Energy efficiency finance ‘becoming established market segment’ says report

Out-Law News | 10 Oct 2014 | 10:11 am | 1 min. read

The global energy efficiency market is worth at least $315 billion a year and growing, according to a new report from the International Energy Agency (IEA).

The Energy Efficiency Market Report 2014 said there is “huge potential for energy efficiency” in emerging economies outside the countries of the Organisation for Economic Co-operation and Development, with efficient vehicles and transport infrastructure among opportunities for investment.

According to the report, energy efficiency finance is “becoming an established market segment, with innovative new products and standards helping to overcome risks and bringing stability and confidence to the market”.

IEA executive director Maria van der Hoeven said: “Energy efficiency is the invisible powerhouse in IEA countries and beyond, working behind the scenes to improve our energy security, lower our energy bills and move us closer to reaching our climate goals.”

Van der Hoeven said: “Energy efficiency is moving from a niche interest to an established market segment with increasing interest from institutional lenders and investors. As energy efficiency is essential to meeting our climate goals while supporting economic growth, the increasing use of finance is a welcome development. To fully expand this market, initiatives to continue to reduce barriers will need to strengthen.”

The IEA estimated that energy efficiency “can reduce up to $190 billion in fuel costs in transport globally by 2020 and can help alleviate local air pollution and even address critical congestion issues in rapidly developing urban transport systems”.

According to the IEA, some 40% of the global energy efficiency market is financed with debt and equity, “meaning that the financial market for energy efficiency is in the range of $120bn per year”.

The IEA said: “The number of products and the volume of finance have greatly expanded in recent years, with green bonds, corporate green bonds, energy performance contracts, private commitments, carbon and climate finance, and multilateral development banks and bilateral banks all offering expanded sources of finance for energy efficiency improvements”.

The IEA said bilateral and multilateral lending alone amounted to more than U$22bn in 2012.

A report by the US-based Wold Policy Institute, published last August, said “increased energy efficiency allows existing and new infrastructure to reach more people by freeing up capital resources to invest modern energy services”.