Helping Kosovo Economy Recover in a Greener and more Sustainable Way
An article by MFK Energy Director, Burim Hashani, on MCC supported interventions in the energy efficiency field in Kosovo; what worked best so far and lessons learned from SEEK Program. This article is published on the 15th edition of the MFK’s quarterly newsletter ‘The Challenger’, published in December 2021.
Subsidies for Energy Efficiency in Kosovo-SEEK, has been one of the most complex donor interventions in the energy efficiency field in Kosovo. Importantly, with the looming energy crisis across the continent, including in Kosovo, household energy efficiency is becoming a critical measure to lower both electricity consumption and address pollution and climate change. Through SEEK, MCC and MFK are providing financial and technical incentives to encourage households and apartments in multi-apartment buildings to invest in energy efficiency measures. Through subsidies and technical assistance, SEEK aims to reduce energy demand, as well as increase the uptake and competitiveness of the Kosovan energy efficiency service market.
- An estimated USD 13.5 – 14.5 million will be available for grants under three Intervention Packages: (1) Household Efficiency Retrofits (HER), (2) Apartment Building Efficiency Retrofits (AER), and (3) Women Energy Entrepreneur (WEE).
- SEEK targets (i) 1.600 household retrofits under HER, (ii) 25 retrofits of multi-apartment buildings (MABs) in seven municipalities under AER, and (iii) over 400 grants for the Grant Program for WEE.
We are currently piloting different types of incentives and delivery methods in order to identify the most cost-effective model for energy retrofit programs. For the first iteration we have pre-selected approximately 500 household beneficiaries, and have hired six construction companies as qualified installers. In an overlapping process, we have begun the second iteration, which involved modifying our approach based on findings from the first iteration of the program: instead of procuring installers, we are now qualifying the installers through training and ensuring compliance with the Code of Conduct. As a result, we now have over 52 Qualified Installers from which the 1000 pre-selected households can choose to apply their energy efficiency measures. This is helping move to a more market-based model and reduce dependency on donors or other implementing institutions.
Throughout the process, we also have very important lessons learned from both Packages of the Reliable Energy Landscape Project. In HER our initial findings helped us design the second iteration, which seems much more effective and creates a more competitive process for both the supply (Qualified Installers) and demand (households) sides. Very importantly and as identified in our baseline studies, citizens continue to expect very high levels of grants (over 70%). These expectations are high when compared to the broader European context but are in compliance with the socio-economic levels of the Kosovo population.
We have also identified the Kosovo Energy Efficiency Fund as the successor institution to take over and scale up the program after MFK concludes its work. We will be providing this institution with capacity building, all project documentation, software and a lessons learned package.
Another salient lesson learned is that cumulative energy savings are estimated to be over 50%. However, on a negative note, a shortage of skilled workers and firms is impeding progress. Increasing the number of Qualified Installers would help speed up the implementation process.
One of the most innovative interventions our team has worked on is the new bank guarantee window for energy efficiency and green energy generation. MFK has been supporting the Kosovo Credit Guarantee Fund-KCGF to open a new Guarantee Window that will provide guarantees to the banks for the loans given to independent power producers (IPP), auto-producers (A-P) as well as energy efficiency projects. As an innovative “Blended Finance” project it focuses on supporting the agency in its Business Plan, Risk/Pricing Model, Financial Projections, training on Project Finance, raising the guarantee and counter-guarantee capital with donors and GoK, etc.
Moreover, we have engaged one of the largest US based consulting companies, Tetratech, to create a substantial pipeline of RE, A-P and EE projects through direct technical support to the private sector on their feasibility studies and bankability, while concurrently working with banks to move more towards a Project Finance approach rather than loans based on high collateral requirements. This project is expected to unlock financing of an estimated USD 25 million from banks towards green investments by the private sector, while the longer term impact is to accelerate up to USD 500 million of RES market investments.
Finally, but not less important, in late 2021 MFK launched the District Heating Metering activity, called Prishtina HeatSave. As the saying goes, “what is not measured cannot be saved.” The control and metering equipment installation in the DH system for individual consumers will enable immediate impact through substantial efficiency gains. This project will help both the corporate upgrade of the DH utility as well as the quality of service for its customers. Each consumer will be able to control their own consumption and heating expenditures; at the same time they will be able to improve their comfort by avoiding overheating or even overpaying in cases when their supply is not satisfactory. Very importantly, it will also help change customer behavior towards more efficient use of energy, which has a multifold benefit such as energy and monetary savings, cleaner air for local residents, etc.
Gender and Social Inclusion has been at the forefront of considerations in all energy activities. Women in Energy and Women in Energy Entrepreneurs are two flagship MFK activities. Although at first glance this activity seemed to be one of the smallest components of the MFK program, it has proved to be one of the most impactful interventions. These programs have been instrumental both in terms of the immediate improvement of the energy sector gender inclusion landscape, as well as the long-term value of working to change biases and promote more sustainable inclusion in the Kosovan economy. Over 400 grants for Women-owned business, 28 scholarships for engineering studies in US, and approximately 200 paid internships in the energy sector proved to really address this important issue both on a short-term and sustainable basis. Based on the success of the Women in Energy programs, we have seen other donors and governmental institutions emulate this model.