Assessment of the residential energy efficiency investment potential in the Western Balkans

Objectives

The objective of this assignment was to prepare a Market Demand Study that assessed the residential energy efficiency investment potential in Western Balkans countries (Albania, Bosnia and Herzegovina, Kosovo, Macedonia and Serbia) and provided information to guide the EBRD and the European Commission through the design of a successful facility. Recommendations from the Study were also to be focused on how the European Commission can use IPA II grant funds and contribute to the financing facility through innovative financial instruments. 

Scope

In this Market Demand Study, E Co:

1. Assessed the potential size of the market for energy efficiency investments in the residential sector – including gauging potential demand amongst banks for implementing credit lines with and without incentive mechanisms
2. Identified the current status and gaps in policy, legislation and regulation (notably current and future projected energy tariffs, condominium laws, etc.) that needed to be resolved to make EE measures attractive to domestic customers;
3. Identified barriers to investment in energy efficiency in the residential sector and provided recommendations upon which the EBRD could structure and implement credit lines or any other financial instruments – with a focus on multi-household apartment buildings but also including other types of buildings
4. Recommended a package of policy dialogue and technical assistance which needed to be tailored to ensure the successful implementation of a residential financial facility in the Western Balkans – with a focus on multi-household apartment buildings but also including other types of buildings
5. Recommended appropriate incentive mechanisms for the European Commission or any other donors that would help to alleviate the barriers and scale up energy efficiency improvements across the residential sector with a focus on widespread application to all parts of society, and especially in multi-story apartment buildings.

Approach and process

E Co’s approach to this assignment involved essentially 6 different country studies and analysing the market situation, opportunities, and barriers within each. The work was carried out by our team of 10 international and 6 national experts. In carrying out the study, E Co:

• Carried out technical and financial analysis of potential investments in the building stock
• Conducted in-depth analysis of the regulatory environment in each country as linked to investments
• Analysed the lending market in each country for residential lending
• Evaluated lessons learned from previous energy efficiency and renewable energy initiatives in the 6 countries
• Interviewed local financial institutions, housing management companies, Home-owner Association representatives, and also received input from public officials on the barriers and possibilities for investment

Results

Results included three deliverable as well as financial models for each country. The main deliverables were:

• Task 1 – Market overview analysing the building stock, potential for investment, and reported barriers for investment in the sector
• Task 2 – Policy review analysing in-depth the regulatory framework for energy efficiency in the residential sector, with a special focus on potential for lending to multi-household buildings
• Task 3 – Recommendations on the implementation of a region-wide programme, including budgets for implementation, appropriate incentive mechanisms, required regulatory / legislative changes, and a timeline for implementation

This study made it possible for EBRD to develop the proposed Residential Energy Efficiency Financing Facility (REEFF) – a region-wide initiative for lending in the sector.