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Follow-up Romanian CITYnvest Workshop

CITYnvest organised a national Romanian workshop (18/10/2016) in order to bring stakeholders together to discuss how to trigger the market uptake for energy efficiency in buildings. In each focus country, CITYnvest first investigates the characteristics of the energy efficiency market and which support local and regional authorities need to deploy their own long-term financing models. In this section, you can read a summary of the findings. Read the preparatory report here.
This will be continuously updated, especially as the stakeholders who took part in the workshop are co-developing a detailed set of national recommendations to boost the Energy Performance Contracting Market in Romania. A first version can be downloaded here.

What is the current context?

In Romania, most buildings were constructed in the second half of the 20th century, with a 90% share of residential buildings build before 1989, when no specific thermal requirements were in place. The lion’s share of energy use has moved from the centrally-planned industrial to the building sector: heating apartment dwellings account for 55% of energy use, and 80% for individual houses (BPIE, 2014). A lot of potential for improving energy efficiency is located in improving inefficient district heating systems and the insulation of buildings. To this end, subsidy programmes such as the 'Build-up skills Romania' were introduced.

In 2011, Romania developed a second edition of the NEEAP (National Energy efficiency Action Plan), where it defines the targets:

Diminishing final energy consumption by 2,8 Mtoe until 2016 (interim target in order to introduce new energy efficiency measures, depending on prilary energy savings and the economic fluctuations[1])
which correlates to an annual average rate of 1,5 % between 2008-2016.

Regarding Energy Efficiency, The Buildings Performance Institute of Europe (BPIE) has developed an overview of existing legislation[2];

The energy roadmap for Romania (GD 890/2003) aiming at a final electricity consumption of57,59TWh in 2015;
The strategy on renewable energy sources (GD 1535/2003) reinforced by the Renewable Energy Action Plan under the RE Directive;
The national strategy on energy efficiency (GD 163/2004) integrating the National Energy Efficiency Action Plan under the ESD;
The national strategy on the heating supply of localities through district generation and distribution systems (GD 882/2004);
The national program “Heating 2006 - 2015 heat and comfort” (GD 462/2006) for rehabilitation of the DH systems and thermal rehabilitation of buildings;
The National Development Plan 2007-2013, in conjunction with ERDF sectorial programmes and with three major sub-programmes on efficient and sustainable energy, renewable energy sources and interconnection networks;
Romania’s national energy strategy 2007-2020 (GD 1069/2007) aiming to reach a primary energy intensity of 0,32 in 2015 and 0,26 in 2020;
The national strategy on the sustainable development of Romania - Horizons 2013-2020-2030 (GD1460/2008).

Read the CITYnvest preparatory document for organizing the national workshop here.

Overview of financial support schemes

Heating 2006-2015 – warmth and comfort «Termoficare 2006 - 2015 - căldură şi confort»

This programme has two components: - the National Programme on Thermal Rehabilitation of block of flats and the one for improving the District Heating systems. It was recently announced that the programme would be prolonged until 2020.

Thermal rehabilitation of housing stock financed by bank loans with Government guarantee complementary to the Multi annual National Programme for increasing the energy performance of dwellings

In 2010, the Romanian government adopted a support scheme for increasing the energy efficiency of the housing stock. The scheme offers government guarantees and subsidised interest for loans contracted for the thermal rehabilitation of housing stock. Homeowners’ associations and owners of single-family housing can thus benefit from favorable credit conditions for the thermal rehabilitation of living space built and acquired by the end of 2000.

Casa Verde or Green house Program

The Casa Verde Program operated in 2010-11 and was re-started in October 2016. It aims at replacing traditional heating types with systems using solar, wind, thermal or biomass systems. The programme includes important funds allocated to this scope of activities.

LGGE Improving Energy Efficiency in Low Income Households and Regions of Romania

This project focuses on reducing energy consumption in low-income public housing to address fuel poverty in Romania. The project aims to improve capacity among local builders and suppliers to reduce fuel consumption in low-income communities and promote community based retrofits of schools, municipal buildings, and households. It also supports improved policies aiming at energy efficiency in low income communities and improved databases and methodologies for tracking buildings’ energy needs.

National Fund for Energy Efficiency

This started as a pilot fund for county capitals but will in the next stage elaborate for all municipalities.

European financing schemes

ERDF funding

Based on the Operational Program with Romania, for more information beneficiaries should contact Romanian Managing Authorities here (national and regional ones).

Integrated Territorial Investment

In Romania, a multi-fund approach will be developed, using both ERDF and ESF funding. Especially the Danube Delta Biosphere reserve is the targeted territory as it has a sparse and isolated population, a weak economic specialization and poor access to services[3].

Jaspers

This is a technical assistance facility to prepare projects, which will be co-financed by EU funds. Potential benificiaries can contact the Romanian Managing Authorities here (national and regional ones).

Horizon2020

Project Development Assistance (EE22 call of Work Programme 2016-2017) and different ‘Coordination and Support Actions’ related to improving energy efficiency.

Private Financing for Energy Efficiency instrument

Under the EU's LIFE programmme, this pilot financial instrument will combine lending from the European Investment Bank to financial intermediaries with protection against losses associated with making loans for energy efficiency projects. The Financial Instrument will help intermediary banks in Member States to develop and offer specific loan programmes for energy efficiency projects. These loan programs will be aligned with the national energy efficiency action plans. The Financial Instrument will also provide support and technical assistance aiming at effectively deploying the PF4EE Instrument by increasing the technical capacity of the financial intermediaries.

Interreg V A Romania-Bulgaria

This programme is financed by the ERDF (budget of 215,745,513.00 €) and focuses on technical assistance and support for e.g. mitigation efforts, resource efficiency and environment projects.

What are the main barriers/solutions to accelerate investments in energy efficiency projects in buildings?

Due to the EUROSTAT ESA10 accounting rules for EPC, the investments are added to the local authorities’ debt, which is at the moment not possible for many counties and municipalities. (For recent developments see here).
In order to leverage substantially private capital, the market has to realize an acceleration of investments with low transaction costs at an acceptable ratio of risk to return within a reasonable payback time. At date, not so many private investors enter the energy efficiency market because dedicated sources of financing are scarce and Romanian local banks are still quiet unfamiliar with this type of investments.
Furthermore, at present, more institutional and legislative support is needed to scale-up the investments rates. A clear demand from the CITYnvest workshop (18/10/2016) was the need for a stable investment environment due to long-term legislative frameworks that reduces the risks.
Local authorities should gain further expertise and capacities to tap into their local potential and develop bankable energy efficiency projects. More dedicated training to experts staying within local authorities should be more supported (this would be the same technical staff preparing energy efficiency tendering processes).
The central government should support the development of a portfolio of energy efficiency in buildings projects that would act as reference database. This would definitely increase the trust in the market and stimulate more public authorities to start deploying their own examples.
During ANRE’s presentation, it became clear that Sustainable Energy Action Plans are becoming mandatory. This creates a longer-term stable investment environment that should be further highlighted.

Examples of different measures to be taken at respective policy levels (National, County, Local)

Triggering discussion between different departments (‘cross-ministerial’) at national level to revalue energy efficiency over different policy sectors, incl. housing, energy poverty, climate strategy etc. Furthermore this should also result in the securitization of sources of financing, including those identified under the EED article 20 together with mechanisms to leverage adequate levels of private financing.
Funding vehicles should be developed, tailored to different market segments in order to provide and encourage third party financing for energy performance contracting.
Establish an effective exchange of best practice examples of local and regional authorities facilitating the deployment of innovative financing models and a track record to show evidence to financial institutions. This should be part of a de-risking strategy, which also decreases the costs of external capital (due to higher interests rates).
Supporting the starting ESCO sector by providing legislative support and financial incentives (loans, guarantees).
Strategy with Managing Authorities on how to make most effective use of the structural and investment funds to kick-start energy efficiency investment programs (blending of existing financial schemes and making it accessible for local authorities). Investigating the possibility to use CLLD (Community-led local development) and ITI (Integrated Territorial Investments).

Long-term recommendations

As an outcome of the workshop, the stakeholders started to co-develop a set of recommendations, which will form the basis of an official letter to be send to the respective national ministries. More information soon!

The Buildings Performance Institute Europe has developed an elaborated guidance, called ‘Renovating Romania’ to assist the national Ministry in fulfilling the commitment of reducing 80% of CO2 emissions by 2050. The guide includes pathways to 2030 and an elaborated list of policy recommendations.

Reference projects

1. The Portuguese Central government (ECO.AP) promoted Energy Performance Contracting in the public buildings via creating a new specific legal framework for EPC and a tender specification model to be used by the public authorities, including the local level. In this process, two ESCOs are selected for the negotiation phase. Learn about the procedure of the installed bidding process and the development of a 36 Million investment programme (via the ELENA technical assistance) here.

2. Two examples of attempts to launch energy performance contracting in Craiova and Galati were presented by Veolia Commercial Director Mr Dogaru on 15 November in Stuttgart. These examples face still barriers regarding the EPC process:

Higher risk perception due to lack of track record in Romania
No Operations & Maintenance included in the tender specification
Too rigid contracts, not providing the ESCO the possibility to safeguard the energy savings guarantee (level of control)
Need for a neutral facilitator to moderate the demands between ESCO and tendering authority
Need for transparent dataLearn about these examples here.

3. Sunshine project for multi-family apartments buildings
Case Study and presentation during the CITYnvest workshop.
Under the Sunshine scheme, a private ESCO, called RenEsco, has renovated, over the last 5 years, 15 typical soviet era apartment buildings using Energy Performance Contracting. These buildings are very old, overcrowded and of poor quality. They are typically heated through district heating. The focus of the investment is building envelope, heat distribution pipes, heat control and energy management. Projects are eligible for ERDF (European Regional Development Fund) support of 40% which gives a simple payback time of 9 – 10 years.
RenEsco’s business model uses EPC as a tool for renovating the buildings, in combination with on-bill financing (i.e. the homeowner continues to pay the same amount, while the ESCO recovers the amount saved through the House Maintenance Company). EPC contracts are typically signed for 20 years. The homeowners get a modernized apartment, with an increased value by about 20% – 30% right after renovation and an extended life time of the building by 30 years.

Step-by-step approach

Follow the different steps to build your local financing model for energy efficiency! Overview.

Any questions?

Please get in touch with info@citynvest.eu!

CITYnvest wants to thank Finacon Romania for its successful collaboration on developing the activities in Romania.

[1] Implementation of Directive 2012/27/EU of the European Parliament and of the Council of 25 October 2012 on energy efficiency
[2] Source: BPIE Renovating Romania, http://www.bpie.eu/uploads/lib/document/attachment/39/Renovating_Romania...
[3] The use of Integrated Territorial Investments, CEMR, June 2014. (ITI) by Member States

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