Energy renovation of residential buildings through soft loans and third-party financing

Location: Parma, Italy

Population: 198,292 (city population)

Climate: Humid

Duration: 2016 – 2020

Sector: Buildings

Funding sources: Private

City networks: Covenant of Mayors

Savings: N/A

Solutions: An attractive financial scheme composed of soft loans.

Multiple benefits: Low-interest loans to homeowners as well as technical guidance.

The housing stock in Parma is responsible for more than 32% of CO2 emissions. The municipal council has opted to concentrate its efforts on residential buildings, which account for more than 70% of the total building stock.

Objective – Provide a more attractive financial tool to increase homeowners’ low awareness and confidence in energy retrofits.

Solutions – The municipality of Parma is working to increase awareness, give technical assistance, and provide alternative funding options to its residents through the following activities:

1) In collaboration with a local bank, developed a soft loan financing system. The municipality established a financing scheme with the Cassa di Risparmio di Parma e Piacenza (Bank Cariparma – Crédit Agricole). It offers low-interest loans to homeowners of single-family homes and condominiums who want to improve energy efficiency and renewable energy use in their homes.

The loan conditions were as follows: 1) Loan Amount: max €50,000; 2) Maturity: 5 to 10 years; 3) Interest rate: Variable interest rate; Euribor (3 months) + 2.9%; 4) Guarantee: Not required. The Energy Agency ensures the money is used for energy retrofits and not for another purpose;

2) Establish a partnership with the Parma Energy Agency, which aims to inform homeowners and provide technical support. The Parma Energy Agency, founded by the Municipality of Parma, assists homeowners with the technical and financial aspects of their energy retrofit projects and the selection of artisans, and the execution of energy-saving measures.

The municipality’s and the independent local energy agency’s involvement gives the energy renovation program and the soft loan scheme more significance and legitimacy.

Funding – According to the collaboration agreement, Bank Cariparma – Crédit Agricole will allocate €20 million to a soft loan until 2020 and actively promote the loan. The agreement contains the Municipality’s and the Bank’s promises and the criteria for qualified recipients and loan terms (amount, maturity, interest rate). The collaboration and standard procedures between the Municipality, the Bank, and the Energy Agency are specified in another document called a “protocol.”

Innovation – There is no similar financial product with such advantageous terms on the market. With the low-interest rate, energy savings, and tax deduction, the investments quickly pay for themselves.

Success factors

• The business models typology involving the three main parties: Parma Municipality, the Bank Cariparma – Crédit Agricole and Parma Energy Agency, providing technical guidance;
• Financing scheme highlights – strong points:
• Management by the bank, resulting in reduced bureaucracy for the municipality;
• Impartial technical check made by the Energy Agency;
• The involvement of the municipality in this project enhances citizen trust;
• Contribution to the city’s energy transition strategy approved by the City Council.

Significant outcomes:

• The bank, the municipality, and the agency meet every six months to review the results and procedures. However, no data is displayed on how are the impacts of the financial scheme;
• The municipality is embarking on a multi-residential development project named Sustainable Condominiums. To execute energy assessments on condominiums, develop and use EPC contracts, and create a local network of construction enterprises, tradespeople, designers, and banks.

Synergies with local policies:

• Parma’s Climate Plan sets the goal to achieve carbon neutrality in the Province of Parma by 2030. Two measures in Parma’s Climate Plan involve energy retrofits. The first involves renovating 1,000 condos. This measure could save 4,500 tons of CO2 by 2020 (source).

Political alignment:

• National Energy Strategy 2017, sets a 10-year strategy to make the national energy system more competitive, more sustainable, and more secure;
• Integrated National Energy and Climate Plan (ENCP). One of the main pillars of the ENCP is energy efficiency, where Italy aims to reduce 43% for primary and 39.7% for final energy consumption. The most significant energy efficiency improvements would come from tax incentives to encourage building stock refurbishment (source);
• Ecobonus scheme. In 2020, Italy launched the Ecobonus scheme, which allows recovery, through a preferential fiscal treatment, of 110% of the cost for improving the energy efficiency of buildings incurred up to June 30, 2022 (source).

Marketability: N/A