Investing in energy efficiency and small renewable installations

Introduced in 2012, Regional Energy Efficiency Programme (REEP) was developed by EBRD in close cooperation with the Energy Community Secretariat, and joined later by KfW, as a comprehensive package of bank financing, EU incentives, other donor funds for technical assistance (TA) and policy dialogue.

To date, the entire programme has mobilised €512 million for project financing, €78.8 million EU grants and €25.9 million other donors’ grants. This programme is ongoing and financing is still available.

REEP is structured around several “windows” of activities:

1. Policy dialogue activities aim to address country-specific barriers to energy efficiency investments.
2.  Two EBRD credit lines complemented with technical assistance and investment incentives:

•  Western Balkans Sustainable Energy Financing Facility (WebSEFF) with a total of €117 million financing complemented with €14.5 million grants for technical assistance and incentives by the EU and other donors. The facility targets SMEs and public sector investments for energy efficiency and small-scale renewable energy projects.
• Green Economy Financing Facility (GEFF) – see more details bellow

3. Direct EBRD financing facility (WebSDEFF) of €80 million targeting mid-size private sector sustainable energy projects, including renewables and Energy Service Companies (ESCOs).
4. KfW credit facility of €50 million for SMEs and public sector on-lending introduced in 2018.
5. EBRD direct public sector finance of €20 million of financing and €2 million of investment grants targeting energy efficiency in public buildings. Beneficiaries include state, cities or municipal companies.

Based on a market demand analysis, supported by the Energy Community Secretariat, EBRD has created a lending facility Green Economy Financing Facility (GEFF), for businesses and homeowners wishing to invest in energy efficient and green technologies. This benefits from the financial support of the European Union, Republic of Austria and the Western Balkan Investment Framework.

The total available financing for the Western Balkans amounts to  €85 million EBRD credit lines to the local partner banks, and 30 million in grants from the European Union and other donors that are used for technical assistance and investment incentives targeting energy efficiency investments for the residential sector (individuals, housing associations, producers, suppliers and vendors of energy efficient equipment and service providers such as facility management companies).

Projects that have been successfully implemented and the energy and emission savings have been verified are eligible to receive an investment incentive of max 20% of the eligible investment costs incurred by a household, or up to 35% of eligible costs for a multi-apartment building.

Initiated by EIB and KfW in December 2009, the Green for Growth Fund has supported energy efficiency and renewable energy loans worth  €316 million in the Western Balkans, while the fund’s investments in the region currently save 1,124 GWh of primary energy and around 340,000 tons of CO2 emission every year.

GGF’s investments seek to achieve a 20% reduction in energy consumption and/or a 20% reduction in CO2 emissions. GGF is a public-private partnership involving donor agencies, international financial institutions and private institutional investors. The fund is supported by EIB, KfW, IFC, the German Federal Ministry of Economic Cooperation and Development, EBRD, Netherlands Development Finance Company (FMO), Oesterreichische Entwicklungsbank AG (OeEB), several private institutional investors, and the European Commission.

GGF provides refinancing and technical assistance to financial institutions (local commercial banks, non-bank financial institutions such as microfinance institutions and leasing companies, etc.) providing loans to households, businesses, municipalities and public sector for energy efficiency measures or renewables projects. In addition, GGF can provide direct financing to renewables projects, including solar, small hydro, small wind, biomass, etc. GGF has 18 partner financial institutions in the Western Balkans.

GGF is currently investing from an additional €20 million contribution received from the EU in 2018, which will support up to €100 million in new clean energy investments in the Western Balkans until 2021.

Apart from the Western Balkans, GGF is investing in energy efficiency in households, businesses, and renewable projects through local financial institutions in Eastern Partnership countries: Georgia: $92.9 million;  Moldova: $3.5 million; Ukraine: €92.6 million.

Set up under the EU umbrella of Western Balkans Investment Facility,  WB EDIF, was launched in December 2012 by the European Commission, the European Investment Fund, the European Bank for Reconstruction and Development (EBRD) and the European Investment Bank (EIB), acting as co-lead international financial institutions.

Although this is not directly addressing support to energy efficiency or small renewable investments, it aims at increasing the financial resources made available to SMEs based in the Western Balkans, in order to support socio-economic development and EU accession across the Region.

The €145 million of initial capital pulled together under WB EDIF may translate into about €300 million of finance benefitting SMEs based in the Western Balkan countries. The facility is implemented through four pillars:

• 1^st Pillar: SME equity financing 
  Under this pillar (total €138 million), EDIF offers two equity funds aimed at early stage innovation companies (the Enterprise Innovation Fund) and later stage companies in their expansion phase (Enterprise Expansion Fund). This gives the SMEs in Western Balkans a great opportunity to start producing energy efficient equipment, such as small/household biomass based boilers, or wood stoves, windows, buildings insulation materials, heat pumps, solar heaters, etc., that would not only increase country’s economic value added, but create jobs and reduce import dependency of such technologies.
• 2nd Pillar: SME Loan Guarantee
  WB EDIF offers also a guarantee instrument, with a total value of €405 million; in many cases, SMEs in the Western Balkans, may have a limited creditworthiness and the financing may be either quite expensive, or the collaterals requested quite large, thus preventing start-ups or small manufacturing businesses to be able to develop. A guarantee product in which a portion of the risk incurred by banks is covered (by EIF) when extending loans to SMEs – this risk coverage enables the banks therefore to provide financing at beneficial terms, such as via lower collateral and interest rates.

• 3rd Pillar: SME Lending 
  This facility amounts to €85 million from EDIF as follows: €70 million EBRD lending to local commercial banks and credit institutions in the countries of the Western Balkans, that would be on-lent to local SMEs; an EU grant component of €15 million is provided to support the Programme.

• 4th Pillar: Support Services
  Having in view, that SMEs are in most cases lacking experience in business development, marketing, financing, etc. EDIF also offers a range of support mechanisms which work together with the financial instruments to remove barriers to growth and innovation potential of SMEs in the region. Support services projects are deployed by the EIB, EBRD, World Bank and OECD.

The E5P is a €220 million multi-donor fund initiated during the Swedish Presidency of the European Union in 2009 to encourage municipal investments in energy efficiency and environmental projects in the Eastern Partnership region. Initially active in Ukraine, in 2014 the fund formally extended its activities to Armenia, Georgia and Moldova, Belarus joined in 2017, and Azerbaijan in 2019. The contributors to this Fund are: the European Union (the largest contributor) and 23 governments of EU and non EU Member States. The Fund co-finances projects in the following areas, through international financing institutions:

• District heating
• Energy efficiency in public buildings (schools, kindergartens, hospitals)
• Energy saving measures in residential housing
• Renewable energy (including biomass)
• Street lighting
• Water and wastewater treatment
• Solid waste management
• Urban transport