Green Finance Institute Spain (GFI) has announced the signing of the Life Grant Agreement to kick off the innovative GEAR UP project, aimed at enhancing the energy efficiency of large buildings through financing. This project is part of the European Union’s LIFE program and will be developed in consortium with Joule Assets Europe, New Energy Group, TNO, SEFA, JLL, Pinergy, and AUTH.
The initiative tackles the scarcity of financial resources allocated for optimizing energy consumption in large buildings. Its main innovation lies in viewing buildings as Distributed Energy Resources (DER) and financing the creation of a new source of efficient energy, thus establishing a long-term sustainable asset class that can be commercialized.
GEAR UP shifts the financial risk from the building owner to the facility manager, aligning the long-term interests of owners, tenants, developers, financiers, and energy marketers. In doing so, it offers an innovative solution to the current shortfall in financing for improving energy efficiency levels in large buildings.
Unlike complex Energy Performance Contracts, GEAR UP employs a financing structure well known in renewable energy projects, moving from a scheme of savings sharing and guarantees to a more mature Power Purchase Agreement (PPA) and energy leasing model.
The project’s core is a standardized dynamic measurement tool for the entire building, certifying energy savings as a new tradable asset called Efficiency Energy. This asset is calibratable, transparent, auditable, scalable, and economically viable to implement. Thus, Efficiency Energy is billed by the marketer to the building owner and can be passed as an operational expense (Opex) to tenants, solving the problem of the split incentive, a significant barrier in other financing structures for efficiency.
The GEAR UP structure ensures energy bill neutrality for both the owner and the building’s tenants, resulting in a more sustainable and healthy building. Tenants will not pay more than they would have if the building were not refurbished. The financier recovers its investment through the harvested and transacted Efficiency Energy, while the building owner can receive payments from the facility manager as energy rent, adding a new line of net operating income. The energy marketer does not lose billing volume and adds a new high-value service for its customers, increasing its retention and market penetration potential. Tenants, in turn, obtain a healthier and improved space at no additional cost compared to the situation before remodeling.
Eduardo Brunet, director of GFI Spain, stated, “From the Green Finance Institute, we are deeply proud to bring this solution to Spain, which has been implemented in the U.S. for over eight years and has achieved great success in the Americas. Considering the large number of buildings in Spain that are not energy sustainable and the challenges in initiating measures to address this, GEAR UP positions itself as a catalyst for making the built environment more sustainable and highlights the critical role green financing plays in this challenge.”