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Removing Barriers to Energy Efficiency Improvements in the State Sector in Belarus

Removing Barriers to Energy Efficiency Improvements in the State Sector in Belarus. Alexandre GREBENKOV UNDP/GEF Project Manager. The Project scope and objectives. Increase internal investments in EE projects in the state sector

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Removing Barriers to Energy Efficiency Improvements in the State Sector in Belarus

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  1. Removing Barriers to Energy Efficiency Improvementsin the State Sector in Belarus Alexandre GREBENKOV UNDP/GEF Project Manager

  2. The Project scope and objectives • Increase internal investments in EE projects in the state sector • Address the legal and regulatory barriers in order to provide incentives for state organizations and internal investors to invest in EE • Attract local investors and leverage loan funds for several EE projects in Belarus’ state sector • Provide sustainability and replication of the results of the Project • Catalyze investments of no less than USD 8 million in four pilot sites and assure GHG emission reduction of 350 ktCO2eq during 15 years • Create a pipeline of EE investments for implementation after project closure • Create an International Energy Centre in order to : • help raise EE investments and provide EE investment services, • develop the new EE projects pipeline • Elaborate a generic business framework • Disseminate knowledge and experience, also through the National EE Platform (NEEP)

  3. EE investment barriers • Low staff incentives: • no regulation on financial savings as a result of energy savings • grant funding does not provide motivation for other EE investments • energy norms are established on a basis of the level achieved • Businesses and banks in general are not directly interested: • relatively high marginal cost (> USD 500 per 1 t.c.e.) • disincentive tariff mechanisms • cross subsidizing (still in place) • limited foreign investments (by a factor of 10 less than for other EITs) • Lack of motivation on supply side • financial flows by activities are not transparent • tariffs are unfair for independent producers • No regulation for energy services, cogeneration, heat supply • High level of centralization. Need of mini-CHPs and «smart greed» • Lack of knowledge and experience in energy auditing, business planning and feasibility study for bankable proposals

  4. Results and lessons: incentives for EE investments • Application of energy norms to energy planning • norms are set up through established methodology • energy budgeting conducted through established methodology • norms are kept on a basis of the level achieved during previous year, and this does not provide any incentives • Introduction of settlement accounts for accruing of energy savings • not possible for it becomes at variance with State Budget Code • Incentives issued to staff • it does work but is not necessarily related with energy savings • otherwise, it becomes at variance with State Budget Code • Increasing share of loans over grants in EE financing • it depends on ownership type (in the state sector the State must behave as a unitary shareholder, especially in budgetary sector) • minimal help from Provisions on the Procedure of Financing Annual Regional and Republican Energy Saving Programmes (May, 2010)

  5. Results and lessons: attracting EE investors • Improving energy auditing standards • three 5-day training sessions of 60 specialists from different organizations • yet another similar training session is planned • extensive offline and online consultations is provided • Providing the Project’s partners with consulting and engineering services and capacity building: • express energy audits • suggested design solutions • business plans and feasibility studies • bankable proposals and loan applications • Investors attracted (BelVneshEconomBank, BelInvestBank) and USD 15.36 million engaged • USD 10.99 million of loan funds • USD 4.12 million of owners’ equity • USD 0.25 million of state loans

  6. Results and lessons: pilot EE projects • Investors like large projects – CHPs dominate • Pilot projects launched and currently under operation: • JSC “KrasnoselskStroymaterialy”: • conversion of the boiler house to mini-CHP of 4.86 MW • JSC “Keramica” (Vitebsk): • installation of 2.8 MW CHP with gas reciprocating engine • installation of variable frequency blow fans • replacement of liquid-packed ring vacuum pumps with oil pumps • installation of automated burners in furnaces • Ivatesevichi Town Utility: • replacement of pumps at the boiler house and the water supply point • installation of variable frequency drives at the water supply point • installation of temperature regulators for hot water supply • use of gas analyzer at boiler house to optimize combustion • JSC “BeriozaStroymaterialy”: • installation of 1.0 MW CHP with gas reciprocating engine • isolation of the furnace and installation of efficient furnace burners • GHG emission reduction of 30.0 thousand tCO2eq per year

  7. Results and lessons: International Energy Centre • The Energy Centre has been created as a CJSC, Sep 6, 2011 • Shareholders: JSC BelVneshEconomBank, JSC OboronProm, TAWI Consultant LTD • Such scheme (financial entities in ESCO) is more competitive • The Energy Centre will be further utilized as an important component of the Project to be used for • benchmarking typical cycles for EE projects and EE investments • sharing knowledge and experience with Project’s stakeholders • providing learning-by-doing • testing new EE investment schemes, e.g. through SPAs • assisting in developing EE investment project pipeline • raising investments

  8. Results and lessons: EE investment project pipeline • Lack of investment portfolio with good well grounded and well prepared projects • More than 40 new objects for EE projects are envisaged and 10 of them are being investigated (express auditing and business plans) to establish a new investment portfolio • As of June 2011, the pipeline consists of • power generation in mini-CHPs (17 sites) • waste heat utilization (5 sites) • energy efficiency in pump and compressor equipment (5 sites) • low/medium thermal potential utilization with large/medium capacity heat pumps (12 sites) • Investors (shareholders of the Energy Centre) committed USD 120 million to be invested in the new project pipeline • At least three new objects are to be prepared for EE investment of not less than USD 10 million as per the Project’s target

  9. Conclusion (recommendations) • Help introduce incentives based on economical instruments • tax and tariff policy, subsidies, effective energy norms (and fix them during payback period at least) • support from public funds under special development programmes • Enhance project cycle and quality of bankable proposals • Provide guidelines on generic business framework • EE project cycle and EE investment cycle, including business planning, preparation of feasibility studies, bankable proposals, loan application • Improve regulations on a basis of the best ESCO practices and SPA experience • Help introduce the SPA, ESCO and other similar schemes • Link with UNDP/GEF projects on EE in buildings and EC project on energy policy • Incorporate EE projects in national carbon market (assist in preparing the Climate Change Law and secondary regulations) • Raising awareness and knowledge transfer through the NEEP

  10. Thank you for your attention тел.: (+37529) 685-2338 alexandre.grebenkov@undp.by

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