Risks and mitigation strategies in energy efficiency financing: A systematic literature review

Kleanthis, Nikos; Flamos, Alexandros; Karakosta, Charikleia; Doukas, Haris

doi:10.1016/j.egyr.2022.01.006

Cited by 20 publications

(9 citation statements)

References 57 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…At this step, the KPIs used as benchmarking criteria are calculated based on the user's input and project data [9] (Table 2). NPV reflects the risk and cashflows discount by quantising it through the discount rate the profitability of the investment by involving the yearly income calculations…”

Section: Calculation Of Evaluation Criteria and Kpismentioning

confidence: 99%

A Multicriteria Tool to Support Decision-Making in the Early Stages of Energy Efficiency Investments

Papapostolou

Mexis

Karakosta

et al. 2022

Decision Support Systems XII: Decision Support Addressing Modern Industry, Business, and Societal Needs

Self Cite

View full text Add to dashboard Cite

The energy demand of modern communities contributes significantly to climate change, increasing the release of greenhouse gases into the atmosphere. Energy efficiency is recognised as the key pathway to reducing energy usage while sustaining an equivalent, contemporary economic activity. In other words, to avoid climate change, mainstreaming energy efficiency finance is considered a top priority. This study focuses on introducing a rating system based on a Multi-Criteria Decision Analysis method that aims to promote the implementation and financing of energy efficiency investments. To this end, a benchmarking Tool is being deployed in order to materialise the proposed methodology and introduce a standardised procedure for benchmarking energy efficiency potential projects during the preliminary stages of investment conceptualisation. The proposed Tool exploits the Multi-Criteria Decision Analysis method ELECTRE Tri, taking into account major key performance indicators that are broadly used by investors and financing institutions to identify bankable energy efficiency investments and promote green transition. The methodology has been applied to benchmark 114 energy efficiency investments from eight different European countries. It should be mentioned that for the successful and effective development of the proposed Tool, input and feedback has been received by a variety of stakeholders from the energy sector and financing community, who also tested the Tool and confirmed that the approach proved to be extremely helpful to those seeking for sustainable investments in energy efficiency. The analysis resulted in the conclusion that the Tool covers the necessity for a standardised benchmark, providing added value to the energy efficiency market.

show abstract

Section: Calculation Of Evaluation Criteria and Kpismentioning

confidence: 99%

A Multicriteria Tool to Support Decision-Making in the Early Stages of Energy Efficiency Investments

Papapostolou

Mexis

Karakosta

et al. 2022

Decision Support Systems XII: Decision Support Addressing Modern Industry, Business, and Societal Needs

Self Cite

View full text Add to dashboard Cite

show abstract

“…Tools like M&V and Investment Grade Audit are demonstrated helpful to mitigate this type of risk by considering the operational discrepancies and energy simulated with calibration with field data (Bertoldi and Kromer, 2006; Schubert et al , 2021). Energy-efficiency/performance insurances could mitigate financial risks for ESCOs by transferring risks to insurance companies but in the current stage, a fair premium needs to be discussed further (Bertoldi and Boza-Kiss, 2017; NOVICE, 2020; Koutsandreas et al , 2022; Töppel and Tränkler, 2019; Bonacina et al , 2015).…”

Section: The Risks Of Epcmentioning

confidence: 99%

“…There is no explicit risk pricing for an EPC project; thus, the initial risk allocation between an owner and an ESCO cannot be set in the contract precisely (Garbuzova-Schlifter and Madlener, 2017). A lack of risk-sharing strategy has been identified as a risk factor towards the contract (Koutsandreas et al , 2022). Detailed responsibilities and risk-sharing mechanisms are demonstrated as a useful way to mitigate contract risk (Hu and Zhou, 2011).…”

Section: The Risks Of Epcmentioning

confidence: 99%

Risk allocation for energy performance contract from the perspective of incomplete contract: a study of commercial buildings in China

Wan

Liu

Ding

et al. 2022

IJCCSM

View full text Add to dashboard Cite

Purpose This article aims to establish a dynamic Energy Performance Contract (EPC) risk allocation model for commercial buildings based on the theory of Incomplete Contract. The purpose is to fill the policy vacuum and allow stakeholders to manage risks in energy conservation management by EPCs to better adapt to climate change in the building sector. Design/methodology/approach The article chooses a qualitative research approach to depict the whole risk allocation picture of EPC projects and establish a dynamic EPC risk allocation model for commercial buildings in China. It starts with a comprehensive literature review on risks of EPCs. By modifying the theory of Incomplete Contract and adopting the so-called bow-tie model, a theoretical EPC risk allocation model is developed and verified by interview results. By discussing its application in the commercial building sector in China, an operational EPC three-stage risk allocation model is developed. Findings This study points out the contract incompleteness of the risk allocation for EPC projects and offered an operational method to guide practice. The reasonable risk allocation between building owners and Energy Service Companies can realize their bilateral targets on commercial building energy-saving benefits, which makes EPC more attractive for energy conservation. Originality/value Existing research focused mainly on static risk allocation. Less research was directed to the phased and dynamic risk allocation. This study developed a theoretical three-stage EPC risk allocation model, which provided the theoretical support for dynamic EPC risk allocation of EPC projects. By addressing the contract incompleteness of the risk allocation, an operational method is developed. This is a new approach to allocate risks for EPC projects in a dynamic and staged way.

show abstract

“…An investment household decision, where financing poses a major obstacle, around the globe is house energy efficiency retrofits (EERs) (Hill, 2019; Rockstuhl et al , 2021; Koutsandreas et al (2022). From the banks’ viewpoint, these types of investments have become even more challenging in recent years because of the changing landscape and the recent COVID-19 pandemic (Kinateder et al , 2021; Batten et al , 2022).…”

Section: Introductionmentioning

confidence: 99%

House energy efficiency retrofits and loan maturity

Drivas

Vlamis²

2022

SEF

View full text Add to dashboard Cite

Purpose The purpose of this study is to examine how households opt for their loan’s duration when it comes to energy efficiency retrofits (EERs). The primary focus is on the time horizon that these types of EERs will provide benefits to the households. Design/methodology/approach This study examines the second wave of the largest EER support program in Greece in recent years. The authors exploit an idiosyncrasy of the support program which offered interest-free loans. The baseline sample of this study includes approximately 18,000 households awarded the support and opted for a loan. To provide robustness and complement the analysis, the authors also use data from 38,000 households that were awarded support from the first wave of the EER program. Findings This study finds that EER investments that are likely to deliver longer-term benefits, in the form of energy savings, are positively associated with longer duration. This finding implies that households view such EERs as long-term investments that will consistently provide benefits in the future, thereby tolerating a longer period of incurring the inconvenience of paying monthly installments. Practical implications This study posits that an EER can be perceived by the household as an investment that saves money in the long term because of more efficient energy use. To this end, the authors bring forward the duration of the benefits accrued to the household as a driving factor to the household’s decision over the length of the loan. Originality/value This study expands on prior literature that has focused on consumer and loans for durables (e.g. cars) by examining EERs. However, EERs are different, as they can save households money in future periods. In addition, house EERs are at the forefront of energy policies and the design of future support programs at the epicenter of several initiatives.

show abstract

Risks and mitigation strategies in energy efficiency financing: A systematic literature review

Cited by 20 publications

References 57 publications

A Multicriteria Tool to Support Decision-Making in the Early Stages of Energy Efficiency Investments

A Multicriteria Tool to Support Decision-Making in the Early Stages of Energy Efficiency Investments

Risk allocation for energy performance contract from the perspective of incomplete contract: a study of commercial buildings in China

House energy efficiency retrofits and loan maturity

Contact Info

Product

Resources

About