Energy renovation of residential buildings through soft loans and third-party financing

In Parma the housing stock is responsible for more than 32% of CO2 emissions. The city council has decided to focus on residential buildings as this sector accounts for more than 70% of the building stock. Two specific actions within Parma’s Climate Plan are related to energy retrofits. The first is the renovation of 1,000 condominiums. It has been estimated that through this measure it is possible to avoid 4,500 tons of CO2 emissions by 2020 . The second is to focus on single family houses or apartments.

The issue

Homeowners’ low awareness and confidence in energy retrofits Parma citizens do not show a great interest in implementing energy efficient refurbishments. Some of them are afraid to invest as they are not confident in the process and are wary of a poor result after renovation.

The Municipality’s big challenge is to raise public awareness and convince citizens that investing in energy measures is a sensible decision, as it not only limits and decreases the energy use of their homes but also improves the quality, comfort and value of the property.

In condominiums, the decisionmaking process is perceived as the biggest obstacle as it is difficult to reach an agreement that is satisfactory for all owners. In this regard, the municipality notes the importance of involving the condominium managers as the main partners and intermediaries in the internal decision-making process and promotion of energy efficiency measures.

Existing financing tools are insufficient and unattractive

Apart from the non-financial barriers, Parma citizens do not have access to attractive financing. Currently several financial instruments support energy renovation but they are either unattractive or not well known:

• Commercial banks offer two types of loans to finance energy retrofits:
• Consumer loan: short payback period and high interest rate (average of 10%).
• Mortgage: long payback period and only attractive when purchasing the home.

The State offers:

• A 65% fiscal deduction for implementation of measures going beyond the national energy efficiency standards.
• ‘Conto termico’ – a national grant funded by the Ministry of Economic Development. The grant is offered to private homeowners who want to replace their heating system with more energy-efficient technology. The conto termico and the fiscal deduction cannot be combined.

A market survey shows that citizens perceive the energy bill reduction, tax deductions and increasing energy prices as the most motivating factors encouraging them to energy retrofit their homes. A free energy audit is also a strong incentive. As regards the loans, 63% of survey respondents found the incentive in the form of a soft loan very attractive. 66% would accept a 0% interest loan, while 34% would be willing to pay at most 2% interest.

Solution

In order to raise awareness, provide technical support and offer complementary financing solutions to its citizens, the municipality of Parma:

• Developed a soft loan financing scheme in cooperation with a local bank

The municipality together with the Cassa di Risparmio di Parma e Piacenza (Bank Cariparma – Crédit Agricole) set up a financing scheme that provides low-interest loans to home-owners of single individual houses and condominiums, in order to increase energy efficiency and the use of renewable energy in their dwellings.

• Set up a partnership with Parma Energy Agency whose role is to raise awareness and provide technical assistance to homeowners

The Parma Energy Agency that was set up by the Municipality of Parma provides support to homeowners in developing the technical and financial aspects of their energy retrofit projects, selecting craftsmen and implementation of energy saving measures.

Involvement of the municipality and the independent local energy agency adds value and credibility to the energy renovation programme and the soft loan scheme.

Homeowners’ advantages

Technical assistance

1. Homeowners interested in energy retrofits visit the Parma Energy Agency. They get initial advice on potential energy saving measures and existing technologies.
2. When they have decided to carry out energy renovation measures, they present the project to the Agency which checks its technical feasibility and gives the Bank the go-ahead to issue the loan.
3. Homeowners contact the bank which analyses their financial situation and issues the loan provided they pass the creditworthiness check. The renovation work can start.
4. Parma Energy Agency checks if the work is completed (invoices, photos, drawings, declaration of completion of work and of conformity).

Soft loans

	Eligibility criteria
Type of housing	Type of households	Eligible measures
-Single family houses and apartments -The housing unit has to be the owner’s main residence	Parma inhabitants Homeowners Have to pass the banks’ creditworthiness check	– Thermal insulation of roofs, walls, glass walls, doors and windows – Installation, regulation or replacement of heating systems connected or not to energy efficient ventilation systems or hot water production. – Installation of renewable energy sources. All work must be performed by certified professionals able to deliver a declaration of conformity required by the law. Only measures going beyond the national energy efficiency standards are eligible

	Loan conditions
Cassa di Risparmio di Parma e Piacenza (Cariparma Crédit Agricole)	Loan Amount: max €50,000 Maturity: 5 to 10 years Interest rate: Variable interest rate; Euribor (3 months) + 2.9% Current market conditions: Euribor 3 months is negative. Parma homeowners get the interest rate of 2.9%. Guarantee: Not required. The Energy Agency ensures the money is used for energy retrofits and not for another purpose.

Financing scheme highlights

Strong points	Weak points
– Management carried out by the bank, less bureaucracy for the municipality – Impartial technical check made by the Energy Agency – There is no similar financial product on the market with such attractive conditions. Given the low interest rate, energy savings and the fiscal deduction, the investments quickly pay for themselves. – The presence of the Municipality in this project increases of citizens’ trust. – Contribution to the city’s energy transition strategy approved by the City Council	– Energy retrofits remain a complex issue for homeowners. The procedure of a ‘double check’ (technical and financial) may be seen as overly bureaucratic. – Requires good coordination among the bank, municipality and the energy agency and regular meetings
Recommendations: High quality and continuous marketing campaign
Next steps: – The Municipality is working on a project called Sustainable Condominiums that is directed at multi-residential buildings. The Municipality has signed a protocol with 5 ESCOs whereby they commit to performing energy audits on condominiums, developing and applying EPC contracting and creating a local network of building enterprises, tradespeople, designers and banks.

Need more details about this case study?

Comune di Parma
Settore Lavori Pubblici e Patrimonio
S.O. Sismica-Energetica
L.go Torello de Strada, 11/a – 43121,
Parma
ITALY
+39 0521 4 0521
www.comune.parma.it

Enzo BERTOLOTTI
e.bertolotti@comune.parma.it

Marco MORDACCI
m.mordacci@comune.parma.it