The report on "Third-Party Financing: Achieving its Potential" was discussed within the Energy Charter's Working Group on Energy Efficiency and Related Environmental Aspects, and draws on valuable input provided by the Energy Charter's member states. Its publication, in English and Russian, was made possible by financial support from the Ministry of Industry, Employment and Communication of Sweden.
Under the Energy Charter Protocol on Energy Efficiency and Related Environmental Aspects (PEEREA), its signatory states are committed among other things to "encourage the implementation of new approaches and methods for financing energy efficiency and energy-related environmental protection investments, such as joint venture arrangements between energy users and external investors" (Article 6(1) of PEEREA). This report was consequently undertaken in the context of assisting the Charter's member states to fulfill their commitments under the Protocol, through the provision of advice on how third-party financing mechanisms can be applied in practice.
The essence of the concept of third-party financing is that some part of a contract awarded to an energy services company is based on that company's performance in achieving energy savings. Third-party financing thus offers an innovative technique for financing energy efficiency and renewable energy projects.
Hitherto, however, implementation of this concept has in practice yielded patchy results, both within the European Union and in Central and Eastern Europe. This report considers the various ways of structuring third-party financing through energy performance contracting, assesses the barriers that exist to wider application of this concept, and provides a series of conclusions and policy recommendations on measures that governments might take to stimulate the wider usage of this method of encouraging investments in energy efficiency.
Among these are that more focus should be placed on the need for capacity building to train energy service companies in performance contracting techniques, and that tariff setting methodologies (e.g., for district heating) should be reviewed in countries where the present pricing approach can even discourage investment in energy efficiency.
The general analytical content of the report is supplemented by specific case-studies of third-party financing projects undertaken in the public and private sectors in a number of states both within the EU (Austria, Germany, Spain, United Kingdom) and in central and eastern Europe (Czech Republic, Hungary, Poland, Ukraine), assessing the results that have been obtained in each case in terms of energy efficiency gains. The respective roles of governments, energy efficiency agencies and, where appropriate, international financial institutions in the implementation of these projects are also assessed.
In her introductory preface to the report, Secretary General Ria Kemper underlines that one of the Energy Charter process's primary goals is to promote dialogue and exchanges of experience among its member states in the wider Eurasian area on the optimal means of achieving energy efficiency.
"By publishing this report, we aim to disseminate the results of our studies in this area, and the resulting policy recommendations, to a wider audience", notes Dr. Kemper. In particular, the report should provide valuable guidance for policymakers, industry, researchers and other interested parties concerning the practical application of third-party financing methods in various situations.