Local Energy Renovation Platform

Bordeaux Metropole has taken a holistic approach to renovation. Awareness raising, technical support and financial incentives targeting homeowners are all provided via a Local Energy Renovation Platform. The Platform provides technical and financial support to homeowners and stimulates the market by connecting banks and contractors with homeowners.

The objective of the Bordeaux Metropole Climate Plan is to renovate 2,000 private and 1,000 social housing units per year. The Metropole encourages the completion of extensive energy renovation work in order to meet low energy building standards (maximum consumption of primary energy is set at 50 kWh/m² per year).

The issue

Lack of attractive financing for homeowners with low to medium incomes

In France, homeowners who wish to renovate their homes have access to the following financial sources:

• Commercial banks offer two types of loans to finance energy efficiency renovation in the housing sector:

– A consumer loan usually has a maturity of 7 – 10 years and
relatively high interest rates (compared to a mortgage). Average consumer loan interest rate was 3.83% in September 2016.

– A mortgage can include energy renovation costs when purchasing the property. The interest rate is lower and maturity longer which is more attractive for homeowners. The average mortgage interest rate was 1.68% in September 2016.

• The national government offers a 0% Eco-loan (Eco-PTZ), however, its uptake is quite low due to two major barriers. First, banks are expected to validate the technical feasibility of the renovation projects which is not their ‘core business’ and the whole administrative procedure linked to issuing loans is very complex. Consequently, banks are not encouraged to actively promote this product to their clients. Second, construction companies and craftsmen are required to issue detailed invoices (e.g. type of materials used, expected energy savings) to be eligible under the financing scheme which is not in line with their standard procedures.At the national level, two other financial and fiscal incentives are also available – the so-called ‘Energy Efficiency Certificates’ and tax credits
  However, existing subsidies, incentives and loans reach their limits when households decide to carry out ambitious energy renovation work which significantly increases the costs. Bordeaux Metropole carried out a market study which revealed that 44% of housing units (154,000) are owner-occupied. Out of the 154,000 households, nearly 90% would be eligible for a commercial bank loan according to the existing standard bank rules if they aimed to achieve 25% energy savings. However, only 68% of homeowners would be eligible for a bank loan if they wanted to carry out extensive energy renovation. Low income households in particular would be excluded. Homeowners with low to medium incomes lack attractive low cost financing for their projects.

Fuel poverty and lack of upfront financing for very low income households

Out of the 154,000 targeted housing units, approximately 1,000 are very low income households who could in fact finance extensive energy renovation work through the subsidies for which they are eligible (there is a wide range of subsidies in France for low and very low income households which are not cited here). In spite of this significant financial support, they cannot have the work done because they are unable to pay the contractors in advance. Indeed, subsidies are only reimbursed once the work is finalised and approved.

Upfront financing is the main problem for this target group.

Solution

In order to create a critical mass of renovation projects that can be showcased as good practice, Bordeaux Metropole decided to focus first on the owner-occupied residential buildings. It was assumed that this target group would be easier to convince about the benefits of carrying out energy-efficiency renovation work. One of the key decisions was also to take a holistic approach to renovation work and provide financial and technical support to homeowners while involving and coordinating all key stakeholders. Finally, Bordeaux Metropole realised that one product will not fit all households which led to the development of tailor-made products for low to medium income households and for very low income households. Bordeaux Metropole:– Has built partnerships with commercial banks in order to stimulate the uptake of the national 0% Eco-loan and to develop and promote low interest ‘energy renovation loans’:Bordeaux Metropole has taken a holistic approach to renovation. Awareness raising, technical support and financial incentives targeting homeowners are all provided via a Local Energy Renovation Platform.

The Platform provides technical and financial support to homeowners and stimulates the market by connecting banks and contractors with homeowners. The Platform stimulates the uptake of the 0% Eco-loan: independent energy advisors help homeowners develop technically feasible projects eligible for the Eco-loan that do not need to be checked by the banks. The Platform also provides a list of craftsmen certified within the framework of a national quality certification scheme ‘RGE’ or a quality charter developed by the Metropole.

Finally, Bordeaux Metropole has established partnerships with a limited number of banks who have become official partners of the Platform. They agree to provide specific ‘energy renovation loans’ with lower interest rates to homeowners. All partner banks promote their products on the Platform which boosts competition.

– Has set up a ‘Subsidy advance payment fund’ which will advance money to contractors who carry out energy retrofit work in order to help out low and very low income households.

Business Model

Low interest energy renovation loans:Bordeaux Metropole does not subsidise low interest loans offered by local banks and does not pay any administration fees for their management. These are managed in full by the partner banks which determine homeowners’ eligibility criteria based on their creditworthiness. The Metropole has not set up any guarantee fund to cover any non-payments by homeowners. The entire risk is born by the partner banks.

Subsidy Advance Payment Fund

Bordeaux Metropole signed an agreement with two partners – Crédit Municipal (local public bank) and InCité (local public-private company) to jointly set up a ‘Subsidy advance payment fund’. The agreement states that:

– Crédit Municipal pays in advance for renovation work directly to craftsmen/companies.– Homeowners authorise InCité to collect subsidies on their behalf (no grants are channelled through the owners) which are then paid to Crédit Municipal.

– Bordeaux Metropole pays a fixed management fee of 3% for advanced payments paid by Crédit Municipal.