If you decided to change something for the better in your multi-apartment building, you must know that owners of housing and co-owners of multi-apartment buildings have several instruments for attraction of investments in the energy saving and clean energy projects. They include:

 
  • Municipal co-funding from the territorial community budget on irrecoverable basis.
  • Direct investments of building residents, owners (co-owners) of premises, condominiums.
  • Co-funding by the owners, public associations  and bodies of self-organization of population and third persons (local, state budget, private investors, etc).
  • Contract with another party, in particular, energy service company (ESCO).
  • Grant (grants), Global Development Alliance (GDA), funding from sale of emission quotas in the Kyoto protocol format.
  • Loan financing, including concessional lending and partial guarantee schemes (mechanisms). It is introduced by the commercial banking institutions or specialized agencies, revolving funds. And now about these instruments in more details.
ATTENTION!! ESCOs have more opportunities for work in the Ukrainian housing sector (due to absence of restrictions related to use of the budget funds), on the other hand, there are additional requirements for multi-apartment buildings – in particular, existence of a condominium.

Practice of implementation in Ukraine of the projects introducing energy efficiency measures in multi-apartment buildings shows that ESCOs must not simply perform work in the building, but also become the provider of communal services of district heating in the building. ESCO implements energy saving measures resulting in reduced energy consumption, and from the saved funds (tariff for the service is not reviewed) has the ability to repay the loan.


 

Under this model, energy efficiency renovation measures were taken in multi-apartment buildings of Nizhyn (2008) and Lutsk (2010). It should be mentioned that in both cases for the model to be economically feasible part of works was fulfilled at the expense of the budget and/or grant funds. The reason for this was relatively low price for heat energy which significantly extended the project payback period. In the conditions of growing heat energy cost and, accordingly, growing tariffs for district heating services, implementation of this model becomes more economically feasible.

Ukraine is implementing a number of international technical assistance projects that provide co-financing for pilot projects in the housing sector, including the projects supporting the condominiums. Co-financing of the projects by these investors is on the irrevocable basis. The feature of this source is that it can only be used in case of direct interest and participation of local authorities which will work with donors according to the signed Memoranda, etc. The most interested party that could use this financial tool and invest in resource conservation in the multi-apartment housing stock can be the condominiums and companies providing the housing and communal services.

ATTENTION! Condominium as a legal entity can be a full client of the bank, even if its balance sheet has no property objects that can be pledged, and it is entitled to take a loan approved by the general meeting decision to repair or modernize its building against the collateral of membership fees of the premises owners, and of the funds from payments.

Currently, condominium lending for energy efficiency programs is provided in Ukraine by commercial banks "Bank Lviv" (Lviv) and "MetaBank" (Zaporizhia). This market segment is also interesting for other commercial banks, such as: "Concord" Bank (Dnipropetrovsk) and Bank "Pivdennyi" (Odesa). "Bank Lviv" is a member of loan guarantee program of the US Agency for International Development (DCA USAID). This loan guarantee is given by the US State Treasury and is recognized by the National Bank of Ukraine, thus allowing commercial banks to lower collateral requirements, extend the loan period, and allowing the bank to test itself in a new market, while being protected by the loan guarantee.
 

As of today, "Bank Lviv" is the only commercial bank in Ukraine which provides loans for energy efficiency measures of the condominiums for the period up to five years, while other commercial banks give loans to condominiums exclusively for one year. "MetaBank" and the "Concord" Bank also expressed their willingness to participate in the DCA USAID program and currently work on fulfillment of the relevant procedures and conditions. Ukrgasbank is probably the most active state bank which is supported by the state in offering loan programs for energy efficiency measures in condominiums. In addition, the state programs on support of energy efficiency measures in the residential sector (including condominiums) are also served by the state banks Oschadbank and Ukreximbank.

Financing of projects in the residential sector can be split between the energy service companies, investors and building residents, with the city providing benefits and possible budget support in the early phases of the program. Creating a transparent regulatory environment and economic stimulation of the projects on modernization of residential buildings must ensure attractiveness of this sector for ESCOs. Development of effective mechanisms to engage citizens in active participation and control over such projects will not only convince the residents in the quality of performed work, but will provide guarantees to investors.

Commercial funding for modernization of multi-apartment buildings is used in all European countries, USA and Canada. Experience of the  countries where residents of multi-apartment buildings joined together and took the lead in management of their own buildings 20 years ago proves that funding of the projects on building modernization is a profitable area of activity.

Of interest to Ukraine can be financial mechanisms of support to energy efficiency used in Poland and Czech Republic. These mechanisms envisage state subsidies for the citizens with the aim of implementation of energy saving measures in their buildings, or state compensation of the bank loans used for energy saving and renovation of the heating systems in buildings. According to the Czech Sponsorship Program for Energy Efficiency in Buildings, 60% of the project cost is covered by the state as a result of joint project implementation.

Lately, particularly relevant for Ukraine are the projects on substitution of natural gas for heating and hot water preparation with alternative fuels and energy. For this purpose, different mechanisms are used, including reimbursement of part of the loan principal used by population for purchase of solid fuel, electrical or other boilers which use other fuels and energy, different from natural gas.

ATTENTION! Loan principal is the amount of consumer loan given to an individual borrower by JSC "State Savings Bank of Ukraine" (the authorized bank) for purchase of the boiler on any fuels and energy (except for natural gas).

Thus, realities and prospects for finding sources of funding for implementation of clean energy projects are not absolutely disappointing. Bringing communal utilities to the break-even level as a result of increase to economically grounded levels of communal tariffs will increase the amount of own funds that can be invested in clean energy projects.  Increase in the number of condominiums will promote more active involvement of the funds from residents in energy efficiency projects in the residential buildings. So create condominiums and make your homes energy efficient!