Funding for renewable energy and energy efficiency Peep Mardiste

Energy consumption in relation to GDP (tons of oil equivalents per 1 million Euro) Denmark123 Germany165 Sweden224 Finland272 Poland650 Latvia759 Estonia1156 Lithuania1273 Opportunity for climate: lowering energy intensity of economies

Which investment priorities?

in Russia the technical energy saving potential is % of total energy consumption EU has in average more than 20% saving potential in EU buildings account for 40% of total energy consumption in EU buildings have 27% energy saving potential by 2020 (which would decrease EU energy consumption by 11%) in reducing the energy use in buildings, insulation is key (accounts for 78% of reduction potential) insulation on pitched roof need ~30 EUR/m² investment, annual energy saving ~7.5 EUR/m² payback time is 4 years Potential priority for funding: energy saving in households?

1.4 million inhabitants 1.1 million live in housing co-operatives current energy use ~250 kWh / m² / year simple repair can achieve ~50 kWh / m² / year: - insulation of walls - using of windows which keep warm - using proper ventilation - enabling to adjust temperature in radiators - replace incandescent lightbulbs with energy saving lamps - using solar panels for heating of water in Summer cost of repair ~200 EUR / m² In 10 years total investment in Estonia: 6 billion EUR (= energy bills of households in 20 years) Financial need: state guarantees + international fund (potential EU Climate Fund ) Example of needs in housing sector: Estonia

Energy saving potential in housing

EU Directive 2002/91/EC on energy performance of buildings (EPBD) Green Paper on Energy Efficiency Action Plan for Energy Efficiency More ambition needed in EPBD: abolish current 1000 m² threshold for major renovations establish minimum performance requirements for buildings Commission shall push all Member States to have very low- energy (or zero-net energy) standards by 2015 Member States shall ensure that financing, subsidies and incentives are in place to allow rapid implementation of proven available energy efficiency improvements (especially in existing buildings) EU framework for energy saving in households

Financial sources available in the Baltic Sea region

Funds and programmes of the European Union: Baltic Sea Region Programme Competitiveness and Innovation Programme Interreg IVB and Interreg IVC JESSICA and JEREMIE Seventh Framework Programme Structural Funds Financial sources for renewable energy and energy efficiency, 1

Other financial instruments: EU-Russia cooperation funds European Bank for Reconstruction and Development (EBRD) European Investment Bank (EIB) Council of Europe Development Bank Global Energy Efficiency and Renewable Energy Fund (GEEREF) Nordic Investment Bank (NIB) Nordic Environmental Finance Corporation (NEFCO) Financial sources for renewable energy and energy efficiency, 2

Availability of funds in countries RUSEELVLTPLDEDKSENOFI EU: Baltic Sea Region Programme GGGGGGGGGG EU: Competitiveness and Innovation Programme GGGGGGGGG EU: Interreg IVBGGGG EU: Interreg IVCGGGGGGGGG EU: JESSICA and JEREMIEL,E EU: Seventh Framework Programme GGGGGGGGGG EU: Structural FundsGGGGGGGG EU-Russia cooperation funds L,G EIBLLLLLLLLLL EBRDL,E NIBLLLLLLLLLL NEFCOL,E

Baltic Sea Region Programme built on earlier experience of Interreg IIC and Interreg IIIB under European Territorial Cooperation Objective and European Neighbourhood and Parthership Instrument total budget of 237 million EUR mostly targeted at territorial cohesion and cross-border cooperation transnationally relevant innovations in SMEs such as promotion and transfer of knowledge in alternative and renewable energy management patterns, environmentally sound and eco-efficient technology target of financing: - 5 renewable energy projects (worth of total some 8 mEUR) - 3 energy efficiency projects (worth of some 4 mEUR) EU: Baltic Sea Region Programme

main framework for EU funding for projects in Russia consists of Annual Action Programmes under the European Neighbourhood and Partnership Instrument (ENPI) - EU-Russia Energy Technology Centre: support in preparation of bankable projects in the energy sector and providing technical assistance for project proposals, feasibility studies and other papers on energy efficiency Northern Dimension Environmental Program (NDEP) - started in 2001, 2.4 billion EUR pipeline of projects - international framework for financing priority environmental projects in north-west Russia - combines resources from EC, EIB, EBRD, NIB, World Bank and Russian Federation - energy efficiency is eligible (district heating Kaliningrad, Murmanks) EU-Russia cooperation funds

36% of the EU budget strategic guidelines lists energy efficiency and renewable energy as one of the 12 priorities de-centralised through some 450 national and regional Operational Programmes (OPs) estimated 4.8 billion EUR for renewable energies and 4.2 billion EUR for energy efficiency just some 2.6% of total Structural Funds budget (up from 1.6% in ) mixed ambition in Member States: over 5% in Lithuania, some 1.7% in Poland EU: Structural Funds

Percentage of total Structural Funds assigned for sustainable energy in Central and Eastern Europe (draft!) EU: Structural Funds

operates in Russia, Estonia, Latvia, Lithuania, Poland the only international financial institution (IFI) with a specialized energy efficiency team target to lend or invest a total 1 billion EUR in energy efficiency and renewable energy projects in loans to projects of a significant scale which save energy supports energy service companies’ (ESCO) projects which target social facilities, such as schools or hospitals loans for rehabilitation of district heating infrastructure European Bank for Reconstruction and Development (EBRD)

While carrying out in 2010 a mid-term review of use of EU Structural Funds for the Commission and Member States shall indicate the share of projects implemented in sectors of energy efficiency and renewable energy and if needed, increase relevant allocations. While drafting and negotiating the Regulation for use of EU Structural Funds for earmarking of certain percentage of funds in all eligible regions for energy efficiency and renewable energy projects shall be considered. Draft recommendations: EU Structural Funds

 In context of Baltic Sea region it’s important that EU continues and increases support to energy efficiency initiatives in Russia within ENPI. Individual EU member states from Baltic Sea region could also consider earmarking additional funds for concrete partnerships on energy efficiency such as EU-Russia Energy Technology Centre. Draft recommendations: EU-Russia cooperation funds

EBRD shall revise its energy policy to ensure emphasis on energy efficiency and set up gradually increasing targets for investments into energy efficiency, reaching for example earmarking of 50% of all lending in the power sector to increasing energy efficiency. EBRD shall revise its energy policy in order to set up targets for the financing of renewable energy projects, for example allocating 50% of all lending in the power sector in current or future EU Member States to renewable energy. Prior to the approval of any project, EBRD shall review related energy efficiency issues and ensure that an energy audit is undertaken. Draft recommendations: EBRD

While Bank lends typically up to 50% of the project costs it shall consider adopting a policy of increasing its share of financing in case of renewable energy and energy efficiency projects to 80% or 90%. Prior to the approval of any project, NIB shall review related of energy efficiency issues and ensure that an energy audit is undertaken. Draft recommendations: NIB