The deliverable 2.4, Report on bankability of the demonstrated innovations, was submitted by Officinae Verdi Group Spa (OV) and Research to Market Solutions (R2M) in December 2019. Following, the executive summary of the deliverable:
“This report details new business and investment models and concepts to create and operate Distributed Positive Energy Blocks (PEBs), with the objective of optimising the bankability of the required investments; it is connected to Task 2.7 “Optimize the bankability of the demonstrated innovations”. The content of this report represents the foundation for the further development and implementation of business and investment models, in the Lighthouse cities Limerick (WP4) and Trondheim (WP5) initially and in follower cities afterwards (WP6). The models conceptualised and developed in this work are also the starting point for business-related “Scaling-up, Replication and Exploitation” of the +CityxChange solutions (WP8).
The Deliverable starts with the “classical” description of the Bankability and its translation within the project framework.
Bankability of a (sub-)project is assessed as:
● the project is acceptable to or at a bank;
● the project is guaranteed to bring profit;
● the project future cash flows are acceptable to potential public and private lenders;
● the project assessment shows high probability of being successful after implementation and during its operational life-cycle.
Bankability concepts are then translated in the framework of the PEB establishment and of the operation of Local Energy Markets, assessed from the perspective of different stakeholders involved. Bankability optimisation strategies and procedures are investigated and proposed in terms of:
● investment de-risking, to reduce to a minimum the risk associated with investments required to establish and operate a PEB market;
● stakeholders acceptance and involvement, to m aximise acceptance of the proposed solutions and foster ownership of the innovations through engagement and co-design.
The conventional value chain of classic energy markets is reviewed in light of new opportunities, stakeholders, collaborations and technologies, leading to the definition of an innovative value chain for the DPEB implementation and the LEM operation, encompassing Engagement, Implementation, Operation, Delivery and Pricing.
Through support from and interaction with cities and industry partners delivering the innovations, the planned implementation of the proposed business models is investigated and reported. Starting from these exercises, cities-specific investment tasks T4.11 and T5.11 will move towards the optimisation of business practices and consequent optimisation of value creation and capturing. Effectiveness of business model is critical in order to make +CityxChange model profitable and attractive to public and private investors at international, national or local level, as identified in the mapping exercise carried out and reported in detail in the following of the report.
In particular the proposed “integrated investment model”, described in section 5 of this report and reported in the following figure, is expected to support +CityxChange in getting access to the necessary funding and financing sources, being them private capital or public funds; customised financing mix and bespoke investment models can be extrapolated from the integrated model, thus designing sub-models the meet the peculiarities of the different sub-projects as well as national and local scenarios. In each city involved in the project, local and global stakeholders together with new potential players in the local market are expected to share investments and financial risks, in a common effort towards the energy transition to a low-carbon future, considering sustainability aspects and their adaptation to different socio-economic contexts.
The model points to support market players in developing and adopting financial solutions to invest in energy infrastructure facilities and services. Public Authorities drive development policies by planning and sharing investments thus increasing social responsibility in all involved stakeholders. The role of the Community is to support and facilitate investments in PEB by the integration of innovative technologies and financial solutions. Main stakeholders that form “the Energy Community” in our integrated business model are: policymakers and public authorities; energy projects executing companies & ESCOs; private investors (real estate companies, banks, insurance institutes); citizens in both individual and associated forms.
The report ends with a Guidelines chapter which identifies seven milestones towards business and investments models implementation, throughout the process of setting up a PEB in lighthouse and follower cities and beyond.”