Transcript Financing For Renewable Energy And Energy Efficiency Projects
World Bank Approach to Financing Heating Infrastructure – Europe and Central Asia (ECA) Region
Presentation at Conference on Heating Sector Institutional Reform in the FSU Baku, October 21, 2005
Typical Approaches to Heating Sector Improvements Institutional reform, pricing, subsidy restructuring Supply-side upgrades, system conversions Demand-side improvements through financial intermediation and/or energy service company (ESCO) models
World Bank Study – Coping with the Cold Survey data from Armenia, Croatia, Kyrgyz Republic, Latvia, Lithuania, Moldova and Tajikistan Study focused on both district heating and individual solutions based on electricity, fossil fuels and fuelwood Included willingness-to-pay surveys in several countries
Coping with the Cold, Challenges
Inability to regulate individual demand in DH systems. Over- and under-heating is frequent Heating infrastructure is deteriorating due to under-investment and mismanagement Low collection rates - unable to disconnect non-payers Many networks fully or partly abandoned Consumers substitute with dirty energy
Coping with the Cold, Poor vs. Non-Poor Non-poor people spend $30-50 per year on heat Poor people spend $25-40 per year on heat The non-poor has better quality of heating with fewer adverse health consequences poor people’s heat demand is quite unelastic – this means that if DH prices go up and they can not control demand, they cannot and will not pay for service
Coping with the Cold – Conclusions (1) Heating systems should only be modernized in high-density areas where DH is cost competitive Block heating and building-level solutions based on natural gas may be feasible if home owners can organize themselves Targeted subsidies may be needed to avoid welfare losses for the poorest DH costumers if tariffs become cost-reflective
Coping with the Cold – Conclusions (2) Policies and investment framework must allow poor people to opt in or out Targeted vouchers for equipment and possibly fuel may be promising instruments In bigger networks lifeline tariffs can be effective Targeted subsidies may be needed to avoid welfare losses for the poorest DH costumers if tariffs become cost-reflective Network investments must be coupled with metering and control options
Ongoing WB EE Projects in CEE
Lithuania (GEF) Poland (IBRD and GEF) Croatia (IBRD and GEF) Romania (GEF) Bulgaria (GEF) ESMAP project in Poland
Lithuania Heat Demand Management Project Project launch: 2003 $6.5 million: VE $2.5m and VCM $4.0m
VE Component (Dalkia): Heat regulation improvements. 75% support from Effective Energy Consumption Fund. Total planned investment: $34m. VCM Component: Building envelope improvement through revolving fund with international fund manager
Poland EE Projects (1)
Krakow EE Project (launched 2002)
Recipient: MPEC, Krakow $15 million IBRD loan, of which $7.5 million for ESCO activities Operation of utility based ESCO (POE) as subsidiary of MPEC Targets public sector buildings in Malapolskie Region
Poland EE Projects (2)
Poland EE Project (launched spring 2005)
Recipient: BGK bank and POE, Krakow $11 million GEF Grant: $7 million for guarantee facility, $2 million for POE ESCO investments, $2 million for TA Work through participating banks, guarantee coverage: 50-70% Active pipeline development and support to energy audits.
Romania Energy Efficiency Fund
Launched 2003 GEF Grant of $10 million: $8m for EE investments and $2m for TA International Fund Manager Debt financing only (co-financing) Targets direct financing as well as TPF through ESCOs
Bulgaria Energy Efficiency Fund
Launched Summer 2005 GEF grant of $10 million: $4.5m partial credit guarantee, $4.0m debt financing, $1.5m TA Co-financed by $1.8 million from GoB and $5.75 million from bilateral donors (tbc).
Fund will be flexible employing debt finance or guarantees as needed International Fund Manager
Russia Municipal Heating Project
$85m IBRD loan onlent to 5-9 city governments General system rehabilitation Investment support, TA and institutional support Trend towards introducing building-level substations Private or quasi-private operators have replaced municipal companies in a few cases Project is ongoing and completion is expected by end of 2007