Energy Efficiency Partners in Romania

1

• Energy Efficiency Partners in Romania
• A joint presentation by
• ARCE and UNDP/GEF
• First European Energy Management Conference
• Milan, Italy
• 23-24 November 2005

Laura Radulescu Outreach Manager UNDP/GEF
Capacity Bulding for GHG Emissions
Reduction through Energy Efficiency www.energie.
undp.ro
Eduard Pungaru Head of Iasi Branch Romanian
Agency for Energy Conservation www.arceonline.ro
2
ARCE and UNDP/GEF - Energy Efficiency Partners
in Romania -

• Todays joint presentation introduces

3
ARCE and UNDP/GEF - Energy Efficiency Partners
in Romania -

• Todays joint presentation introduces
• The Romanian Agency For Energy Conservation
• - its mission, activities and Energy
  Management Programme
• The UNDP/GEF Energy Efficiency Financing Team
• - who work closely with ARCE to leverage new
  energy efficiency investment in Romania

4

• So lets begin

5

• Todays joint presentation introduces
• The Romanian Agency For Energy Conservation
• - its mission, activities and Energy
  Management Programme
• The UNDP/GEF Energy Efficiency Financing Team
• - who work closely with ARCE to leverage new
  energy efficiency investment in Romania

6
Ministry of Economy and CommerceRomanian Agency
for Energy Conservation

• ARCE is a specialised governmental agency with a
  clear role and a clear mission...
• Implement the National Strategy for Energy
  Efficiency
• - as described in Government Decision
  no. 163/2004
• Promote Renewable Energy
• Adhere to the principles of Sustainable
  Development
• Pay special attention to Environmental Protection
• Lower primary energy
• intensity by 40 over
• the period 2004-2015
• through cost-effective
• savings

Potential for cost-effective savings
7
Romanian Agency for Energy Conservation

• Legal status, budget and powers enable ARCE to
  carry out its mission
• Governmental agency under the umbrella of the
  Ministry of Economy and Commerce
• Operational, organizational and financial
  autonomy
• HQ in Bucharest, with branches throughout Romania
• Wide responsibilities and powers that are defined
  in the Law for the Rational Use of Energy
• - Law no. 199/2000, amended 2002

8
Romanian Agency for Energy Conservation

• Day-to-day activities reflect ARCEs role,
  mission, legal status and budget
• Information, awareness
• - www.arceonline.ro, campaigns etc.
• Communication, dissemination
• - mass media, events
• Training and certification
• Representing Romania in EE and RE programmes
• Drafting legislation
• - Primary and secondary
• Implementing The Energy Management Programme (EMP)

9
Romanian Agency for Energy Conservation

• Five elements of The Energy Management Programme
  (EMP) are highlighted
• EMP 1. Private sector energy audits
• EMP 2. Public sector audits and energy plans
• EMP 3. Training of energy auditors and managers
• EMP 4. Licensing of energy auditor and managers
• EMP 5. Local workshops on how to comply with EE
  legislation
• EMP 6. Direct investment in industrial energy
  efficiency
• EMP 7. Direct investment in municipal energy
  efficiency
• EMP 8. Direct investment in renewable energy

10
Romanian Agency for Energy Conservation

• EMP 1
• Private sector energy consumers have clear legal
  obligations
• Large companies must carry out Energy Audits
• - Large fuel/power/consumption of
  200 toe/year
• - 215 companies fall into this category
• Very large companies must appoint Energy Managers
• - Very Large consumption of 1,000
  toe/year
• - 510 companies fall into this category
• ARCE regulates, and monitors compliance
• - All energy auditors and managers are
  certified by ARCE

11
Romanian Agency for Energy Conservation

• EMP 2
• Public sector entities also have energy
  efficiency obligations
• Large local authorities require Energy Efficiency
  plans
• - Large 20.000 inhabitants. ( gt
  110 localities)
• Large public buildings energy audits every five
  years
• - Large with an area of 1,500 m2

12
Romanian Agency for Energy Conservation

• EMP 3
• Energy Managers and Auditors are trained by
  Technical Universities approved by ARCE

Suceava
Oradea
Iasi
Cluj-Napoca
Brasov
Galati
Timisoara
Bucharest
Constanta
Craiova
13
Romanian Agency for Energy Conservation

• EMP 4
• Energy Auditors and Energy Managers are licensed
  by ARCE
• 141 licensed Energy Auditors and Energy Managers
  so far, of which
• - 104 auditors are individual experts
  (natural persons)
• - 8 auditors are companies/instituti
  ons (legal persons)
• - 29 Energy Managers so far
• ARCE is working towards growing these numbers
• - To increase the pool of certified
  experts
• - To enable full national compliance
  with the law

14
Romanian Agency for Energy Conservation

• EMP 5
• ALEE workshops are raising awareness, and hence
  compliance with EE legislation
• Application of Legislation in the field of
  Energy Efficiency ALEE
• - 63 workshops so far, throughout
  Romania
• - Create awareness of the law
• - Provide practical information on how
  to comply
• Target groups
• - gt875 industrial operators
• - gt680 municipalities and public
  utilities

15
Romanian Agency for Energy Conservation

• EMP 6, 7 and 8
• ARCE is also closely involved in investment
• Helps industry to prioritise energy efficiency
  projects
• Managed the Government of Romanias programme of
  Direct Subsidies towards public sector investment
  (2003 and 2004)
• - for energy efficiency
• - for renewable energy
• Participates in other energy efficiency and
  renewable energy investment activities... such as
  that of UNDP/GEF

16
Romanian Agency for Energy Conservation

• EMP 6
• Industrial EE investment priorities
• Modernisation of technological processes by
  introducing highly energy efficient installations
  and equipment
• Extension of recovering and use of secondary
  energy resources
• Promotion of small and medium size cogeneration
• Development of industrial sectors with high added
  value and small energy consumption

17
Romanian Agency for Energy Conservation

• EMP 7
• Municipal EE investment priorities
• Thermal rehabilitation of buildings
• Rehabilitation of Local and District Heating
  systems
• Metering
• - Heat meters and controllers
• - Level thermostat valves
• - Heat cost allocators)
• Public lighting
• - Outdoor and indoor
• Modernisation of potable water systems

18
Romanian Agency for Energy Conservation

• EMP 8
• Renewable investment priorities
• Wind energy for local electricity generation
• Solar energy for heating and sanitary hot water
• Biomass heat plants
• Geothermal energy for heating and hot water
• Biomass heat plants
• Heat pumps for domestic and industrial
  applications
• Solar energy for heating and sanitary hot water
• PV Panels for local public outdoor lighting

19
Romanian Agency for Energy Conservation

www.arceonline.ro provides more information on
all the above
20
Romanian Agency for Energy Conservation

• And now to introduce Laura Radulescu from
  UNDP/GEF...
• Multilateral and bilateral agencies and donors
  regularly carry out EE and RE projects and
  programmes in Romania
• - With ARCE representing the Government
  of Romania.
• Part 2 of todays presentation describes the
  UNDP/GEF project Capacity Building for GHG
  Emissions Reduction through Energy Efficiency in
  Romania
• - which provides an excellent example
  of a successful partnership between the
  international community and ARCE

21

• Todays joint presentation introduces
• The Romanian Agency For Energy Conservation
• - its mission, activities and Energy
  Management Programme
• The UNDP/GEF Energy Efficiency Financing Team
• - who work closely with ARCE to leverage new
  energy efficiency investment in Romania

22
Capacity Building for GHG Emissions Reduction
through Energy Efficiency in Romania

• Four partners - ARCE, UNOPS, UNDP and GEF
• Romanian Agency for Energy Conservation -
  Governmental partner
• UNOPS - Executing agency
• UNDP - Implementing agency
• GEF - Main financier (2 million)
• launched the EE Financing Project in 2003
• Recruited a Project Manager part-time at
  first, full-time from December
• who ran a Start-up Phase planning,
  hiring/equipping, holding launch event etc
• and recruited a local team of six for the
  core tasks of outreach, banking,
• finance, engineering, administration and
  logistics.
• so the EE Financing Team was operational by
  January 2004
• Re-launch of an earlier initiative that had
  stalled in 2001 and was re-designed in 2002

23
Capacity Building for GHG Emissions Reduction
through Energy Efficiency in Romania

• ... and ARCE continues to play an enabling role
  in the UNDP/GEF project
• Regularly provides introductions, contacts and
  meetings
• - with Mayors, Ministries, NGOs, equipment
  suppliers etc
• - hosting meetings/events, or accompanying
  UNDP/GEF teams
• Always participates in formal Evaluation
  Meetings with UNDP/GEF
• - provides technical expertise to help
  select consultants for studies
• - helps determine the type and value of
  energy efficiency grants
• Becomes more deeply involved in selected energy
  efficiency projects
• - e.g. our work in helping to stimulate the
  development of ESCOs

24
Capacity Building for GHG Emissions Reduction
through Energy Efficiency in Romania

• UNDP/GEFs project mission - to reduce GHG
  emissions
• Turning EE ideas into real investment projects
• Applying the principle that a small,
  non-reimbursable investment
• by UNDP/GEF can leverage large energy
  efficiency investments by
• others
• Building capacity for our partners
• Transferring expertise and lessons
  learned to our governmental
• partner, and to other energy efficiency
  stakeholders in Romania

25
Capacity Building for GHG Emissions Reduction
through Energy Efficiency in Romania

• UNDP/GEF offers three basic services
• 1. Technical Assistance (T.A.)
• - Typically a Feasibility Study by specialist
  consultants
• - Private sector and public sector are eligible
• 2. Direct Contributions (D.C.)
• - Equipment grant - maximum 50,000 or 20 of an
  investment
• - Only for public sector
• 3. Deal building
• - Bringing energy efficiency investors and
  financiers together
• - Advising on the range of commercial financing
  options that are
• available in Romania.

26
Capacity Building for GHG Emissions Reduction
through Energy Efficiency in Romania

• and we offer two basic deals
• 1. If UNDP/GEF funds T.A. (usually a
  Feasibility Study)
• Then Project Developer will carry out the
  EE project and
• Financier will make investment
  funds available
• 2. If UNDP/GEF agrees to make a small
  D.C. (equipment grant)
• Then Project Developer will invest in an
  EE project and
• Financier will make investment
  funds available
• D.C. is offered to public sector investors
  only, and disbursed after the investor has
  entered into a firm financing or works contract
  for the main investment. The maximum DC is the
  lower of 50,000 or 20 of the value of the
  investment. This facility is now fully
  subscribed, but not yet fully disbursed meaning
  that funds will be disbursed on municipal
  projects that are already under-development but
  have not yet financial closure.

27
Capacity Building for GHG Emissions Reduction
through Energy Efficiency in Romania

• And this simple formula works!

28
Capacity Building for GHG Emissions Reduction
through Energy Efficiency in Romania

• Key financial results
• We have leveraged over 25 million of definite
  investments so far
• Public sector/definite 7,959,600
• Private sector/definite 17,537,500
• Total/definite 25,497,100
• expect another 6.5 million to result from
  work-in-progress
• Public sector/possible 2,820,000
• Private sector/possible 3,650,000
• Total/possible 6,470,000
• and have a large and growing pipeline of
  potential investments
• From which we expect to leverage many more
  millions of investment dollars
• Definite means a financing or works contract
  is now signed or awarded, or investment is
  under-way or complete.

29
Capacity Building for GHG Emissions Reduction
through Energy Efficiency in Romania

• 8 million of Public Sector investments are now
  definite
• Assistance Town/description Investment Main
  financing source
• DC Panaci / Kindergarten
  25,500 Governmental financing
• DC Tg Jiu / HCA/TRV
  132,100 Grant
• DC Radauti / Meters
  170,000 Bank loan (BCR)
• DC Cluj / HCA/TRV
  188,000 Supplier credit
• TA/DC Tarnaveni / Buildings
  279,000 Bank loan (BCR)
• TA/DC Sighisoara/ Schools
  280,000 Municipal financing
• TA/DC Alba Iulia/ Schools
  620,000 Municipal financing
• DC Iasi / District Heating
  1,300,000 Loan from FREE (World Bank/GEF)
• TA Vatra Dornei / Water 3,200,000 EIB,
  EU and Government
• DC Cluj / Burners/automation.
  600,000 Supplier credit
• TA/DC Satu Mare/ Schools
  150,000 Municipal financing
• TA/DC Tulcea / District Heating
  790,000 Municipal financing
• TA/DC Focsani/ Water Pumps 85,000
  Supplier credit
• TA/DC Victoria / Buildingsi
  140,000 Municipal financing
• TA Technical Assistance (typically a
  Feasibility Study) DC Direct Contribution
  (Equipment Grant)

30
Capacity Building for GHG Emissions Reduction
through Energy Efficiency in Romania

• A further 2.8 million of Public Sector
  investments are probable
• Assistance Town/description Investment
• TA (DC) Orastie / Lighting
  350,000
• TA (DC) Brad / District heating pumps
  1,200,000
• TA (DC) Vaslui Solesti / Water system
  500,000
• TA (DC) Valea lui Mihai / Lighting
  150,000
• TA (DC) Salonta / Lighting
  350,000
• (DC) Oradea / County hospital
  370,000
• TA Technical Assistance (typically a
  Feasibility Study)
• DC in the case of probable projects - means
  that we envisage providing a non-reimbursable
  Direct Contribution of maximum 20 of the value
  of the investment (typically lower) but only
  when a firm agreement to implement the main
  investment is in place.

31
Capacity Building for GHG Emissions Reduction
through Energy Efficiency in Romania

• 17.5m of definite Private Sector
  investments... could rise to 21m
• Assistance Company / description Investment
  Main type of Financing
• Six definite private sector investments value
  17.5 million (plus)
• TA Nord Simex /wood waste
  600,000 Bank/own Financing (BRD)
• TA Ulerom / sunflower husks
  560,000 Loan FREE (WB/GEF)
• TA Iridex / hospital waste
  1,377,500 Leasing (Piraeus)
• TA Sicomed / CHP 2,000,000
  BOOT - RAEF/RIEEC/SE-GES
• TA Barlad/Rulmenti / CHP 13,000,000
  Bank Financing (BCR)
• TA Mangalia/Rominservices/ solar/substation
  350,000
• Five possible private sector investments -
  value 3.6 million
• TA Bucuresti/Isovolta/ steam generation
  700,000
• TA Victoria/Viromet/ steam recovery
  300,000
• TA Ploiesti/Timken/ CHP 2,000,000
• TA Dej/Samus Mex/ wood waste 350,000
• TA Deva/Matex/ compressors/boilers
  300,000

32
Capacity Building for GHG Emissions Reduction
through Energy Efficiency in Romania

• Lessons learned (so far)

Tips and Tricks How to use small sums of
grant financing to leverage large sums of new
investment in energy efficiency
33
Capacity Building for GHG Emissions Reduction
through Energy Efficiency in Romania

• Lessons learned (so far)
• 1. An enthusiastic, empowered financial
  decision-maker is the key success factor!
• - Managing Director with the support of the
  Board or
• - Mayor with the support of the local council
• 2. Involve a bank from day 1
• - A Project Developer that hesitates to
  involve a bank is probably not creditworthy
• - Most EE loans involve balance-sheet
  financing, not project finance
• - The banks have loan pipelines so
  get the project entered early
• 3. The value of most municipal energy efficiency
  investments is small
• - Only 350,000 for a typical
  municipal project
• - The (few) multi-million dollar
  projects rarely apply for free technical
  assistance

34
Capacity Building for GHG Emissions Reduction
through Energy Efficiency in Romania

• Lessons learned (so far)
• 4. A team that leverages investment needs
  banking, finance and outreach skills
• - Engineering skills are essential, but
  not sufficient
• - So hire a multidisciplinary team with
  mixed backgrounds and local knowledge
• 5. Lack of departments and staff specialized on
  energy management
• - No specialised departments for energy
  management
• - No energy efficiency programs
• - Lack of energy managers
• 6. Finding good Energy Efficiency investment
  projects is tough!
• - Only 21 of 250 EE proposals to
  UNDP/GEF have, so far, become investments

35
Capacity Building for GHG Emissions Reduction
through Energy Efficiency in Romania
Leveraging EE investment is tough!

Energy efficiency investment proposals
that are technically robust with good internal
economics
by creditworthy project developers
who are willing to borrow
willing to prioritise Energy Efficiency
and who dont change their minds after the
Feasibility Study has been carried out
36
ARCE and UNDP/GEF - Energy Efficiency Partners
in Romania -

• Questions?

For Eduard from ARCE?
For Laura from UNDP/GEF?
37

• Energy Efficiency Partners in Romania
• A joint presentation by
• ARCE and UNDP/GEF
• First European Energy Management Conference
• Milan, Italy
• 23-24 November 2005

Laura Radulescu Outreach Manager UNDP/GEF
Capacity Bulding for GHG Emissions
Reduction through Energy Efficiency www.energie.
undp.ro
Eduard Pungaru Head of Iasi Branch Romanian
Agency for Energy Conservation www.arceonline.ro