The European Investment Bank released a case study on Residential energy efficiency financial instruments in Lithuania. The Jessica II fund of funds was set up by Lithuania’s Ministry of Finance and Ministry of Environment early in the ERDF 2014-2020 programming period to fund loans to support investment in energy efficiency in apartment block buildings in Lithuania. It followed the successful implementation of financial instruments in the sector during the previous programming period under the JESSICA initiative.
WHAT IS THE JESSICA INITIATIVE?
JESSICA stands for Joint European Support for Sustainable Investment in City Areas. This initiative is being developed by the European Commission and the European Investment Bank (EIB), in collaboration with the Council of Europe Development Bank (CEB). Under new procedures, Member States are being given the option of using some of their EU grant funding, their so-called Structural Funds, to make repayable investments in projects forming part of an integrated plan for sustainable urban development. These investments, which may take the form of equity, loans and/or guarantees, are delivered to projects via Urban Development Funds and, if required, Holding Funds (more information here).
The financial instruments have supported the development of a single product for homeowners known as the ‘Modernisation Loan’ which forms the centrepiece of the Lithuanian government’s programme to improve energy efficiency in residential properties. The Modernisation Loan programme is also supported by a programme of capital and technical assistance grants and a ‘one stop shop’ service arrangement that has been key to the successful delivery of the financial instrument. The success of these initial loan financial instruments has led to the subsequent development, during the period, of the Lithuanian Leveraged Fund, with loan and guarantee instruments that use ERDF and aim to attract even more financial support from banks and a number of International Financial Institutions (IFIs), including the European Investment Bank (EIB).
The funf of funds is managed by the EIB and aims to mobilise more than 700 million of private finance to invest in measures to improve the energy efficiency of privately owned apartment blocks in the country, which make up aproximately 66% of the housing in Lithuania.
It provides low cost, long term and low interest loans without asking for a deposit or collateral. Owners can then finance the replacement of doors, windows, exterior cladding an install more efficient heating system. All this process is managed by a Lithuanian fovernment agency in a one-stop-shop to create an easy access for owners.
The success of the energy efficiency financial instruments in Lithuania can largely be attributed to the fact that they are implemented in combination with grants, both in the form of technical assistance, interest rate subsidies to lower the cost of borrowing for households and as capital rebates to lower the cost of renovation.