The materials presented here are a selection of resources considered useful in applying the principles discussed throughout the Toolkit. It is envisaged that this section will be a “living document” that can be added to as the energy efficiency financing market develops and grows.

Energy efficiency basics


Energy efficiency is a reduction of energy input to produce a certain output.

Energy efficiency is assessed compared to a baseline performance using an energy performance indicator.

Energy performance indicators can either be asset based or operationally based. Asset based means they are based on an assessment of the asset e.g. a building. Operationally based means based on actual operational data. Examples include:

  • Energy Performance Certificates
  • Energy indicators such as kWh/m2/year or kWh/tonne of production.

On-site energy efficiency or final efficiency refers to the efficiency of a industrial facility or building within the system boundary. Primary efficiency refers the overall efficiency of the energy system including generation, transmission and distribution.

On-site generation through technologies such as Combined Heat and Power or renewables does not reduce on-site energy energy demand but can reduce costs. It may also improve the overall energy efficiency of the electricity grid.

Demand response, the shifting of electrical load from one time to another to reduce costs, does not improve on-site energy efficiency although it may contribute to improving the overall efficiency of the electricity grid.

Projects described as “energy efficiency” projects are likely to increasingly include on-site generation and demand response as we move towards a more flexible energy system.

Energy efficiency projects are split into three types:

  • retrofit projects – where the primary purpose is to improve energy efficiency of an existing building or industrial facility e.g. changing lights to LEDs
  • projects that are embedded into larger renovation project where the primary purpose is not energy efficiency e.g. a building refurbishment to improve its rentability or an upgrade to a production line to increase output.
  • new build projects, either in buildings or industry. To be truly energy efficiency projects, new build projects should achieve a higher level of energy efficiency than building regulations or engineering norms i.e. higher than “business as usual” .

There is a wide variety of energy efficiency technologies, all of which are well proven and understood. Improving energy efficiency does not require any technology risk.

Energy management is the systematic process of improving energy efficiency through the implementation of monitoring and targeting and the identification and implementation of energy efficiency projects.

There are a variety of actors in the energy efficiency market including:

  • energy consultants
  • energy service companies
  • energy analytics providers
  • monitoring and targeting companies
  • measurement and verification companies
  • retro-commissioning companies
  • equipment vendors
  • construction companies.

Defining energy efficiency

Energy efficiency essentially means a reduction in energy input to produce a certain output. Examples include reducing energy usage in a building from 300 kWh/m2 to 200 kWh/m2 per annum assuming constant comfort conditions and building usage, or reducing energy use from 5,000 kWh/tonne to 3,500 kWh/tonne of steel produced[1]. A familiar example is given by LED lighting, a 16 watt LED that replaces a 34 watt fluorescent light produces the same light at roughly one half of the energy usage. Improving energy efficiency does not always require equipment replacement as it can often result from changes in management practices and management systems. Large gains in efficiency can be achieved for example by adjusting the control settings of existing equipment, or managing industrial processes within tighter limits, or reducing waste levels. However, the largest and most permanent energy savings can only be delivered through investment into more efficient equipment and processes.

Efficiency, and the economics of efficiency, cannot be assessed without reference to a previous standard of management or equipment performance. For existing buildings or industrial facilities, efficiency gains are typically measured by a performance-based comparison of new equipment, processes or the whole building/facility against those they replaced. For new construction, efficiency measurements typically come from a comparison of new installations with building code requirements, with an industry reference standard, or with the average performance of comparable buildings or industrial facilities. 

Energy efficiency is often associated with on-site generation of power (and heat), particularly renewables. On-site renewables such as solar or biomass boilers, along with the use of other on-site generation technologies such as Combined Heat and Power (CHP) do not themselves improve energy efficiency on the site but can reduce the usage, and hence cost, of purchased energy coming onto a site or into the building. They can also help to improve the overall efficiency of the energy supply system by reducing peak loads but this benefit falls to the supply system operator and not the project host, unless there is some form of incentive scheme in place. 

Similarly, energy efficiency is often associated with demand response. Demand response is the short-term shifting of electrical load whereas energy efficiency is the permanent reduction of load. Demand response can be profitable in certain power market regimes and is likely to become more important in all markets as the proportion of power produced by renewables increases, and therefore the need for flexibility in the power system increases. In itself demand response does not improve energy efficiency at the level of an individual site or building, it simply shifts load from one time to another. It can, however, improve the overall efficiency of the power system by reducing the need to operate inefficient stand-by power generation assets.

Although a purist view on energy efficiency does not include demand response and on-site generation, in reality many “energy efficiency” projects will include, or be combined with elements of demand response and/or local generation as these can be sources of value, either reduced costs or additional revenues. In fact as we move towards a more decentralised energy system, buildings and industrial facilities of all types are likely to become more tightly integrated into the electricity supply system and move from being simply consumers of energy towards being both consumers and producers. In the emerging energy system flexibility of demand will in itself have value. 

Final or on-site efficiency and primary energy efficiency

Final, or site, efficiency refers to the efficiency of on-site usage – that is the energy measured by the meters at the site boundary divided by the unit of output (or service) delivered from (or by) activities on the site. At the level of an organisation (or building) energy efficiency is usually measured at the site level, as the useful output (tonnes of production or m2 of conditioned floor area) per kWh of energy utilised.

Primary energy efficiency examines the efficiency with which the units of energy used on-site were produced. This is most relevant to electricity. For example, if the electricity used on the site came from a low efficiency oil-fired power station it will have a lower primary efficiency than a electricity from a modern gas turbine power plant, a wind farm or a nuclear power plant. In most countries there is a mixture of generating equipment types supplying power to the grid and there will be a nationally recognised efficiency number (known as the Primary Energy Factor or PEF) for the entire grid. As it is not possible to separate out electricity from the grid by its source, it is necessary to take this average national number for grid efficiency to calculate primary energy efficiency.

For environmental calculations, primary energy efficiency gives a much more complete picture of the overall impact of a facility’s energy usage. For example, a project that shifts a building from domestic hot water produced by electricity to domestic hot water produced by gas will produce very different site energy usage relative to primary energy. Electricity heats hot water extremely efficiently (> 90% efficient) and gas much less so (~55%). On a site efficiency basis, electricity is far superior and the conversion to gas would appear to decrease efficiency. However, if the electricity used for heating the water was itself produced by a generation, transmission and distribution system that is only 35% efficient, its primary energy usage is closer to 30% (0.9 x 0.35 = 0.31) accounting for the origin of the kilowatt hours, while primary energy for a gas system will be only slightly less than its site energy usage of 55%. A gas system in this case produces greater overall primary energy efficiency.

Another example of site versus primary energy efficiency is given in Figure 1. At a primary level the efficiency of the factory shown is 0.1 MWh/tonne of product (100 kWh/tonne). However as the electricity is supplied by a coal fired power station with a fuel input of 40 MWh (which produces 11 MWh of electricity at the power station with an overall efficiency of 27% and 10 MWh at the factor meter)[2] the primary energy efficiency is 0.4 MWh/tonne (400 kWh/tonne) of primary energy.

Figure 1: Primary and final energy efficiency

From a finance perspective, understanding the primary and site efficiency distinction may at first sight have little relevance but it can have a bearing on an investment decision. For example, it can be relevant in assessing commodity price risks associated with an energy efficiency project. In the hot water example, the project’s exposure to gas price rises and its exposure to electricity price falls. If for instance the site has access to on-site generated wind or solar power it can raise primary efficiency for electricity to near 100% and remove any price risk due to the long-term price certainty of renewable power. That shift may affect the financial wisdom of making site efficiency changes. The primary efficiency may also be relevant for those organisations targeting reductions in the overall emission of greenhouse gases resulting from their operations. 

Energy management

Energy management is the process of measuring energy performance against targets, and developing and implementing projects to improve energy efficiency and reduce energy costs. As well as capital projects energy management can include motivation and behaviour programmes designed to reduce consumption. Within large organisations there is often an energy management function or process, usually run or overseen by an energy manager, and in many countries there are qualifications for energy managers. Within smaller organisations energy management tends to be part of other functions such as engineering or technical, or not present at all. 

Organisations with well run energy management functions are more likely to be able to produce a flow of well developed energy efficiency capital projects for funding and implementation. The best practice in energy management is represented by ISO 50001, Energy Management Systems, which sets out requirements including:

  • develop a policy for more efficient use of energy
  • fix targets and objectives to meet the policy
  • use data to better understand and make decisions concerning energy use and consumption
  • measure the results
  • review the effectiveness of the policy
  • continually improve energy management.

Although organisations can implement effective energy management without ISO 50001, using the standard ensures that the processes are embedded within the organisation rather than being ad hoc or based upon certain individuals being in place.

To increase the flow of projects requiring financing banks and financial institutions should encourage borrowers and investee companies to adopt ISO 50001.

Energy efficiency policy

Energy efficiency is a central part of energy policy within the EU. The current EU target for energy efficiency is a 20% energy savings target by 2020 when compared to the projected use of energy in 2020 – roughly equivalent to turning off 400 power stations. The range of policies in place and progress to date are discussed here:

On 30 November 2016, the European Commission proposed a 2030 binding energy efficiency target of 30% for the European Union. The new target is part of the Commission's proposal to update the Energy Efficiency Directive to make sure the new target is met. More details can be found here:

The full range of proposals for energy efficiency are summarised here:

Energy performance indicators

Energy efficiency is measured relative to a benchmark level of performance. Energy performance indicators provide a measure of energy efficiency. They can be operational indicators, examples being kWh/m2/year for a building or kWh/tonne product for a factory, or asset based such as the Energy Performance Certificates which are legally required for many buildings in Europe.

Text Box 1. Energy Performance Indicators

Asset based indicators such as Energy Performance Certificates have the advantage of being generally available (because of regulations requiring them) but suffer from errors in assessment techniques. Operational indicators require greater granularity of information but more accurately reflect the real situation. The appropriate indicator will depend on the situation. EPCs will probably be a more practical route for a bank assessing the energy efficiency of its property loan book (as EPCs may already have been collected as part of the original loan documentation and collecting energy consumption data from borrowers would be difficult and prohibitively expensive), whereas for a property investor with a portfolio of buildings, the operational indicator of kWh/m2 is probably more appropriate.

Operational performance indicators often show a wide variation in performance even for buildings of a similar type with similar usage patterns. Reducing this variance in performance, as well as reducing overall energy usage per building, should be objectives of an energy management programme and investment in energy efficiency measures.

In order to set priorities for action when assessing a portfolio energy performance indicators should be reviewed alongside total energy spend and management priority given to high energy unit

Types of projects


Nearly 90% of commercial buildings in the EU were built before 1990. Nearly 90% of commercial buildings in the EU were built before 1990 which means that there is significant potential to upgrade the performance of these buildings. The slow rate of new building in Europe also means that if Europe is to achieve its climate goals it will be through retrofitting existing buildings and not by building new buildings.

“Almost half of the EU’s buildings have individual boilers installed before 1992, with efficiency of 60% or less. 22% of individual gas boilers, 34% of direct electric heaters, 47% of oil boilers and 58% of coal boilers are older than their technical lifetime”[3].

Text Box 2. Useful life of equipment


Chillers 15-25

Boilers 15-25

Pumps 10-30

Motors 10-20

Lighting 7-10

Controls 7-15

Many of the largest pieces of core building energy infrastructure – chillers and boilers – have useful operating lives of 25 to 30 years. Typical equipment lifetimes are shown in the Text Box 2. Asset owners often find it preferable to maintain older equipment, patching and mending, rather than replacing. In buildings those expensive capital items that tenants do not see are often deferred in favour of cosmetic improvements or amenities that improve the marketability of the property. 

Nevertheless, equipment retrofits represent a major class of energy efficiency project. The energy system technologies utilised in buildings have changed over the last ten to twenty years and the average efficiencies of most equipment have improved considerably. Most importantly, as discussed later, the technologies that control that equipment have changed, allowing for much better automatic management. Depending upon the project, equipment replacements can lead to efficiency gains of 30% or greater. 

Equipment retrofits not only create permanent efficiency improvements but may make it possible to reduce power usage during peak periods, allowing users to take advantage of Demand Response incentive programmes. Industrial, commercial and residential end-users could engage in demand response by undertaking different actions: reducing the energy-usage temporarily without a change in consumption during other periods (e.g. lower the indoor temperature), shifting energy demand to other time periods (e.g. start cooling a building before peak period), or temporarily using on-site generation instead of energy from the grid (e.g. micro-cogeneration, district energy or thermal storage with renewable energy sources). Demand response solutions have also been facilitated by the development of apps allowing end-users to check on the status of their home appliances and thermostats and to take control, through their smartphones[4].

Text Box 3 A retrofit project – heat recovery from condensate to pre-heat process hot water

A food processing site in Ireland producing soups installed a heat recovery system to pre-heat water for process and wash down requirements. A volume of 150m3/day of water at 60oC was being used and this was being produced by heating well water at 10oC using a steam plate heat exchanger. Waste heat from the evaporator steam and product condensate was rejected to atmosphere through cooling towers. A heat recovery system was installed to pre-heat the well water using heat from the condensate. This reduced steam consumption by 350 kg/hour, increasing available capacity of the boilers by 5% and reducing energy costs associated with hot water generation by 55%. An investment of €50,000 was recovered in less than 12 months.


Embedded projects

As outlined above these are projects that take a more holistic view and can often be initiated for reasons other than energy efficiency such as the need to bring accommodation up to modern standards. They can include building fabric elements (walls, roof, windows etc.) as well as the replacement and/or upgrading of equipment and controls. Buildings typically undergo such renovations on a twenty to thirty-year cycle. During the renovation process it can be expected that the energy efficiency performance of the building after renovation would be better than before renovation even if energy efficiency was not specifically being addressed in the project because of the advance of technology, particularly in HVAC and lighting. (Note that they could be more energy intensive because of added functions or higher levels of comfort or performance.) It is likely however that the level of energy efficiency could be improved upon when energy efficiency is explicitly targeted in the project from the concept and design stage. Note that renovation works can only truly be considered an energy efficiency investment if the level of performance exceeds the given/normal energy efficiency standards/regulations i.e. it goes beyond Business As Usual. An example of this situation is the renovation of the KfW banking group offices.

Text Box 4. A renovation project - KfW headquarters

The headquarters of the Kreditanstalt für Wiederaufbau (KfW) was built in the late 1960s as a group of office towers in Frankfurt. The building was starting to look down at heel and the owner decided that it needed to undergo radical modernisation – only the load bearing framework remained intact. This enabled the provision of daylight, fresh air, heating and cooling to be considerably improved and, above all, to be carried out in a much more energy-efficient way. Work on the 22,000m2 building was completed between 2002 and 2006. Workplace conditions were brought up to modern standards. 

The thermal insulation of the building, both façade and windows, was considerably improved. An absorption chilling plant was added to the existing Combined Heat and Power plant to produce “tri-generation” – heat, cold and power. Heating energy demand calculated according to German regulation EnEV was reduced from 113.2 kWh/m2a to 42.3 kWh/m2a.


For embedded projects which are part of larger renovation projects, the assessment of the value and risk of the energy efficiency aspects will form a sub-set of the overall project assessment. The principles outlined in this Toolkit, however, still apply.

New build projects

As outlined above, any new building or industrial process is likely to be more efficient than the one it replaces even if energy efficiency is not a design criteria. At the very least the building will have to meet current building codes or regulations which have been progressively tightened. Likewise any new industrial facility is likely to be more efficient because of advances in process technology and the underlying efficiency of energy transformation and utilisation technologies, as well as possibly innovation in the process itself. 

At the EU level, the Energy Performance of Buildings Directive (2010/31/EC) introduced the concept of Nearly Zero Energy Buildings (NZEBs), very high performance buildings where the nearly zero or very low energy requirements should be extensively met by renewable energy either generated on-site or near-by. By the end of 2020, all new buildings in the EU will have to be Nearly Zero Energy Buildings and all new public buildings must be nearly zero-energy by 2018.

Investors seeking energy efficient new buildings can use one of several existing performance measurement and design standards on the market. These include amongst others: Energy Performance Certificates (EPCs), the minimum energy performance requirements defined in each Member State as required by the EPBD Directive, LEED (Leadership in Energy and Environmental Design), BREEAM (Building Research Establishment Environment Assessment), local green building standards and Passivhaus. In industry new build factories, like buildings, can be designed to optimise energy usage. A process that just meets current standards may well save energy costs compared to the plant it replaces but cannot truly be considered “low energy” or “energy efficient”. It is only truly energy efficient if it moves beyond current norms or standards for new plant. This distinction becomes important in green financing, especially green bonds, where green bond purchasers wish to know the use of funds. 

Although new buildings and industrial facilities and equipment will tend to be more efficient than those they replace, many cost-effective energy efficiency opportunities are usually not implemented, locking in higher than necessary energy use for the owner. This occurs due to a range of reasons including reliance on engineering norms or customs and practice, the need for speed in the design process, lack of design know-how, engineering fee structures, and the perception that energy efficiency is not cost-effective. Designs are not usually optimised for energy and even a building built to current building codes will almost certainly miss opportunities for cost-effective improvements in energy efficiency. Building standards and minimum energy performance standards set out a minimum level of performance, and not the optimum. Banks and financial institutions can help address this issue by assisting borrowers to ensure their proposed facility or building is optimised. The EBRD for instance, has long practiced this. All investments are reviewed, usually with external technical assistance, to identify cost-effective efficiency improvements that could be incorporated. These are then included in the loan. This has two effects; firstly it improves the owner’s cash flows through reduced energy spend, and secondly it increases the size of the loan. National and international funds deploying capital could apply similar practices through for instance, implementing an investment rule that requires investments to be in the top quartile performance in energy use.

Text Box 5. A new build project - The Edge

The Edge is Deloitte’s building in Amsterdam which was completed in 2014. Billed as the “greenest building in the world” the Edge produces more electricity than it consumes with generation coming from solar panels. Lighting throughout is by LED and the lighting system contains 28,000 sensors that detect motion, light, humidity and carbon dioxide levels. A smart phone app assigns daily workspaces that best fit the users’ preferences and allows them to adjust the lighting and climate of their particular areas. It can also direct people through the building. The building is close to public transportation, a high-speed rail link, and a cycle route network. More than 500 bicycle spaces encourage cycling to work while in the garage drivers are given directions to available parking spaces, and sensor equipped LED lighting adjusts lighting levels as drivers arrive and leave.


Common energy efficiency measures in buildings are shown in Figure 2.

Figure 2: Technologies for improving the energy efficiency of buildings

Major energy efficiency technologies

Improving energy efficiency can entail using a wide variety of technologies covering on-site energy generation and distribution systems (including steam and hot water systems), space heating, building fabric, building mechanical and electrical environmental systems, controls technologies, lighting, electric motors and drives, industrial process heating and heat recovery, and others. Despite this variety there is a set of fairly standard, and extremely well proven, technologies that are most likely to be those encountered by investors and lenders. The major categories are briefly described here.

Building fabric measures

Building energy usage can be reduced by a series of measures to improve the building fabric, notably insulation and air tightness. Insulation can be added to most building elements (roof, wall, floor) although in many cases the nature of the existing structure will affect the technical and economic viability. In addition to insulation building heat losses can be reduced by the installation of better glazing (double or triple glazing with high performance glass) and better doors. Increasing air tightness by sealing unnecessary gaps in the structure will also reduce heating/cooling energy use although care must be taken to ensure at least the minimum required levels of fresh air. This can best be done by variable controlled mechanical ventilation.

Direct Digital Controls (DDC)/ Building Automation Systems

Beginning in the 1980s and growing quickly in sophistication, the controls industry developed sensors that communicate information to Building Automation Systems (BAS), computers capable of integrating the information and managing the interaction of the lights, dampers, valves, fans, pumps, motors and other machinery that produce and deliver a building’s energy services. Many older buildings rely on analogue electro-mechanical or pneumatic controls to turn equipment on and off or modulate fans and pumps. Older technologies are less accurate, cannot centralise building information, and cannot generate the data analytics that allow operators to optimise performance with programming. DDC-enabled BASs make it possible to programme lights and HVAC equipment to turn off when they are not necessary, hot water heaters to stop during night-time hours when hot water may not be required, and reduce the operating speed of fans and pumps when there is low demand for conditioned air or water. In other words, DDC allow existing building equipment and systems to operate much more efficiently.

Demand-Controlled Ventilation (DCV)

DCV is a technology that reduces the need for heating and cooling space that is unoccupied. A sensor samples the air in a room to test the level of CO2 exhaled by its occupants. When those CO2 levels indicate the need for fresh air, dampers open and fans operate to provide it. This strategy has grown in importance as movements for sustainability standards such as LEED have imposed fresh air requirements. DCV allows the provision of that fresh air without unnecessary waste of energy.

A variant of DCV is increasingly used in laboratories that perform chemical testing and have hoods that ventilate toxic fumes out of the building. Often these hoods run constantly, sending heated and cooled interior air out of the building whether there is a toxic chemical present or not. As a result the building utilises enormous amounts of energy to heat fresh air, and frequently experiences negative pressurisation that causes other systemic problems. DCV allows sophisticated sensors to detect the presence of toxic chemicals and turn ventilation systems on only when they are required for health and safety. DCV in laboratories can save upward of 60% of their energy usage.

Variable Frequency Drives (VFDs)

VFDs (also called Variable Speed Drives, VSDs) are power converters that allow the modulation of the speed of motors that without a VFD are either on or off, i.e. they only have one speed. For example, a sensor may indicate that the demand for hot water has dropped, and the Building Automation System directs the VFD to reduce the speed of the hot water pump. Since the torque required to run a pump or a fan is the square of the volume, savings from reducing the speed are dramatic. A pump running at half speed consumes 1/8th of the energy of the same pump running at full speed. A pump running at 80% speed consumes just half of the energy of the same pump at full speed. VFDs can be applied to those situations where loads are variable. The considerable daily load variation in HVAC facilities makes it economical and attractive to install VSD’s on more or less all rotating equipment such as pumps and fans. Other examples include conveyor systems in industry.

High efficiency electric motors

Electric motors are the single largest end user of electricity and are responsible for about 45% of global electricity use, or about 10% of global energy use. They are ubiquitous in industry and buildings ranging from the largest commercial buildings to the smallest homes. Technological advances in motor design and construction, partly driven by regulations, has led to improvements in motor efficiencies. In many jurisdictions the use of high efficiency motors is mandated for certain applications e.g. above a certain power output. Evidence shows that more efficient motors do not necessarily have a higher capital cost compared to less efficient equivalents but running costs over the lifetime of the motor are significantly lower as energy cost makes up 90% of the total lifetime cost of a motor.

Compressed air technologies

Compressed air is widely used industry for a variety of purposes including actuation, operation of power tools and cleaning. Compressed air utilises about 10% of total industrial electricity use in Europe (around 80 TWh per annum). Technologies to improve the efficiency of compressed air include; advanced compressor designs, improved sequencing and controls, better design of tools and distribution systems and automatic cut-off mechanisms.

Heat Recovery

Heat recovery refers to the process of utilising heat that would otherwise be wasted. Examples include; recovering heat from stale warm air being exhausted from a building to pre-heat fresh cold air coming into the building; or utilising waste heat in a furnace exhaust to pre-heat cold air or product coming into the process. The heat recovery medium can be air, water or another liquid and heat recovery can use a variety of technologies including; plate and micro plate heat exchangers, shell and tube heat exchangers, run-around-around coils, heat pipes, heat wheels. There is a huge untapped potential of using waste heat from industrial processes and power generation in district heating systems. A report to the EU Parliament estimated that the excess heat available in Europe exceeds the total heat demand in all European buildings, and that 50% of the total EU heat demand can be supplied via district heating. Source: European Parliament Report on an EU Strategy on Heating and Cooling (2016/2058(INI)) Sep 2016.

Heat pumps

Heat pumps are a specialised form of heat recovery often used in air conditioning systems and increasingly for heating systems as well as occasionally for process heating. A heat pump takes electrical energy (and sometimes rotational energy from an engine) and uses it to pump heat from a lower temperature source to a higher temperature. It is often said that a heat pump is a refrigerator running in reverse but in fact a refrigerator is an application of a heat pump but in the case of a refrigerator the useful output is cold. In a HVAC or industrial heat pump application the useful output of a heat pump is higher grade, legwarmer heat. Applications include heat pumps to take heat from the ground to provide building heating and hot water (ground source heat pumps) as well as air or exhaust air source heat pumps. As they operate on electricity heat pumps are seen by some as being important for the decarbonisation of heat. The important variable of a heat pump is the COP, Coefficient of Performance which is a measure of electrical input compared to heat output. COPs vary with ambient conditions but can typically be in the range of 2.5 to 5 i.e. they produce 2.5 to 5 times as much heat as electrical input. At first glance to a non-specialist this may appear to creating “something for nothing” and breaking the first law of thermodynamics (the conservation of energy law) but this is not the case.

Absorption Cooling

Absorption cooling technology is more than a century old, but is mentioned here because it is increasingly viable when added to energy efficiency projects, particularly co-generation. Rather than an electrically-powered compressor, absorption cooling relies on a heat source, typically waste heat or sometimes solar energy, to drive a cooling process. Adding absorption chilling to co-generation can be labelled tri-generation as the combined system is then producing electricity, heat and cold.

LEDs and low energy lighting

Light-emitting diodes (LEDs) are semiconductor light sources. Application of electricity causes electrons to recombine with electron holes and release photons, creating electroluminescence. LEDs are 15-20% more efficient than fluorescent lights and six times more efficient than incandescent bulbs. The technology is improving even as the cost of LEDs is dropping. In some situations other, higher efficiency lighting systems, may be appropriate e.g. using metal halide or compact fluorescent lamps to replace tungsten lamps, although it is true to say that LED is becoming the dominant lighting system in all sectors. LED lighting conversion may not be cost-effective in all situations due to physical or technical requirements.

Lighting controls

As well as improving the efficiency of lighting itself through the installation of LEDs, the use of energy in lighting can be significantly reduced through the application of lighting control technologies that use sensors such as movement detectors or light level sensors to adjust or turn off lighting. Lighting controls can affect both the times of operation and the output of light. Increasingly lighting controls are integrated into BAS and light fittings are becoming internet enabled, allowing very individualised control of lighting.

Solar photovoltaics (PV)

Solar cells receive photons from sunlight and liberate electrons from silicon, creating current. The technology is steadily improving and the cost of panels is dropping.

Solar thermal

Solar thermal systems utilise solar energy to produce heat, usually in the form of hot water. Solar thermal systems should be distinguished from solar photovoltaics. Both may have a role to play in energy efficient buildings. 

Thermal Storage

Thermal storage refers to a wide variety of technologies that allow excess energy to be collected and stored at times when it is not needed and preserved for use at a later time. The storage medium can either be hot water, ice or another material such as molten salts, or phase change materials that change their state at certain temperatures. Thermal storage technologies have been applied in both building heating and hot water systems as well as industrial processes.

Battery Storage

Recent advances in battery technology and the falling costs of batteries have made storage of electricity more economically viable, either at local building or area level, or at grid scale. While not technically an energy efficiency measure, battery storage systems can enable both the shifting of usage from peak to non-peak loads (the ability to store electricity produced when it is cheaper) and the storage of renewable energy such as wind and solar, which have intermittent production periods. Storage projects, both stand-alone and as part of larger energy efficiency investments, are becoming more common.


A micro-grid is a local network of supply and distribution of power that can disconnect from the primary regional power grid and operate autonomously. It has its own source(s) of power supply, often co-generation and/or renewables. Since micro-grids can manage local demand more readily, dispatch supply strategically to meet local needs and experience much less line-loss from long-distance distribution, they tend to be more efficient. They also offer redundancy that is important to mission critical services of large companies, governments or emergency services, for which they may have a significant willingness to pay. 

Demand Response

Demand Response refers to a class of energy projects that allow a facility to respond to demands on the local energy system (usually electricity). During specific times of day when all customers are consuming at or near their peak usage, electrical grids may be constrained in bringing on extra generating capacity for a number of reasons and reducing load, by encouraging demand response amongst consumers, may be a good option. Not only do demand response measures generate savings at times of peak energy prices, but the local utility may offer additional cash incentives for reducing peak usage. Examples of demand response measures might include shutting down some building systems, utilising back-up generators for local electricity production, changing production levels, increasing or decreasing the operating temperature of the building, utilising electricity to make ice at night when energy is cheap and using the ice to cool the building during the day (ice storage), or reducing common area lighting usage to the regulatory minimum.

The economic returns to Demand Response projects are highly subject to energy price variations, local regulatory conditions and local incentives. Utilities can and often do change the incentive regimes they utilise to promote peak reductions in energy usage, sometimes to the benefit of Demand Response programs and sometimes to their detriment. Aside from incentives, weather and power grid investments can change the market price differential between on-peak and off-peak power. Encouraging demand response is increasingly seen as a viable option in many countries to help meet supply constraints and is likely to play a larger role in future energy markets as the need for flexibility increases as the proportion of electricity from intermittent renewables increase.

Co-generation / Combined Heat & Power

Facilities with a large demand for thermal energy may be good candidates for co-generation. A co-generation plant is typically a reciprocating engine or a turbine that generates electricity from fossil fuel. Rather than wasting the heat produced by combustion (which is normally exhausted to atmosphere), a co-generation system harvests the heat for useful purposes, usually as steam or hot water for heating or process use, but potentially also for cooling using absorption chilling. Co-generation is highly efficient. Instead of generating power at around 35-45% efficiency overall efficiency can be increased to > 70% by utilising the heat that is normally wasted. Engineers often determine the size of a co-generation plant by reference to the facility’s demand for heat. They also consider its base load power needs, i.e. the amount of electricity used off-peak, usually measured at night when it is minimally unoccupied. 

In general, co-generation achieves optimal economics when it is integrated with a retrofit of core energy systems. Generating power is typically more expensive than not using it at all. Without optimising energy usage from a building’s primary systems, a co-generation plant may be oversized, making it more costly to build and operate. After an efficiency project, the optimal co-generation plant may be smaller and cheaper.

Co-generation can present significant design challenges when developed as part of a retrofit rather than included in the original construction of a building. Not only does it require integration with the existing electrical switching systems, but the heating and cooling components of the system must be integrated with the existing systems that were not designed and built with co-generation in mind. As further discussed below, the legal and financial risks associated with such a project may increase if they are owned by a third party.

Although in themselves co-generation plants do not reduce on-site energy demand they do improve primary efficiency through being a more efficient way of generating electricity than the conventional electricity grid.

On-site Renewables

Renewables refer to all forms of power that do not derive from fossil fuels and that can be continuously re-generated without depletion. These forms include solar power, wind power, bio-gas, ground-source thermal energy, and biomass. Renewable energy projects are not technically efficiency projects, in that by themselves they do not reduce energy demand from a facility or building. They do, however, reduce the consumption of purchased fossil-fuel. In many cases renewables can be integrated with a retrofit. Solar hot water is a good example; an electric or gas-fired hot water system may be replaced by a solar thermal system to heat water. 

Retro-Commissioning/On-going Commissioning

Retro-Commissioning refers to the calibration of building systems to match current demands for electricity, heating, cooling, and comfort. A retro-commissioning process does not involve capital investment to change those systems. The premise of retro-commissioning is that over time equipment drifts away from its optimal operating conditions. The drift results not only from natural entropy and the vibrations of large equipment but from the addition of new equipment to the building such as supplemental air conditioning or large computer servers and from changes in the tenancy and its needs over time. Often demising walls of rooms or ductwork that carries air to those rooms have changed. A retro-commissioning process aims to recalibrate the systems in the building so that they account for these changes and optimise energy usage and comfort based on the capacity of the existing systems.

In some cases, depending upon the quality of the existing equipment and the degree of drift, a retro-commissioning process may be the most cost-effective efficiency improvement available. For example, retro-commissioning might identify cases where mis-scheduled equipment runs through the night when it should be turned off. The expense of the evaluative process is relatively small relative to the gain with no purchase of additional equipment or installation cost.

On-going Commissioning refers to a repetitive, i.e. daily or weekly, process of calibration and tuning of existing systems to meet the performance needs of a building. For example, a heating system is in balance when the flow in the whole system corresponds to the flow rates that were specified for the design of the system. A major challenge is that heating systems are often constructed and designed to meet the heating requirements in the worst case scenario, such as when outdoor temperatures are extremely low, so that the system will be oversized in the remaining period. In recent years, a software industry and integrated dynamic/automatic control has emerged that provides on-going commissioning services and also reduces time for commissioning substantially.

Whole house/building retrofits

Whole house/building retrofits utilise an optimised combination of technologies to achieve lower energy consumption. The energy efficiency measures used will vary between situations but could include; insulation, new windows, draught reduction, ventilation systems with heat recovery, new boilers, better heating and hot water controls, low flow hot water systems, low energy lighting and low energy appliances. The exact combination will usually be optimised by techno-economic modelling. Capital cost recovery could come in a range of ways including; straight consumer credit loans, on-bill recovery where an additional charge is added to electricity (or gas) bills, or property assessed systems where charges are added to local property taxes. Although whole house retrofits are an ideal there are many barriers to achieving them at scale including; the basic economics especially for deep energy retrofits, lack of consumer demand, and the logistical challenges of organising retrofits across a geographic area or portfolio of properties.

Types of implementation contracts

Energy efficiency projects can be implemented through a range of contract types similar to those used for general construction and mechanical/electrical works. The main types likely to be encountered are described here.
Main Contractor

A Main Contractor (also called a prime or general contractor) is a firm capable of holding the contract for the entire retrofit, bidding out the various elements and managing the subcontractors necessary to install the improvements. As discussed earlier in this section, it is possible for an asset owner to execute a lease-purchase agreement and hire its own Main Contractor for implementation. Indeed, implementation by a Main Contractor is feasible under any of the financing approaches described in the Financing Energy Efficiency section of this Toolkit. A Main Contractor marks up the bids of the subcontractors as part of its profit margin and takes all construction risk on the project. Track record and credit quality of the Main Contractor is a key consideration in pursuing this approach.

Construction Manager/Construction Manager-at-Risk

A Construction Manager (CM) is a firm that project manages the planning, design and construction of a project from its beginning to its end. The CM is responsible for controlling time, cost and quality. Some asset owners find using a CM preferable to a Main Contractor. If there is no Main Contractor, the asset owner may hold the contracts with the various trades and make the CM responsible for managing them to schedule and budget. A CM that holds the contracts with subcontractors is called a Construction Manager at-Risk (CMAR) and operates similar to a Main Contractor but under a different cost structure, i.e. it may not mark up the subcontracts as part of its margin.

Individual Trades/Single Measure

Some types of retrofits may not lend themselves to a GC what is a GC?, particularly if they involve very few trades or a single trade. Lighting is a good example. A comprehensive lighting retrofit in a building may require a single lighting contractor, obviating the need for a Main Contractor or Construction Manager.

Design Bid Build versus Bid Specification

Another critical distinction in the implementation of energy efficiency concerns the allocation of responsibilities among contractors. Full service ESCOs almost invariably take a “Design Bid Build” approach. They execute the construction contract with the host asset, taking responsibility for performing the engineering (either directly or via subcontract) necessary to prepare design drawings for the retrofit, bidding the project out according to those designs, and contracting for the work. While staff of the host property typically have an opportunity to comment and request modifications, design approaches and choices lie with the contractor.

Some asset owners are uncomfortable with the degree of control that Design Bid Build places in the hands of the profit-motivated vendor of the project. Owners often have engineering firms they have worked with over time, that know the building well and have their trust. Owners may have concerns about equipment choices, value engineering processes, or impacts on tenants or other parts of the building. They may prefer the alternative approach, called Bid – Specification whereby the asset owner engages its own engineering firm to perform design and bid the project. While it keeps control over the project in the hands of the asset owner, it may be difficult if not impossible to secure a savings guarantee from an ESCO that did not design the project and manage the savings risk associated with those designs.

Design Build Operate Maintain

Another approach to contracting is common where the energy project involves construction of facilities that are physically separate from the rest of the operation of the host property or can be ring-fenced. Co-generation is a good example where the extent of the plant can be clearly defined and meters can be utilised to measure heat and power output. Many firms specialise in the design, construction, operation and maintenance (DBOM) of co-generation plants. They may operate as a fee manager or sell power and heat to the host, making their return on the sales rather than management.

Energy Performance Contract

EPCs are mostly offered by ESCOs (Energy Service Companies) operating as a Main Contractor with turnkey responsibility for the energy assessment, project development, design, bidding, construction, commissioning, and provision of a savings guarantee. The savings guarantee is the critical element that makes a contract an EPC and binds the various pieces together. An EPC can be used with or without external financing.

Savings Maintenance Contracts

Retro-commissioning and Ongoing Commissioning are an emerging field in energy efficiency. Studies have shown that energy efficiency projects are subject to natural entropy, operator mis-management, and other factors that cause them to “drift” away from their optimal commissioned design state. As a result, the savings tend to diminish each year. A growing number of engineering firms offer services that correct for this drift. For an investor or lender reliant on savings to provide debt service or a return on capital invested, regular analysis and course correction services may be a good investment if it is priced effectively. 


Retro-commissioning refers to the process of recalibrating systems in an existing building to optimise efficiency and comfort relative to its current occupancy and usage. It does not seek to return to the original commissioned design of the property, but to reflect the changes that have occurred – new tenants, new needs, new equipment such as supplementary heating or cooling installed by new tenants. Retro-commissioning aims to make the building as efficient as possible in light of those changes. It does not, almost by definition, involve installation of new systems, although it may recommend them. Retro-commissioning providers are typically paid a fixed or hourly fee and do not offer guarantees or ongoing maintenance contracts.

Ongoing or Continuous Commissioning

Ongoing or continuous commissioning refers to a retro-commissioning process that happens with regularity, often daily or in real time. A growing number of service providers offer software that works with controls systems to provide these services. The software performs the analytics that a standard retro-commissioning provider might perform by extracting data from building systems and manipulating it manually.

Software for ongoing commissioning is still in its relative infancy and may vary considerably with respect to its capacity and effectiveness. The services break down into two main categories: fault detection and diagnostics, and optimisation.

Fault detection and diagnostics

Software that performs fault detection and diagnostics analyses large quantities of data from the Building Management System and identifies instances of equipment or process failures. For example, it might find that a thermostatic sensor calls for cold air to be delivered to a part of the building but the corresponding damper fails to open. These kinds of systemic failures can lead to significant over-consumption of energy as the chiller continues to produce cold air and direct it toward the space that needs it, and the thermostat continues to register the need for air the space is not receiving.

An important distinction is that fault detection and diagnostic software does not purport to identify the optimal settings for building systems. It does not, for example, prescribe the optimal openness of the damper in the example above or the fan speed for the cold air. It identifies the problem for which operators must then provide the remedy.


Optimisation software goes a step beyond diagnostic software to recommend specific strategies for improving efficiency. It utilises the same Building Management System data but is likely to require substantially more information about the operating conditions of the building considered desirable by the operators at different times of day and different days of the week. Developers of these software systems aim, eventually, to provide the capacity to take remedial steps at the press of a button and to offer services that can perform those actions remotely.

Measurement and Verification

The measurement and verification (M&V) of energy savings is an important to project hosts, contractors and project investors and lenders. The methods of M&V were formalised in the 1990s under the International Performance Measurement and Verification Protocol (IPMVP), which is now managed and maintained by the Efficiency Valuation Organization (EVO). 

For full details see:

The table below sets out the various types of M&V specified in IPMVP and the exposure to risk they entail. In the table the term “guarantor” is used generally to refer to the vendor of an energy efficiency project that offers some kind of guarantee, and the term “owner” is used to refer to the party responsible for paying the energy bills.

Type of measurement


Exposure to risk


The parties agree on the factors to be used to estimate savings. For example, they might stipulate the number of hours a set of lights are on each day, and their energy usage per hour (typically based on manufacturers specifications) and the hourly usage of the lights they replaced.

Stipulation places risk on the owner not the guarantor. There is no measurement of actual energy usage but an educated estimate.

Partial or full in isolation

Energy use of the installed equipment is measured (or some elements are measured) in isolation from the rest of the building. For example the power draw of a set of lights is measured before and after the retrofit. Operating hours can be stipulated (“partial isolation”) or measured (“full isolation”).

The guarantor is at risk for the technical performance of the installation. The owner bears the risk for interactions of the installation with the all other factors affecting energy usage, and for “partial”, the risk with respect to the accuracy of the stipulated parameters.

Whole building measurement

Energy usage for the entire facility is measured before and after the retrofit. Adjustments may be made for weather and any extraordinary circumstances.

The guarantor bears the risk for performance of the whole building retrofit.


Pre-retrofit usage is simulated using models of the whole building which have been calibrated using past consumption data. Post-retrofit usages is based on the whole building metered data. This method has traditionally been used more for new construction but with the advent of more powerful, lower cost modelling software, is increasingly being used for retrofits.

The guarantor and the owner bear risk, the former for unrealistically low simulated pre-retrofit usages and the latter for unrealistically high simulated usage.

[1] The numbers used here are illustrative only and not intended to represent actual situations, the cost-effective potential or a specific target

[2] With 1 MWh lost in the electricity transmission and distribution system

[3] An EU Strategy on Heating and Cooling – Communication from the Commission to the European Parliament, the Council, the European economic and Social committee and the Committee of the regions” Feb 2016.

 [4] BPIE report “Smart buildings in a decarbonised energy system” - June 2016

Glossary of key terms

This section explains key terms found when considering energy efficiency investments. In order to help foster a common language it is a combination of energy efficiency and financial terms.

Base line: a base line energy consumption for a building or industrial facility (or process) against which energy savings are measured. For building the base line typically covers twelve months to take into account seasonal changes.

Base load: the base load of a facility is the electric current it draws at the moment of its lowest utilisation. Typically this moment occurs at night when a building is unoccupied. Base load calculations are used to determine how much electricity a building consistently uses, and may be used to help size on-site generation. 

Benchmark/Energy Usage Benchmark: a comparison of the energy usage in a building to that of a building comparable in size, type, underlying energy systems and climatic zone. A benchmark may be rendered as a normative value, e.g. a 1-100 scale, or as an Energy Usage Index.

Building Automation System (BAS): an automated, centralised control system that automatically turns equipment on and off, opens and closes valves and ducts, adjusts the speed of fans or pumps, and otherwise modifies energy-using systems in a building (as contrasted with manual operation of these systems).

Building Management System (BMS): Another term for BAS.

Co-generation: a system of electricity production, typically through combustion of fossil fuels, that utilises heat that is normally wasted for a productive purpose. Typically the heat is used to supply steam or hot water to a building or manufacturing processes although it can also be used for cooling via an absorption chiller.

Coincident Peak Demand: the energy usage (usually electricity) of a facility at the moment in time that is local power grid experiences its peak demand.

Combined Heat and Power (CHP): see co-generation. The terms are equivalent.

Commissioning: a process of intensive quality assurance that begins during design and continues through construction, occupancy, and operations to ensure that a new installation or facility operates initially as the developer intended and that its operations staff are prepared to operate and maintain its systems and equipment.

Control Systems: the systems that control building or industrial plant. They can be stand-alone or integrated into a Building Automation System or industrial SCADA system.

Construction companies: most energy efficiency projects in buildings are within the normal capabilities of construction companies whose core skills including building technologies, contracting and the management of specialist sub-contractors. Construction companies have a major role to play in scaling-up energy efficiency within the built environment. 

Debt Service Coverage Ratio (DSCR): a measure of cash flow available to meet repayments of debt interest and principal. A common benchmark in debt finance. DSCRs are usually specified in commercial debt agreements and monitored on a regular basis.

Deep retrofit: a retrofit to a building that achieves a high level of energy savings. Although there is no single definition of deep retrofit it should typically achieve energy savings in excess of 50% compared to the baseline usage. Renovate Europe define a deep retrofit more strictly as one that produces savings of between 60% and 90% of the baseline.

Demand Side Management (DSM): the adjustment of a facility’s energy consumption, i.e. its demand, in response to constraints of the local or regional power grid.

Demand-Controlled Ventilation (DCV): introduction of fresh air into a space based upon its occupancy (usually via measurement of CO2) so as to avoid ventilation of uninhabited rooms. Not only does DCV technology reduce ventilation fan usage, but it fresh air is often heated or cooled, requiring further consumption of energy.

Demand Response (DR): a class of management activities that a facility can take to reduce consumption during the local power grid’s peak consumption period or move the consumption to periods of lower aggregated consumption. These activities can include reducing load by switching things off or by utilising stand-by generators to produce power on-site.

Distributed Generation (DG): a term used describe smaller nodes of electricity generation that may be located relatively far from large power plants or switching stations. It is often used loosely to refer to CHP facilities. DG promotes energy efficiency because the plants may be highly efficient, take pressure off existing grid infrastructure, allow in some circumstances for dispatch of smaller plants when the grid’s requirements are lower, and can serve as a node of supply for micro-grids. 

Energy Services Company (ESCO): a firm that offers an energy performance contract. ESCOs are typically makers of integrated controls systems that have a degree of vertical integration across equipment manufacture, software, and construction management. They design, build, and guarantee savings from a building retrofit.

Energy Audit/Energy Assessment: an analysis of a building’s energy usage by end-use equipment or process. As an energy audit increases in depth and detail it may include savings estimation and software simulation, or modelling, of energy consumption under design or retrofit scenarios.

Energy auditor: person or company that carries out an energy audit.

Energy conservation measure (ECM): See Energy efficiency measure.

Energy efficiency equipment vendors: companies that provide energy efficiency equipment which is incorporated into energy efficiency projects.

Energy efficiency investment or loan: an investment or loan into an energy efficiency project or portfolio of projects.

Energy efficiency investor or lender: a financial institution (or individual) that provides capital to an energy efficiency project, either as equity (investor) or debt (lender).

Energy efficiency measure (EEM): A single technology project e.g. LED lighting to a particular area in a building or addition of Variable Speed Drives to a set of electric motors. Measures can also include non-technical measures such as training or provision of better monitoring information.

Energy efficiency project: a single intervention that can include one or many energy efficiency measures.

Energy efficiency project/investment portfolio: a collection of energy efficiency projects, either within one building or industrial facility or across a range of buildings or facilities.

Energy service: the physical benefit, utility or good derived from a combination of energy with energy-efficient technology or with action, which may include the operations, maintenance and control necessary to deliver the service, which is delivered on the basis of a contract and in normal circumstance has proven to result in verifiable and measurable or estimable energy efficiency improvement or primary energy savings.

Energy Services Company (ESCO): a company offering to deliver energy efficiency projects with potential use of external finance and often a guarantee of performance (an Energy Performance Contract). Although mostly often associated with Energy Performance Contracts ESCOs may offer other types of services and contracts.

Energy service provider: a natural or legal person who delivers energy services or other energy efficiency improvement measures in a final customer’s facility or premises.

Energy Performance Contract (EPC): a contractual arrangement between the beneficiary and the provider of an energy efficiency improvement measure, according to which the payment for the investment made by the provider is in relation to a contractually agreed level of energy efficiency improvement or other agreed energy performance criterion, such as financial savings.

Energy Efficiency Obligation (EEO): a regulatory requirement on energy suppliers to meet specified targets on energy efficiency, either in terms of energy saved or spend on energy efficiency measures.

Energy Usage Index (EUI): a measurement of the intensiveness of energy usage in a building. The numerator contains all energy used by the building converted to a single unit (typically kWh or btus) and the denominator the total conditioned space in the building.

Fault Detection: identification of an equipment or process failure within energy system infrastructure, typically performed by software that evaluates information provided by sensors.

Feed-in tariff: government subsidy paid to generators of certain types of electricity (usually renewables) although it could in principle also be applied to energy savings.

Forward curve: refers to a series of sequential prices either for future delivery of an asset or expected future settlements of an index.

Heat recovery: the technique of recovering heat that would normally be rejected for a useful purpose e.g. recovering the cooling water heat from an engine in a CHP plant to produce hot water, or recovering heat from the exhaust of a process kiln or oven to pre-heat incoming cold air or product.

HVAC: engineers and contractors often use the acronym for Heating Ventilation and Air Conditioning. While they can generate substantial savings, HVAC system improvements are often the most intensive and expensive.

International Building Performance Simulation Association (IBPSA): an international non-profit association of researchers, developers and building science practitioners that utilise software to model performance of buildings.

International Performance Measurement and Verification Protocol (IPMVP): a set of standards developed in the 1990s under the auspices of the U.S. Department of Energy intended to provide consistency and reliability in energy savings measurements. IPMVP is now part of the Efficiency Valuation Organisation (EVO).

Investment Grade Audit (IGA): a more detailed energy audit on which an investment decision can be based.

Investor Confidence Project (ICP): an international non-profit initiative intended to standardise the process of evaluating energy efficiency investment opportunities, underwriting, monitoring and servicing.

Investor Ready Energy EfficiencyTM (IREE): system of project accreditation developed by the Investor Confidence Project.

ISO 50001: the set of international standards regarding energy management and associated processes such as energy auditing.

Lifecycle Savings: a method of calculating energy savings over the useful life of the piece of equipment installed. Implicit in the concept of lifecycle savings is the notion that a piece of equipment that saves more energy cost over its useful life than it costs to purchase and install it (at a given discount rate) is worthy of investment. However, the useful life of the equipment may not represent a realistic investment horizon for an asset owner.

Load Shedding: the reduction of systems and equipment that use electricity during periods of peak energy usage for the local electrical grid. Another name for Demand Response (although DR can also involve bringing on standby generators).

Loan to Value (LTV): the ratio of the amount of a loan secured against an asset such as a building and the value of that asset.

Measurement and Verification (M&V): the process of measuring energy savings. M&V can take various forms from the least rigorous (stipulation based on a manufacturers representation of performance) to the most rigorous (calibrated, metered measurement pre- and post- installation of the ECM).

Micro-grid: a network of generation and distribution of electricity that supports a smaller grouping of users – e.g. a campus, a small neighbourhood or grouping of city blocks – typically powered by a smaller piece of generation equipment separate from large power stations. Micro-grids are considered part of both resilience and energy efficiency because they can manage dispatch of power to users more flexibly, ramp up and ramp down generation in a more customised fashion, and operate independently of the central power grid.

Modelling/Simulation: the representation of building physics including materials, air flow, equipment, conditioned area, and operating dynamics using software. Computer models are used to simulate existing conditions and to compare various scenarios for changes in equipment and operating practices.

Net Zero Energy Building: a building that has low energy requirements that are primarily met by on-site or locally generated renewable energy, sometimes defined as a building that over a year does not use more energy than it generates.

Off-taker: the contracted buyer of the production of power. The term is typically used for Power Purchase Agreements to denote the buyer of solar or wind energy but it can refer to the buyer of co-generated power, steam or chilled water.

On-going (or continuous) Commissioning: the process of recalibrating and adjusting building systems to optimise efficiency, typically on a daily or weekly basis as opposed to occasional retro-commissioning. Increasingly diagnostic software helps to perform this function.

Passivhaus standard: a building design standard developed in Germany in the 1990s and now applied world-wide to both residential and non-residential buildings. Passivhaus buildings rely on very high levels of insulation and air-tightness with mechanical ventilation with heat recovery. Passivhaus can be applied in any climate zone and typical result in energy consumption 75 to 95% lower than a building built to normal building regulations (depending on jurisdiction).

Payback Period: the period of time required for an energy efficiency investment to return the capital invested, accounting for the investors interest rate. A simple payback period is one that does not account for the time-value of money.

Peak Demand: the highest level of power utilised by a facility during the day, usually measured in kilowatts.

Project Host: the organisation (building or site) that serves as the setting for an energy efficiency project. A host may or may not own the improvements that make up the project and may or may not operate the related systems. Typically, however, it is the positive impact on the host’s financial position or its physical condition that provides the impetus for the efficiency project.

Rent roll: The total income received by a landlord from rental payments.

Retro-Commissioning: the process of recalibrating systems in an existing building (as opposed to a new one) to optimise efficiency and comfort relative to its current occupancy and usage. Retro-commissioning takes into account equipment and systems that have aged and the extent to which the buildings needs have changed since the building was originally commissioned to match the design intent of its developers. 

Retrofit: the replacement or renovation of physical equipment and systems, typically for purposes of greater efficiency, operability or comfort. 

Savings to Investment Ratio (SIR): the savings generated by an energy systems improvement over its useful life divided by the cost of that improvement. A savings to investment ratio may or may not account for the time value of money in the denominator.

SCADA system: a Supervisory control and data acquisition system which uses central computers, networked communications and local controllers to provide control and management functions over industrial process equipment.

Single Measure Retrofit: a building efficiency upgrade focuses on a single technology and piece of equipment, e.g. lighting. Single measure retrofits may not have to account for interactions between that measure and other buildings systems.

Smart Grid: the application of intelligent metering, monitoring and control systems to the electricity grid in order to improve flexibility, reduce costs and improve energy efficiency.

Split Incentive: a condition whereby savings from a retrofit do not accrue in whole or in part to the party responsible for making the capital investment in the retrofit. The most frequent cause of the split incentive is a lease where tenants are responsible for operating costs and landlords for capital expenditures. In order to make a retrofit, a landlord must expend capital on which the return is very low since it does not recoup savings.

Trigeneration: the simultaneous generation of electricity, heat and cooling.

White certificate: also Energy Savings Certificate (ESC), Energy Efficiency Credit (EEC), or white tag, is an instrument issued by an authorised body guaranteeing that a specified amount of energy savings has been achieved. Each certificate is a unique and traceable commodity carrying a property right over a certain amount of additional energy savings and guaranteeing that the benefit of these savings has not been accounted for elsewhere. In some jurisdictions white certificates are tradable and are used to drive spending on energy efficiency.

Whole Building Retrofit: a set of improvements that takes advantage of all or most of the efficiency opportunities in an existing building. Typically, a whole building retrofit involves a) core building infrastructure such as HVAC and controls, as opposed to less capital and labour intensive replacements such as lighting; b) analyses that account for the interaction between old and new equipment and systems in a building.

Types of energy efficiency organisations and their roles

The energy efficiency eco-system is inhabited by a range of different organisations, all with separate functions. The primary types of organisations likely to be encountered by investors and lenders are described here.


Aggregator of energy efficiency projects, usually looking to warehouse projects and subsequently refinance a large portfolio of projects. Although much talked about very few if any have emerged in Europe to date.

Architects and Engineers (A&E firms)

Providers of design and supervision services for new buildings, building services and processes. Usually operate on a fee-for-service model using A&E standard contracts and fee structures, which traditionally have been based on capital spend.

Behavioural change companies

Companies that design and run programmes designed to effect behavioural change. As well as several specialised consultancies there are a few larger players.

Building analytics companies

Building analytics is an emerging field that covers several types of software-based service. Analytics companies provide software tools to collect and analyse energy use in buildings.

Building Management System (BMS) bureaux

Monitor and control BMS operation in buildings, ensuring the BMS operates the buildings in an optimal fashion, identifies areas of energy wastage, and adjusts control strategies to make savings.

Construction managers

Used on large projects as independent managers to protect clients’ interests.

Construction companies

Delivery of energy-saving technologies or projects, usually operating on normal contracting principles and models.

Energy consultants

Provide advice on energy-saving opportunities on a fee-for-service model. Typically they provide initial energy surveys and investment-grade audits, but some specialise in training and motivation schemes. They range in size from sole traders and small companies right up to major international engineering companies which offer energy consultancy amongst other services.

Energy procurement consultants

Assist with procurement of energy through data collection and tendering of energy supplies in markets with competitive energy supply.

Energy Service Company (ESCO)

A company that identifies and delivers energy efficiency improvements in a customer’s facility or premises. ESCOs may offer a guaranteed level of savings through the use of Energy Performance Contracts (EPCs). ESCOs can range from small to large, but for any guarantee to be effective, the ESCO requires a sound financial standing. ESCOs are usually technology agnostic although some of the larger ones are part of equipment companies offering controls or other energy saving technologies.

Energy suppliers

Suppliers of electricity, gas and fuels. The energy supply market in most countries is dominated by gas and electricity suppliers, although in some markets, for example Denmark, there are also heat suppliers. The market structure of energy supply varies between monopoly, oligopoly and various forms of competition.

Equipment vendors

Suppliers of energy efficiency equipment. Equipment vendors range from small early stage ventures through to global companies such as ABB, Siemens, GE and Philips. Technology developers are aiming to become equipment vendors or develop technologies that can be purchased by vendors.

Facilities Management (FM) companies

Providers of FM services; split into hard FM (the physical maintenance of buildings and equipment) and soft FM (services such as catering and cleaning). The activity of many FM companies overlap the energy management market in different ways, including provision of M&T and other services as well as capital project design and development. Many FM companies are moving into energy services and management. Traditional FM contracts do not incentivise FM companies to reduce energy usage, although there has been some contract innovation.

Energy analytics providers

An emerging class of company offering transparency on energy use and projects for property owners – similar to Building Analytics Companies.

Measurement and Verification (M&V) service providers

Specialised independent providers of M&V services can be used to provide M&V for investment programmes, particularly those involving third-party financing. This is a relatively new area, particularly in the UK, which could usefully be used in internally funded investment programmes to give greater certainty around reported savings. These companies usually implement M&V schemes using the International Performance, Measurement and Verification Protocol (IPMVP) as a guide. [EEVS is an example of an independent M&V provider.]

Monitoring and Targeting (M&T) bureaux

Providers of bureau services for M&T. These are used by companies which do not want to, or cannot justify, running their own internal M&T service. M&T bureaux provide regular consumption data against targets and identify areas of energy wastage. They can also provide their own software.

Monitoring and Targeting (M&T) software companies

Vendors of software packages to provide M&T, bill validation and assist with energy procurement. M&T vendors often also offer M&T Bureau services.

Retro-commissioning companies

Apply a systematic process to bringing the building controls and operation back to a high standard of energy efficiency in line with the building owner’s/occupier’s requirements. This can be achieved by conventional recommissioning or by the application of software overlays, sometimes sold as a software as a service (SAAS) package.

Retrofit developer

A developer of energy efficiency retrofit projects. Traditionally these have been end users themselves, energy consultants or ESCOs. With the advent of new opportunities, as well as new contract forms such as Managed Energy Service Agreements (MESAs), a new type of developer is emerging that can sometimes also bring third-party finance.

Retrofit fund

Specialist fund established to provide third-party finance to energy efficiency projects. To date there are very few, if any, specific retrofit funds, although we expect to see some formed in the next few years.

Simulation company

Specialist companies that offer 3D energy modelling of buildings that predicts energy use under different scenarios with different ECMs. Traditionally 3D energy modelling has been too expensive for all but the largest projects, and has been largely used for new buildings, but advances in building physics models and low-cost computing is dramatically reducing the cost of 3D energy simulation models.

Technology developers

Developers of new energy efficiency products (and sometimes services). Companies are usually backed by the founders, high-net worth individuals, venture capital investors, and/or corporates. Examples include Soladigm, Energetix and Enlighted.

Transaction Vehicle

A company established solely to facilitate investment in energy efficiency projects/retrofits. Transaction vehicles may use different contractual and business models.

Useful organisations


Cogen Europe

Covenant of Mayors for Climate and Energy

Energy Efficiency Financial Institutions Group

Energy Efficiency Industrial Forum

Energy Efficiency in Industrial Processes



European Alliance to Save Energy

European Council for an Energy Efficient Economy

European Federation of Intelligent Energy Efficiency Services

European Heat Pump Association

European Insulation Manufacturers Association

European Smart Metering Alliance

GCP Europe

GBCI Europe

GCP Europe

International Building Performance Simulation Association

International Organization for Standardization

International Partnership for Energy Efficiency Cooperation

Lighting Europe

Smart Energy Demand Coalition

World Green Building Council

Relevant ISO definitions and standards


Energy: electricity, fuels, steam, heat, compressed air, and other like media.

Energy baseline: quantitative reference(s) providing a basis for comparison of energy performance.

Energy consumption: quantity of energy applied

Energy efficiency: ratio or other quantitative relationship between an output of performance, service, goods or energy, and an input of energy. Note: both input and output need to be clearly specified in quantity and quality, and be measurable.

Energy management system (EnMS): set of interrelated or interacting elements to establish an energy policy and energy objectives, and processes and procedures to achieve those objectives.

Energy management team: person(s) responsible for effective implementation of the energy management system activities and for delivering energy performance improvements.

Energy Performance Indicator (EnPI): quantitative value or measure of energy performance, as defined by the organisation. Note: EnPIs could be expressed as a simple metric, ratio or a more complex model.

Relevant ISO standards

ISO 50001

ISO standard 50001 Energy management systems – Requirements with guidance for use specifies requirements for establishing, implementing, maintaining and improving an energy management system, whose purpose is to enable an organisation to follow a systematic approach in achieving continual improvement of energy performance, including energy efficiency, energy use and consumption.

ISO 50002

ISO 50002:2014 specifies the process for carrying out an energy audit in relation to energy performance. It is applicable to all types of organisations, and all forms of energy and energy use.

ISO 50002:2014 specifies the principles of carrying out energy audits, requirements for energy audits.

ISO 50003

ISO 50003:2014 specifies requirements for competence, consistency and impartiality in the auditing and certification of energy management systems (EnMS) for bodies providing these services. In order to ensure the effectiveness of EnMS auditing, ISO 50003:2014 addresses the auditing process, competence requirements for personnel involved in the certification process for energy management systems, the duration of audits and multi-site sampling.

ISO 50004

ISO 50004:2014 provides practical guidance and examples for establishing, implementing, maintaining and improving an energy management system (EnMS) in accordance with the systematic approach of ISO 50001. The guidance in ISO 50004:2014 is applicable to any organisation, regardless of its size, type, location or level of maturity.

ISO 50006

ISO 50006:2014 provides guidance to organisations on how to establish, use and maintain energy performance indicators (EnPIs) and energy baselines (EnBs) as part of the process of measuring energy performance.

The guidance in ISO 50006:2014 is applicable to any organisation, regardless of its size, type, location or level of maturity in the field of energy management.

ISO 50015

ISO 50015:2014 establishes general principles and guidelines for the process of measurement and verification (M&V) of energy performance of an organisation or its components. ISO 50015:2014 can be used independently, or in conjunction with other standards or protocols, and can be applied to all types of energy.

ISO 50044

ISO 50044 is developing a standard for Energy Savings Evaluation -- Economics and financial evaluation of energy saving projects

The process of establishing an energy efficiency product

To successfully establish any energy efficiency initiative or product a financial institution should go through the following basic process.

  • secure high level commitment
    • commitment should be driven by the senior executives, preferably at board level. The commitment can be driven by a combination of the four drivers:
      • reduced risk
      • new market opportunity
      • Corporate Social Responsibility
      • regulator actions or advice
  • identify a senior executive to champion the programme
    • any initiative should have a high-level champion, again preferably at board level.
  • identify appropriate target sector(s)
    • choice of target sectors is likely to be driven by a) the market opportunity and b) alignment with existing business. Accessing existing customers e.g. property sector borrowers, is likely to be the first target for banks and for financial institutions holding property portfolios the existing building stock is a ready-made market.
  • Identify and engage internal team with appropriate skills and resources
    • any initiative will require a team to be assembled and resourced. The skill set of the team will vary across institutions depending on the nature of the product(s) being offered. It is likely to include origination, analysis, and lending/investment staff.
  • identify and engage authoritative technical support
    • an appropriate source of technical advice and support needs to be engaged. This is likely to be external energy / engineering consultants with specific expertise in the sector(s) being targeted. The roles of the technical support include; advice on the scale of the opportunity, the appropriate technical measures, origination channels, and supply chains as well as project specific due diligence.
  • develop products
    • products can range from straight forward commercial debt or green mortgages through to complex energy service deals utilising techniques such as Energy Performance Contracts or other energy services contracts. All products should utilise best practice on standardisation and measurement and verification.
  • market test and development
    • product concepts should be tested in the market and development driven by customer needs.

The process for establishing an energy efficiency fund

The following road map for establishing an energy efficiency fund has been set out by the World Bank.


Obtain government commitment, adopt legislative initiative, and establish legal framework


Identify suitable funding sources


Define fund objectives and target markets


Establish the governance structure


Select the Fund Manager (or Management Team) and recruit key staff


Define the financing mechanisms to be deployed, including Technical Assistance and other services


Develop marketing strategy and approach; develop a pipeline


Define the operating rules and procedures and the application forms. Prepare the Operations Manual.


Identify and document eligibility criteria


Develop standardised procurement models, including simplified performance-based payment schemes


Develop approaches for project aggregation to reduce transaction costs


Define the monitoring, reporting, and evaluation procedures

The process for addressing energy efficiency in a property portfolio

For financial institutions holding property portfolios, or indeed corporates holding portfolios of similar assets, either buildings or industry, the process of identifying energy efficiency investment opportunities is as follows:

  • select appropriate Energy Performance Indicator.
    • Energy Performance Indicators can be asset based e.g. Energy Performance Certificates, or operationally based, e.g. kWh/m2
  • Assess portfolio using the performance indicator.
    • The portfolio should be assessed and ranked using the selected performance indicator.
  • Prioritise high consuming, low performance assets.
    • Energy performance indicators are estimates of potential improvement in energy efficiency. To assess priorities for action they should be combined with energy usage/expenditure information and priority being given to large energy users with low performance. These properties should be assessed with on-site surveys to identify specific opportunities.
  • Assemble portfolio of energy efficiency investment opportunities.
  • Combine analysis of performance indicators, energy efficiency investment opportunities, energy spend and planned renovation programmes to create an investment programme.
  • For existing property portfolios the investment opportunities should be sorted into those that can be implemented separately (as retrofits) and those that could be incorporated into planned renovation work e.g. at end of tenancy or normal life cycle upgrades.
  • Implement investment programme.
  • Monitor results using overall energy performance indicators.

Examples of energy efficiency products/financial instruments

The following section provides example of various types of energy efficiency financing that are currently in operation.

Financial instruments

Private Finance for Energy Efficiency (PF4EE) is an agreement between EIB and EC which aims to address the limited access to adequate and affordable commercial financing for energy efficiency instruments. The PF4EE instrument has two core objectives:

  • To make energy efficiency lending a more sustainable activity within European financial institutions
  • To increase the availability of debt financing to eligible energy efficiency investments.

The instrument, which is available to qualified financial intermediaries within the EU, is managed by the EIB and provides:

  • A portfolio-based credit risk protection provided by means of cash collateral (Risk Sharing Facility)
  • Long term financing from the EIB (EIB Loan for Energy Efficiency)
  • Expert support services for financial institutions (Expert Support Facility).

The EIB has already signed agreements with financial institutions in:

  • The Czech Republic
  • Spain
  • France
  • Belgium
  • Italy

Property Loans

ING Real Estate Finance (ING REF) set an ambition of reducing CO2 emissions from its Dutch portfolio by 15-20% with a target of energy cost savings of €50 million per year. This entailed targeting 3,000 Dutch clients with 28,000 buildings. ING paid for the development of an app which was offered to all clients – the app provides an analysis of the clients energy use across their portfolio and identifies potential energy savings. If the potential energy savings exceed €15,000 the client is offered a free site energy survey.

ING REF also provides advice to clients on what subsides are available (through a specialist third party) and ING REF offers 100% finance for energy efficiency improvements from ING Groenbank with a 0.5% discount on normal interest rates.

Within the first two years, the app has been used to scan 18,000 buildings with a total floor area of 10 million m2 (65% of ING REF’s portfolio). ING aims to empower 5,000 Dutch clients and roll out the app to other European countries.

ING REF has also instituted a new policy – if more than 50% of a portfolio has an energy label of C or above then the acceptable LTV is 5% higher than otherwise. Furthermore, in December 2016, ING announced that they will only offer new financing for office buildings in the Netherlands that achieve an Energy Performance Certificate of C or above. This is in line with Dutch regulations that say from 2023 buildings must have a C rating or above in order to be rented as office space.

For more information see:

Lloyds Bank established a £1 billion facility for commercial property owners looking to implement energy efficiency measures. The fund will offer discounts of up to 20 basis points for loans over £10m to clients achieving defined sustainability targets.

For more information see:

Commercial loans

Royal Bank of Scotland (RBS) launched a £200m energy efficiency facility in 2012 aimed at SMEs. The bank offered energy audits to eligible customers followed by provision of a loan facility to fund identified energy efficiency projects. By 2016 some 400 businesses had gone through the process and achieved £10m of long-term energy savings. RBS extended the service to large corporates. 

For more information see:

Consumer Loans

BPCE: The BPCE-KfW- ELENA programme was devised to address the large potential market for residential energy efficiency retrofits. In 2013 the French government established an ambitious target of 500,000 renovations a year to reduce housing energy use by 38% by 2020 and a study concluded that the potential market was €5.6 billion a year of financing. Despite the large potential market, and the political objectives, the existing situation was seen as complex. BPCE saw a need to co-ordinate a common framework and put together the BPCE-KfW-ELENA programme to address this need.

BPCE selected three target audiences: individuals, SMEs and properties in co-ownership. The selected measures were purely thermal renovations in private buildings. Two main tools were developed, a path to simplify the customer journey, and a loan product. Local banks and local government were involved in the programme as important routes to market and were able to benefit from the €2.985 million ELENA grant

The local governments were established as the single point of contact for the customer and they also undertook awareness raising. Their input was supported by the ELENA grant. On receiving a qualified lead they used one of a set of qualified contractors to survey the building and make proposals for a thermal renovation. This was passed to the bank who carried out an analysis of the customer and for those approved projects funding was provided by KfW. The contractor then carried out the renovation work to a labelled standard. The project generated energy efficiency certificates (white certificates).

Four banks and communities were selected for a trial and a total of €95m was provisionally committed to these trials.

The initial feedback from the local government and banks was good but market feedback was les satisfactory. The small volume of loans made was attributed to a number of reasons:

  • forming the right links between local banks and local government takes a long time
  • internal organisation within the bank could be improved
  • the programme was still too paper based and needed digital tools
  • local communications needed to be improved.

In 2014 and 2015 the programme was built upon and there are now five sub-projects, two with one local authority. 

The current achievements to date are:

  • capital deployed: €36m
  • renovations completed: 909 properties
  • energy saved: 56 GWh

BPCE is developing on a new programme that will address some of the difficulties identified.

For more information see:

Specialised Energy Efficiency Funds

European Energy Efficiency Fund (EEEF) is a public-private partnership focused on financing energy efficiency, small-scale renewable energy and clean urban transport projects at market rates. It is aimed at municipal, local and regional authorities and public and private entities aimed at serving those authorities. It was capitalised in 2011 with €265m with investments from the EC, the EIB, Deutsche Bank (DB) and Cassa Depositi e Prestiti SpA (CDP). EEEF invests in the range of €5m to €25m through a range of instruments including equity, senior debt, mezzanine debt, leasing and forfeiting loans. The fund is managed by DB. It provides Technical Assistance (TA) to assist potential investees to develop projects through a dedicated TA facility.

For more information see:

SUSI Energy Efficiency Fund is a [€200m] fund which aims to invest in large scale energy efficiency projects through Energy Performance Contracts. It targets investments between €3m and €30m in projects with proven technology, a project duration of 4 to 12 years, and clients with a solid credit rating. It has invested in a range of industrial, building and street lighting projects.

For more information see:

London Energy Efficiency Fund (LEEF): LEEF is a £100m fund managed by Amber Green which provides senior and mezzanine debt for energy efficiency projects in London, ranging in size between €3m and €10m (€1m minimum and €20m maximum). Investment came from the London Green Fund (£50m) and RBS (£50m). Projects must demonstrate at least a 20% energy saving and an annual carbon reduction cost of less than £5,000 per tonne of carbon reduction.

For more information see:

Bulgarian Energy Efficiency & Renewable Sources Fund (BEERSF) is a USD10m fund established by Global Environment Facility (GEF) and the Bulgarian and Austrian governments. It is managed by not-for-profit fund manager staffed by a Canadian private sector consultancy, a foundation and a financial institution. It provides TA, partial credit guarantees (PCG) and loans.

For more information see:

Eiffel Energy Transition Fund is a fund sponsored by EIB and ADEME which will provide bridging finance in the form of short term secured bonds. The fund aims to provide financing to bridge between the equity stage and the availability of long-term bank financing. It typically provides funding for between 6 and 36 months at an interest rate of between 6 and 9% with LTV between 70 and 80%. The fund is targeting €150 to €200m with €40m committed by the EIB.

For more information see:

Property Funds specialising in energy efficient buildings

The Credit Suisse European Climate Value Property Fund acquires existing commercial properties that have leased well in promising European markets and implements a system for controlling, measuring, and monitoring energy consumption in cooperation with the Siemens technology group.

All properties in the portfolio are continually upgraded in terms of their energy efficiency on the basis of measurement data in order to systematically reduce overall energy consumption as well as CO2 emissions. This ensures that alongside the sustainability of the investment, the earnings potential for the fund's investors is also strengthened. The remaining portfolio share for which the energy consumption cannot be reduced in a cost-effective manner is made completely "carbon-neutral" once a year through the purchase of CO2 certificates.

For more information see:

The Low Carbon Workplace Fund is a £208 million unleveraged property fund which invests in commercial office space and invests to improve its energy performance. It is advised by Threadneedle Asset Management Limited, the Carbon Trust and Stanhope plc. It has achieved the following energy efficiency results across the 8 buildings in the portfolio:

  • average EPC improvement from E to B
  • BREEAM Excellent status awarded to all buildings
  • 60% more energy efficient than CIBSE’s ECON19 office benchmark
  • 35% more energy efficient than Better Building Partnership’s Environmental Benchmark.

In November 2015 the fund reported a 60% return after fees in the three years to September 2015. This is an annualised return of 17%, well above the benchmark index for balanced property funds.

For more information see:

Green Bonds

Berlin Hyp has a core focus on commercial real estate finance in metropolitan areas in Germany. It’s total real estate finance portfolio is €18.1 billion. Berlin Hyp finances energy efficient buildings which means buildings with an energy demand below the levels required by the German energy savings regulations (EnEV0 and/or a good sustainability certification. As of 28 February 2017 the green finance portfolio comprised 42 loans with an aggregate amount of €2.02 bn. The portfolio has been refinanced with issuance of green bonds.

For more information see:

City of Gothenburg. In 2013 the City of Gothenburg became the first city in the world to issue green bonds with an SEK 500 million, AA+ and Aaa rated, issue (USD 77 million) and has followed this up with subsequent bond issues. The bonds have been over-subscribed. The proceeds are used to finance various environmental projects which have included biogas projects, electric vehicles, district heating and sustainable housing.

For more information see:

Forfaiting Funds

Latvian Baltic Energy Efficiency Facility (LABEEF) is a forfaiting fund designed to purchase the cash flows from ESCO completed deep energy renovations in Soviet era multi-family residential blocks. LABEEF is supported by EBRD and private investors. For more information see:

De-risking Energy Efficiency Platform (DEEP)

As part of the EEFIG De-risking Project a database, DEEP, was developed to store information on energy efficiency projects across Europe and across sectors. It was designed to help up-scale investment into energy efficiency in Europe through improved transparency and analysis of energy efficiency projects in industry and buildings. DEEP was launched on 30th November 2016 with initial data on 7,877 projects with a total combined investment of €1.5 billion. The initial data was provided by 25 large companies, ESCOs and financial institutions. It is the largest pan-European, open-source evidence base for energy efficiency investments. 

The DEEP platform offers the following services:

  • The Key Figures page provides a quick overview of the Buildings and Industry projects in the DEEP
  • The Data Overview page provides a more comprehensive (but still aggregated) overview of the energy efficiency projects in the DEEP
  • The View Charts functionality allows the user to view and filter a number of predefined charts for Buildings / Industry energy efficiency projects
  • Add and Manage Projects presents the list of the current added projects connected to the users profile
  • The Analysis Toolbox allows the creation of charts in a dynamic and highly customisable manner
  • The Benchmark Service allows to benchmark the projects of the user against the projects of the Deep Platform database

By 1st June 2017 DEEP contained data on 5,094 projects within buildings and 2,783 projects in industry.

The average project capital investment was as follows:

  • €248,000 in buildings - ranging from €167,000 for lighting to €312,000 for building fabric measures such as windows, roofs, walls and floors.
  • €99,000 in industry - ranging from €17,000 for compressed air measures to €1,671,000 for power measures.

The buildings projects had a median payback period of 5 years with an avoided energy cost of 2.5 Eurocent/kWh. The industry projects had a median payback period of 2 years with an avoided energy cost of 1.2 Eurocent/kWh. 

The payback periods for various categories of projects are shown below.

Energy efficiency measures in buildings


Number of projects

Average investment


Lifetime of measure

Payback time
(median, years)

Avoidance costs over lifetime of measure, undiscounted
(Eurocent / kWh)







HVAC (Heating, Ventilation and Air Conditioning)






Building Fabric Measures (roofs, walls, floors)






Integrated renovation






Energy efficiency measures in Industry


Number of projects

Average investment

Lifetime of measure

Payback time

(median, years)

Avoidance costs over lifetime of measure, undiscounted
(Eurocent / kWh)

Compressed Air












Process heating






Process cooling






Metering, Monitoring and Energy Management






Power Systems






Waste heat utilization
























Interested parties can become users and/or provide data through the DEEP website:

Figure 3: Screen shot from DEEP


Building Energy Data Exchange Specification (BEDES)

BEDES is a US project funded by the US Department of Energy which has developed an open source dictionary of terms, definitions and field formats designed to facilitate the exchange of data relating to buildings and energy usage. It is intended to be used in tools and activities that help stakeholders make energy investment decisions, track building performance, and implement energy efficient policies and programmes. BEDES is not a software tool, database or schema. It is a dictionary that provides common terms and definitions which different tools, databases and data formats can share. 

Three priority use cases for BEDES have been identified. Each involves the same stakeholders and requires using the same information at a similar level of granularity.

Energy efficiency investment decision making

Owners and managers use building energy performance information to assess capital and operational opportunities in individual buildings, develop energy strategies across portfolios, and identify trends in local real estate markets.

Building performance tracking

The implementation of disclosure policies for public or private buildings requires public officials to collect, clean and analyse massive amounts of data, then share portions of it with the public.

Energy efficiency programme implementation and evaluation

Energy efficiency programs often provide incentives or technical assistance to support owners' data collection and analysis activities. They also use data to conduct program design and outreach, track project performance, and evaluate programmes.

For more information see:

BEDES has been used in various projects/products including:

The Standard Energy Efficiency Data (SEED) Platform: manages portfolio scale building performance data from a variety of sources. It is primarily aimed at public agencies such as city, county and state governments implementing policies or supporting voluntary agencies.

For more information see:

Buildings Performance Database (BPD): the largest US dataset of information about the energy-related characteristics of commercial and residential buildings, containing data on over 750,000 buildings. The BPD combines, cleanses and anonymises data collected by Federal, State and local governments, utilities, energy efficiency programs, building owners and private companies, and makes it available to the public. The web site allows users to explore the data across real estate sectors and regions, and compare various physical and operational characteristics to gain a better understanding of market conditions and trends in energy performance.

For more information see:

Building Button: aims to bring standardised and actuarial “big data” to the energy efficiency industry. It is an initiative of the Investor Confidence Project and Lawrence Berkeley National Laboratory (LBNL). Essentially the Building Button allows project developers using the ICP’s Investor Ready Energy Efficiency™ project certification system to literally push a button at the end of the development process and have all the data transferred into a standard form based on the US Department of Energy’s BEDES “dictionary” of terms. This allows project data to be collected in a standardised way which will allow market participants including investors, lenders, insurers, building owners and developers to share, aggregate and analyse project level data. 

For more information see:


Investor Confidence Project (ICP) resources

The Investor Confidence Project (ICP) provides a framework for energy efficiency project development, which standardises projects into verifiable project classes in order to reduce transaction costs associated with technical underwriting and increase reliability and consistence of energy savings. The ICP’s certification system, Investor Ready Energy EfficiencyTM (IREETM) assembles best practices and existing technical standards into a set of Protocols that define a clear roadmap for developing projects, determining savings estimates, and documenting and verifying results.

The benefits of IREETM are as follows:

  • Building owners get a standard that they can use to source energy efficiency projects they can believe in
  • Investors achieve reduced due diligence costs thanks to third-party review of each project before certification
  • Standardised approach to developing projects enables aggregation of projects into high performance portfolios.

The IREETM process is shown below.


Key ICP resources include:

ICP Protocols

ICP Europe has developed Protocols for the following types of projects:

  • Tertiary Buildings
  • Large – designed for large scale projects in tertiary buildings that involve whole building retrofits involving multiple measures with interactive effects.

  • Standard – designed for projects in tertiary buildings that involve whole building retrofits involving multiple measures

  • Targeted – designed for projects in tertiary buildings with only one or a limited set of energy efficiency measures without major interaction between them.

  • Apartment blocks
    • Large – designed for large scale projects in apartment blocks that involve whole building retrofits involving multiple measures with interactive effects.

  • Standard – designed for projects in apartment blocks that involve whole building retrofits involving multiple measures

As well as English the ICP Protocols are available in Bulgarian, German and Portuguese.

ICP Project Development Specification (PDS)

The ICP Project Development Specification (PDS) represents a comprehensive resource designed for project developers, third-party quality assurance providers, and investors to ensure that projects are developed in full compliance with the ICP Protocols. The PDS provides essential information about the Protocols’ requirements, best practices quality management tasks, and references to ensure that all stakeholders are operating from a common setoff requirements and practices.

ICP Index of National Resources (Annex A)

The ICP Index of National Resources summarises information by country on national standards, guidance documents or sources of information which can be used to support ICP projects. It covers the 28 countries of the EU (including 3 regions of Belgium), Switzerland and Moldova.

ICP Project Development Templates

The ICP has developed a range of templates to assist project developers. These include:

Operational Performance Verification (OPV) plan template – provides a framework and outline of the specific language for creating a project specific commissioning plan. The OPV plan can be used directly to describe the commissioning process to support Investor Ready Energy Efficiency (IREE) projects that use either in-house or third-party commissioning providers.

Operations, Maintenance and Monitoring (OM&M) plan template – provides a framework and outline for creating a project specific OM&M plan which can be used directly to support IREE projects. The OM&M plan can be used as a stand-alone document or included as an appendix to the OPV plan.

Measurement and Verification: Option C plan (M&V) template – provides a framework and outline for creating a project-specific M&V plan compliant with the IPMVP Option C, Whole facility approach. The M&V plan can used directly to describe the M&V process to support IREE complaint projects.

Project development templates can be found here:

ICP for Industry, Street Lighting and District Energy

From 1st May 2017 the ICP, with the financial support from Horizon 2020 (Project Number: 754056) is expanding the ICP’s Investor Ready Energy Efficiency system to include projects in industry, street lighting and district energy.

ICP Project Brief

ICP has developed a standard project brief

Financial resources for project development

The European Commission provides financial support for project development.

Project Development Assistance.

Project Outline Data Capture Sheet

Sample Investment Committee approval document/summary

Many organisations use a two-stage approval process. The first stage, here called a Preliminary Investment Approval Request (PIAR) informs the Investment Committee of a project that is being developed and is likely to come forward for final approval in the short to medium term. It often includes seeking approval to incur expenditure on due diligence. The final approval, the Final Investment Approval Request (FIAR) contains more detail including the conclusions of all due diligence, legal, accounting and tax reviews and provides the Investment Committee with all the information it need to make an investment decision. Typical headings for a PIAR and an FIAR are shown here, the specific headings and content will vary between financial institutions.

Preliminary Investment Approval Request (PIAR)

Summary of Proposal

  • Recommendation

Overview of the Transaction

  • Structure chart of the transaction
  • Energy Performance Contract
  • Technical Scope

Overview of corporate structure

  • Client
  • ESCO

Transaction summary

  • Funding to be provided
  • Terms and conditions of funding
  • Project timetable

Transaction income

  • Arrangement fees
  • Commitment fees
  • Interest rate

Transaction costs

  • Legal fees
  • Techncial advisory fees
  • Project M&V fees
  • Due diligence cost summary

Compliance with policy

  • Compliance with facility objectives
  • Other compliance issues

Conclusions and next steps


  • As required

Final Investment Approval Request (FIAR)

Executive Summary

  • Project Overview
  • Recommendation

Transaction description

  • Preliminary Investment Approval Request
  • Amendments since PIAR
  • Loan amount
  • Breakeven & fees
  • Loan financing
  • Tranches and sources of funds
  • Investment structure
  • Terms of lending agreement
  • Structure chart
  • Credit risk
  • Financial model
  • Sensiitivy analysis
  • Project update

Costs and timetable

  • Legal costs
  • Technical advisory fees
  • Due diligence cost summary
  • Project timetable

Compliance with policy

  • Compliance with facility objectives
  • Other compliance targets

Accounting and tax

  • Drawdowns and repayments
  • Interest
  • Financial statements
  • Fees and transaction costs
  • Corporation tax
  • VAT
  • Withholding tax on interest
  • Know Your Client on the borrower

Risk register and mitigations

Anti-bribery statement


  • Credit standing of borrower
  • Structure chart

Benefits check list

Risk check list