Factsheet of the 2nd National Roundtable in Croatia
“Financing green transition in multi-apartment buildings & industry”
Wednesday 13 & Thursday 14 April 2022
Organised by REGEA
3 Parallel Sessions
3 Main Discussion Pillars
– Financing energy efficiency measures in multi-apartment buildings
– Financing energy efficiency measures in the industry
– New European Bauhaus as an incentive for sustainable financing for buildings
Energy transition is a lengthy process and, given the current context, not sufficient to achieve the set climate goals. Instead, we should focus on the "transformation" of the EU's energy system and how the energy is consumed. Within the framework of energy "transformation", it is necessary not only to think about how to open new energy supply routes, replace fossil fuels with renewable energy sources, but also how to maximise energy efficiency and save energy.
Julije Domac, Managing Director, REGEA
I am confident that the use of financial instruments will result in greater awareness of the need to implement self-sustaining public infrastructure projects – projects that generate savings and cover their operating costs throughout their lifetime. Such an approach would also contribute to the greater fiscal responsibility of policymakers towards the citizens (voters) just like the previous experience in other member states that joined the EU one period before the Republic of Croatia has shown.
Dijana Bezjak, Ministry of Regional Development and EU funds
Financing energy efficiency measures in multi-apartment buildings
Continuous and regular publication of calls for financing are often more critical for building co-owners than the co-financing rate. The calls help building owners what and when to expect and prepare their renovation projects on time. Timely communication on planned calls and regular call announcements would reduce the impact such calls have on the market conditions (material prices, labour shortages), allowing the companies in the construction sector to deal with better conditions for business planning.
The start of the reconstruction works of the public buildings and buildings damaged in the series of earthquakes – for which the allocated EU funds are multiple times higher – will cause further market turbulence in addition to the labour shortage that Croatia is facing.
Increasing the renovation rate in Croatia will require regular communication with citizens about future calls for funding. Furthermore, an effort is needed to prevent situations that lead to a lack of trust and motivation of citizens to implement the renovation measures.
One of the future challenges will be motivating and convincing the building co-owners to start the renovation using their own funds without the contribution of national and EU grants. Own financing is important to achieve the national energy and climate goals that Croatia has set.
New forms of financing are urgently needed to increase the rate of energy renovation. It is likely that the new Operational Programmes will no longer foster the use of grants to such an extent. Still, given that citizens are accustomed to grants and high co-financing rates, it will be necessary to formulate public calls differently and promote the benefits of energy renovation without grants.
Building managers and co-owners without sufficient funds in the building account also need short-term working capital loans to ensure that payments to the contractor are continuous while waiting for interim payments based on the requests for reimbursement.
Banks already offer loans to building co-owners who did not receive grants, but they will seek to align the loan terms with the needs of the building management companies. However, without grants, citizens cannot invest in works and services that can achieve more significant savings which slows down the progress towards a decarbonised building stock by 2050.
Financing energy efficiency measures in the industry
Ambitious plans and sound investment projects aiming to decarbonise energy-intensive industries will undoubtedly have the governmental support to reduce their carbon footprint and operating costs. Future public calls for funding need to ensure the acceptability of a broader range of measures to increase energy efficiency and the use of renewable energy sources, which would encourage the transition of the industry from fossil-intensive processes to sustainable ones based on renewable energy sources.
To reduce the administrative burden for the applicants, the public bodies preparing the future calls should allow investments through alternative procurement models, for example, the “Design and Build”, i.e., D&B model.
The success of the green transition in the economy is dependent on (a) financial support through EU funds, (b) a clear definition of plans at a national level, (c) cooperation between the public and private sector, and (d) prompt publication of calls. Companies are ready to make use of the opportunity to co-finance their projects; however, they need support in identifying sources of funding for green transition projects, speeding up and improving existing procedures, and regular communication between all parties involved.
Strengthening the capacity of public bodies in the management and control system for the EU funding – especially related to the state aid and the principle of do-no-significant-harm issues – is necessary for faster preparation and publication of calls including evaluation, contracting, and implementation of projects.
EU grants should be seen as an opportunity to achieve a faster return on previously planned investments. Entrepreneurs need to have developed strategies and be aware of which business segments need to be improved to respond to disruptions that create excessive costs in the business. On the other hand, the state and public institutions should listen more to the needs of the industry and entrepreneurs and adapt the regulatory and legal framework to allow more efficient absorption of the EU funds.
Green transition is a multidisciplinary and long-lasting process. More efficient and faster actions by state bodies would give way to entrepreneurs achieving sustainable goals and reducing the negative earlier experience of the green transition.
New European Bauhaus as an incentive for sustainable financing for buildings
The recently established National Platform for the NEB initiative is considered as a useful instrument for linking the development and strategic projects with the growth and funding potential of the NEB initiative. The platform should allow gathering of different stakeholders who will analyse and name critical regulatory areas where innovation and change are needed to overcome obstacles and pave the way for integrating NEB values, with a particular focus on the building sector.
NEB values are an integral part of new Operational Programmes (OP), and projects that incorporate those values – sustainable, beautiful, and inclusive – will be strongly supported. The Regional Development Fund instrument is in the making and will be financed within the OP Integrated Territorial Programme 2021-2027. It will encourage investments in public and business infrastructure that align with NEB values.
The Ministry of Regional Development and EU Funds also announced new funding possibilities in the financial perspective 2021-2027. The funding mechanisms in this perspective will enable a combination of a grant and a financial instrument within one operation with the possibility of writing off part of the principal. Such mechanisms are a satisfactory solution for financing energy efficiency measures in buildings and industry since beneficiaries do not have to worry about administrative monitoring of the project. If they achieve planned energy savings, they will have the possibility to write off a part of the principal.
Using the Level(s) framework during the construction or reconstruction of a building and later during the use of the building would allow for a more straightforward and more transparent evaluation of investments by the financial sector, especially in terms of sustainability. The possible introduction of a Zero Emission Building Standard can be used to indicate the building’s impact on the environment during and after construction.
Although the Managing Authority (Ministry of Regional Development and EU Funds) has defined initial criteria for evaluating individual NEB values, they need more precise information based on which they will be able to prepare call conditions and clear criteria for writing off part of the principal of projects that achieve expected savings and NEB values.
The three parallel sessions were moderated by Ivana Belić, PR at REGEA.