Energy Efficiency Technology Data Infrastructure Finance

DEEP 2.0 - De-risking energy efficiency through better reference data

28 September 2021 by Carsten Glenting
DEEP 2.0 - De-risking energy efficiency through better reference data

The De-risking Energy Efficiency Platform (DEEP) is an open-source database for energy efficiency investments performance monitoring and benchmarking. DEEP provides an improved understanding of the real risks and benefits of energy efficiency investments by providing market evidence and investment track records. It now includes data on more than 17,000 energy efficiency projects in buildings and industry from 30 data providers. DEEP 2.0 is available at: deep.eefig.eu

 

Energy efficiency in buildings and industry is not only the cheapest fuel for the EU economy but also generate many non-energy benefits (reduced air pollution, improved indoor comfort, reduced respiratory deceases). In spite of this the level of investment in energy renovation is significantly below the level needed for Europe to meet its climate ambitions.

 

The DEEP platform has been developed by the Energy Efficiency Financial Institutions Group (EEFIG), which was established by the European Commission DG ENER and the United Nations Environment Programme Finance Initiative (UNEP FI) to get public and private financial institutions, industry representatives, sector experts and policy makers together to identify barriers to the long-term financing for energy efficiency and propose solutions. The platform addresses the challenge that lack of evidence on the performance of EE investments makes the benefits and the financial risk harder to assess, which was identified as a key barrier to scaling up energy efficiency financing in the EEFIG 2015 report “Energy Efficiency – the first fuel for the EU Economy”.

 

The vision is to provide detailed analysis and evidence on the performance of energy efficiency investments to support the assessment of the benefits and financial risks. This is done by disclosing thousands of data points showing the real technical and financial data from implemented energy efficiency projects across the economy. The DEEP platform is a source of operational risk management information, which will help project developers, financiers, and investors better assess the risks and benefits of energy efficiency investments across Europe.

 

DEEP 2.0

At the end of June 2021, we have launched the new DEEP 2.0. The updated platform has a new visual identity and several improvements based on user feedback: New structure where more information is directly available on the landing page and accessible without registering as a user or logging in; New data fields for buildings integrated RE and fields aligning with the new EU taxonomy; Improved benchmarking tool that allows users to benchmark their own portfolio against DEEP data as well as benchmarking between user defined subsets of the DEEP data; More advanced risk indicators (skewness, kurtosis and Value at Risk); and Easier to access DEEP analysis through API with worked example.

 

DEEP KPIs - Payback time vs. Avoidance cost

Key KPIs shown in the DEEP include the Payback Time (years required for the saving to pay for the investment in the energy efficiency measure) and the Avoidance Cost (average investment cost in eurocent for each kWh energy saved over the lifetime of the energy efficiency measure). While the Payback Time KPI remains commonly used in investment decisions, it is nevertheless not a satisfactory measure of project economy from an economic point of view, as it disregards the cost of financing and neglects differences in lifetime of the investment. This is addressed by the Avoidance Costs KPI which intuitively should be considered as the Lifecycle Cost of Energy (LCOE) from energy savings resulting from the investment in the energy efficiency measure (DEEP allows the user to select the discount rate for the avoidance cost). This also allows direct comparison with the cost of production of conventional and renewable energy.

 

DEEP Results – Buildings

For the 7,700+ energy efficiency projects in buildings included in DEEP the median payback time is 5 years and the median avoidance cost is 3.1 Eurocent/kWk (before discounting).

On a disaggregated level there are significant differences in payback time between low hanging fruits such as renovation of lighting and heating systems (around 3 years payback time on average) and energy efficiency renovations of the buildings envelope (11 years payback time on average), as illustrated in Figure 1 below.

 

Figure 1: European buildings in DEEP, Payback time for energy renovations – Source: DEEP screenshot

 

However, the energy efficiency renovations of the buildings envelope have a longer lifetime than renovation of lighting and heating systems and should therefore be compared based on the avoidance cost as illustrated in Figure 2 below (from a socio-economic point of view with a rate of return of 2%). Hence, renovation of the building envelope is as attractive from a socio-economic point of view as renovation of lighting and heating systems – even before adding the many non-energy benefits renovation of the building envelope (reduced air pollution, improved indoor comfort, reduced respiratory deceases).

 

Figure 2: European buildings in DEEP, Avoidance cost (eurocent/kWh) for energy renovations (at socio economic discount rate of 2%) – Source: DEEP screenshot

 

But the longer payback time for renovation of the building envelope challenges the financial return as illustrated in Figure 3 below (comparing a socio-economic rate of return of 2% with a financial point of view with a rate of return of 6%).

 

Figure 3: European buildings in DEEP, Avoidance cost (eurocent/kWh) for energy renovation of buildings envelope (comparing avoidance cost from socioeconomic and financial perspective) – Source: DEEP screenshot

 

The conclusion is that deeper renovations are attractive from a socio-economic point of view but require access to long-term financing at attractive terms.

 

DEEP Results – Industry

For the 9,400+ industrial energy efficiency projects in DEEP the median payback time is 3.4 years and the median avoidance cost is 2.7 Eurocent/kWk (before discounting) and 3.8 Eurocent/kWh (when adding a financial rate of return requirement of 6%).

 

Figure 4: European industry in DEEP – Payback time by measure – Source: DEEP screenshot

 

Hence, DEEP clearly shows that energy efficiency is the cheapest source of clean fuel and that many energy efficiency projects have payback times below 4 years.

 

Why should you use DEEP?

For the users, DEEP provides anonymized historical data structured along major project characteristics (geography, energy efficiency measures, verification status, industry / type of building, multiple benefits, etc.). Furthermore, the platform provides insight on financial performance indicators such as payback time (allows assessment of minimum loan tenure needed) and discounted avoidance cost (allows assessment of financial viability at different interest rates and energy prices). These clearly document the existence of many investment opportunities within energy efficiency in both buildings and industry. Financial institution may upload their own individual projects or portfolios as private projects and benchmark them against user-selected sub-sets of the projects in DEEP.

 

The process of anonymization of data is carried out in primarily two steps. Firstly, the data provider uploads individual data records with selected information. Secondly, the database aggregates projects, so users cannot identify the projects from the graphical and tabular presentation of data within the platform. DEEP is financed by the European Commission DG Energy and the data shared will be kept confidential, not shared with third parties and only shown through aggregated analysis.

This allows Financial Institutions and other data providers to contribute to the de-risking of energy efficiency financing in buildings and industry and through this to decarbonization of the EU economy without compromising confidentiality concerns related to the data.

 

Visit DEEP at deep.eefig.eu to get better informed!


About Carsten Glenting

Glenting

Carsten Glenting is partner at Viegand Maagøe, a specialist consulting company within the fields of energy efficiency, renewable energy and green transition. He holds a M.Sc. in mathematics and finance and has 30 years’ experience in management consultancy, as CFO for energy company, and as fund manager. Carsten has since 2015 headed the secretariat for the Energy Efficiency Financial Institutions Group (EEFIG) and led the development of the De-risking Energy Efficiency Platform (DEEP).


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