors switched on depending on LAs preferences:
– Marksman Consulting
– CAMCO
– Grant Thornton
– KPMG
– ARUP
• EST currently working with following LAs using specific contractors:
• Birmingham & Newcastle (using Marksman Consulting)
• Nottingham (using CAMCO)
• Greater London Authority (Marksman)

17. 17
EST case studies (Birmingham)
• Birmingham Energy Savers Phase 3 Pathfinders’ programme:
– Business case to establish large scale retrofitting of 15k homes cost of ~ £100m
• Cabinet decision (April 2011), OJEU (Sept 2011):
1. Commitment to establish a public private partnership programme to improve the energy
efficiency of 200,000 properties in Birmingham by 2026 in line with Green Deal
2. Approves the plans for an initial Pathfinder Programme for 15,000 properties with an initial
scheme value of £250m.
- 250m
3. Commencement of a procurement process to select a delivery partner, includes the option
to extend the scheme value up to £1.5b by 2020 with 20 WM orgs
includes the option to extend the scheme value up to £1.5b by 2020.
4. Approves the deployment of financial, legal, procurement and technical resources
• EST and Marksman Consulting commissioned by Birmingham City Council to:
– develop business case for green finance modelling
– undertake housing stock modelling to underpin finance model
– write, review and provide feedback on EIB and ELENA applications

18. 18
EST case studies (Newcastle)
• Newcastle Investment in Housing Retrofit:
– 10,000-15,000 house programme (option to extend to 45,000)
• Cabinet decision (July 2011):
1. Commitment to fund initial project costs of £100,000
2. Agreed consultation with neighbouring authorities regarding contributions/ partnerships
commission
3. Procurement of legal, financial and technical advice
4. Further Cabinet report in Jan ‘12 to run a competitive process to select a Delivery Partner
Aug 2011 – secured €1.6m IEE funding for technical assistance to develop &launch programme
• EST and Marksman Consulting commissioned by Newcastle City Council to:
– developing business case for green finance modelling
– undertake in depth housing stock modelling to underpin finance model and delivery
– write, review and provide feedback on IEE applications
– disseminate information to national and European partners within IEE application

19. • Review of Local Authority finance models
– Assess options for 15,000 house eco refurbishment programme
– Select model for financing and implementation
• Key differences with other LA retrofit schemes
– Ambition to create a common energy tariff for businesses and households
– Reviewing potential for an overarching framework for delivering all aspects of the Energy
Strategy (including district heating)
• EST commissioned by Nottingham City Council to:
– develop business case for green finance modelling with CAMCO
– undertake in depth housing stock modelling to underpin finance model and delivery
– Provide links to local, regional, national and European programmes/ stakeholders
– Share insight and Best practice
EST case studies (Nottingham)

20. EST Finance Innovators Group (FIG)
• National Finance Innovators Group
- Launched September 2010
- 18 member organisations (including UK Government – DECC, WAG, LGG)
- Meetings held every 2 months in London
• Aims
- Forum for structured discussion on design and implementation issues for
delivering finance models
- Assess common issues to develop common solutions
- Share the detail of LA finance models (i.e. legal templates to reduce costs)
- Group to disseminate learning and showcase schemes as they develop
- Contribute to the negotiations between local government and central
government

21. Energy Saving Trust Key Contacts:
Andy Deacon - Director of Local Delivery
andy.deacon@est.org.uk
+44 (0)207 654 2601
Vicky East – Green Finance Manager
vicky.east@est.org.uk
+44 (0)207 654 2477