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Leasing enables a building owner to use a renewable energy installation without having to buy it. The installation is owned or invested in by another party, usually a financial institution such as a bank. The building owner pays a periodic lease payment to that party.
This business model consisting in leasing Renewable Energy Technologies (RET) offers new opportunity for building owners to use RET without having to make an upfront investment. It is applicable to large scale equipment in commercial buildings and in some cases to small-scale devices for private home owners, for instance RET such as photovoltaics. The opportunity to lease equipment may be part of an energy services package offered by an Energy Service Company (ESCO), but may also be offered on its own, especially in the case of individual residential customers. In addition to RET, leasing may be available for energy equipment and installations like condensing boilers, small and micro-CHP systems.
Generally, the actor who offers the lease (i.e. the lessor) remains owner of the asset during the lease period. However, several types of leasing are possible, which differ in ownership and other economic, legal and fiscal conditions. There are two main types of leases: operational lease (or operating lease, usually treating as renting) and financial lease (or capital lease, usually treated as a loan. In that case, there is a an ownership transfer option at the end of the lease period).
Leasing can be a central component of the business model of an ESCO having limited own capital (and therefore limited access to debt), which in this case may lease equipment from a financial institution. The ESCO then installs the equipment at the premises of its customers as part of the services that it offers. However, building owners may also finance RET via leasing without the involvement of an ESCO.
Leasing can also be a central component of the business model of a company that introduces a specific new technology to the market. Company providing the technology can offer it to property owners via a leasing arrangement, including a service and maintenance package.
In brief, the different scenarios can be illustrated as follow:
- A bank acts as the lessor of RE equipment. The building owner leases – for instance – a solar water heater directly from a bank, which owns the equipment. In exchange the building owner pays a periodic lease rate during the contract period which includes a lease instalment and interest share:
- An ESCO undertakes the negotiations with the financial institution, provides additional services to the building owner and acts as the tenant of the equipment, which is still owned by the financial institution. The advantage of the involvement of an ESCO is that the ESCO can act as a facilitator:
- A provider of a specific technology, such as a micro-CHP system, leases the system to private or commercial customers. This approach is mostly used by companies who want to bring a new technology into the market, and must compete against established technologies, traditional institutional areas of influence and potentially long supply chains to individual customers. The technology provider usually also provides operation and maintenance services for the equipment:
Leasing is however not frequently used for RET (and even less for EE solutions). One reason for this is that not all RET can be leased. Generally, any equipment totally integrated in a building has to be owned by the building owner. If installed technologies become part of the building, an operational lease is impossible because for this type of lease the ownership has to remain with the lessor. Another reason is that regulation usually requires that after the leasing period, an asset can be reused in reasonable state at a different time and place. This criteria is referred to as ‘fungibility’. RET systems such as soil or water-based heat pumps do not meet this criteria as the complete system cannot be removed without substantial damage. Similarly building insulation, which is often a very suitable energy efficiency measure, cannot be removed after the end of the lease term.
The renovation of Torrelago district was implemented in the framework of the FP7 funded CITyFiED project (http://www.cityfied.eu/) .
Torrelago district involves 31 private multi-property residential buildings (1488 dwellings) that were constructed in the 1970s–1980s, more than 140,000 m2 and 4000residents involved. Former conditions of the district were very low in terms of efficiency, comfort and costs, which fostered the intervention. Main energy measures implemented at the building scale are buildings external insulation (Composite System-ETICS, ventilated façade), connection to district heating (twelve new heat exchange substations at building level), individual metering to raise users’ awareness.
The E2VENT system directly targets a special typology that correspond to suburban multi-storey residential buildings built in the 60’s 70’s that are characterized by a high energy consumption, bad air quality due to the lack of air renewal motorized system, and with low architectural interest. To tackle all those problems with one refurbishment strategy, E2VENT offers an innovative yet simple modular and adaptable system.
The E2VENT system is an external thermal building refurbishment solution with external cladding and air cavity that embeds different breakthrough technologies that will ensure its high efficiency:
- A Smart Modular Heat Recovery Ventilation (SMHRV) for the air renewal allows the heat recovery from the extracted air using a double flux exchanger. Indoor Air Quality is ensured while limiting the energy losses.
- A Latent Heat Thermal Energy Storage (LHTES) based on phase change materials provides a heat storage system for heating and cooling peak saving.
- A smart management that controls the system on a real time basis targeting optimal performances
- An efficient anchoring system that limits thermal bridges and allows an easy and durable installation.
To know more: http://systems.e2vent.eu/
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