Banking on energy savings
Innovative business model pays for Soviet-era flats to become more energy efficient.
Many of the Soviet era apartment blocks in Latvia are in poor technical condition, are corroding rapidly and highly energy inefficient, with little heat insulation and old-fashioned heating systems. But flat-owners in the cities of Valmiera and Cesis are achieving significant improvements to their properties without having to make any payment thanks to an innovative award-winning finance and renovation scheme that began in 2008.
Although much of the mass housing in Latvia has been passed from state ownership to individual ownership over the last couple of decades, most of the owner-residents of flats have low to medium incomes and energy consumption typically amounts to more than 20% of the average household income.
In order to tackle this problem, Renesco devised a business model to fund the modernisation of apartments through energy conservation measures. The cost of renovation work is financed by banks solely on the expected energy savings over a 20-year period. Renesco claims to be the first company in the world to absorb the full cost of building renovation work on its own balance sheet without any financial contribution or guarantees from the apartments’ owners, who receive a 25% share of the company’s net profits. The expectation is that converted apartment blocks can continue to be used for another one to two generations.
The energy savings from the project have so far been substantial: annual energy consumption for heating and hot water has fallen from a pre-renovation annual average of 200 KWh/m2 to about 65-90 KWh/m2 depending on the measures implemented. It is calculated that this corresponds to an annual reduction of carbon dioxide emissions of 384 tonnes. Renesco expects that its 2013 projects will result in the lowest energy consumption of any renovated buildings in Latvia, and possibly in Eastern Europe.
The renovation work includes the installation of mechanical ventilation systems with heat recovery as well as the installation of geothermal heat pumps, which further reduce energy consumption by around 20KWh/m2.
So far, Renesco has fully renovated 294 apartments in Latvia with work now underway on a further 820. The project’s financial and legal basis was designed to be replicable in other countries. As a result, Renesco will be starting operations in Lithuania in 2013 and is also considering expanding into Poland, Estonia, Slovenia and Macedonia.
Renesco chairman Eric Berman said: “Making one organisation responsible for all aspects of the project is, in our opinion, a game-changer. It allows us to have a laser-sharp focus on the best combination of cost reduction, quality control and the smartest energy saving. Renesco's results prove this.”
“The energy performance contracts and bank agreements we have developed and agreed upon with residents and banking credit committees are probably our most innovative achievement.”
For more information: Renesco
Contact: Eric Berman; email@example.com