Energy Efficiency in the Russian Federation (Umbrella Programme)

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PROJECT IDENTIFICATION FORM (PIF)
PROJECT TYPE: Full-sized Project
THE GEF TRUST FUND
S
Submission Date: 21 January 2008
Resubmission Date: 22 February 2008
PART I: PROJECT IDENTIFICATION
GEFSEC PROJECT ID1: 3653
GEF AGENCY PROJECT ID:
COUNTRY(IES): Russia
PROJECT TITLE: Energy Efficiency in the Russian Federation
(Umbrella Programme)
GEF AGENCY(IES): UNDP (coordinating agency),
EBRD, UNIDO
OTHER EXECUTING PARTNERS:
GEF FOCAL AREAS: Climate Change
GEF-4 STRATEGIC PROGRAM(S): CC-SP 1 and CC-SP 2
NAME OF PARENT PROGRAM/UMBRELLA PROJECT:
INDICATIVE CALENDAR
Milestones
Expected
Dates
Work Program (for FSP)
April 2008
CEO Endorsement/Approval December 2008
GEF Agency Approval
January 2009
Implementation Start
February 2009
Mid-term Review
2011
Implementation Completion
2014
A. PROJECT FRAMEWORK (Expand table as necessary)
Project Objective: Facilitate market transformation towards more a more energy efficient economy through the promotion of efficient technologies and
practices in key sectors. The project will improve energy efficiency in industry, buildings, and lighting through regulatory support, investment, and capacity
development at the federal, regional, and local levels. In line with the GEF Climate Change strategy, this umbrella program will cover the entire spectrum of the
building sector, including the building envelope, the energy-consuming systems and appliances used in buildings for heating, cooling, lighting, including
appliances, as well as building operation and energy consumption during building operation. In industry, the project will promote the deployment and diffusion of
energy-efficient technologies and practices in industrial production and manufacturing processes, focusing on GHG-intensive industries.
Indicate
whether
Expected
Project Components
Investment,
Outcomes
TA or STA
Improving Energy Efficiency in TA
Enabling policy
Buildings in Northwest Russia
framework and
enhanced
institutional
capacities for
improving building
energy efficiency at
the provincial and
local level
GHG emissions
reduced by 34-45%
at pilot sites and
60% of pilot site
buildings certified
for energy
efficiency
performance
Local energy
efficient solutions
and management
models
demonstrated
Improving Energy Efficiency in Investment
Urban Housing
& TA
Concepts of
integrated municipal
planning introduced
and disseminated.
Best practices in
building code
1
Project ID number will be assigned initially by GEFSEC.
Expected Outputs
Provincial legal and
regulatory framework.
Indicative GEF
Financing*
($)
%
Indicative Cofinancing*
($)
%
Total ($)
5,840,000
20
23,250,000
80
29,090,000
9,670,000
10
86,500,000
90
96,170,000
Energy efficiency
curriculum, vocational
training centre, distance
learning programme
Three demonstration
projects: Model
construction site in
Vologda oblast,
introduction of a
methodology for
certification of EE
buildings in Vologda
Oblast, and a municipal
project management
system for EE in
construction and
maintenance in
Arkhangelsk Oblast.
Development of
municipal investment
frameworks in
participating
municipalities.
Guidance developed for
1
support introduced
and disseminated.
Credit for EE
investments in
housing increased;
EE considerations
“mainstreamed”
into housing sector
lending.
Improving Energy Efficiency in Investment
Public Buildings
& TA
Municipal EE
projects identified,
audits conducted,
and project
proposals prepared
for financing.
Support provided
for tendering
procedures and
management of
large-scale
programs that may
need additional
dedicated resources.
the Russian Municipal
Housing Reform Fund
(RMHRF) to phase in
requirements for certified
buildings.
Line of credit and project
preparation support for
regional governments
and/or residents
undertaking housing
reconstruction programs
within the RMHRF that
adequately address
energy efficiency.
Technical support for
project identification,
audits, project
preparation, and
tendering.
9,210,000
13
62,700,000
87
71,910,000
7,810,000
20
32,000,000
80
39,810,000
EBRD financing in the
form of an a municipal
energy efficiency loan
Loans for EE investments
to municipalities
Forfaiting mechanism
Energy savings of at
least 30% in target
buildings and
facilities achieved.
Introducing Energy Efficiency
Standards and Labeling
TA
Innovative financial
mechanism
introduced—
forfaiting—that will
transfer credit risk
and assets in energy
efficiency
investments to a
third party.
National legal,
regulatory, and
institutional
mechanisms for a
widespread energy
efficiency S&L
scheme in place
Market penetration
of energy efficient
appliances
increased
Energy efficiency
standards and labels for
selected products
S&L demonstration
programme in selected
regions
Testing and labeling
protocols; procurement
models
Strategic buyer
Awareness among
partnerships and produer
targeting consumers agreements
and market agents
increased
Awareness campaign
2
Transforming Markets for
Energy Efficient Lighting
TA
Efficient lighting
policies and
standards
introduced
Capacity (and
incentives for) of
the supply chain to
promote EE lighting
enhanced
EE office lighting
marketed to all
public and
commercial
buildings
EE street lighting
replicated
Improving Energy Efficiency in TA &
GHG-Intensive Industries
Investment
National platform and
knowledge centre
established
7,020,000 26
20,500,000 74
27,520,000
15,385,000 10
135,750,000 90
151,135,000
5 to 10 suppliers assisted
in improving their
production or imports of
EE lighting equipment or
components
Health and educational
buildings in City of
Moscow switched to
efficient lighting
EE street lighting
installed in Nizhny
Novgorod City and
Oblast
CFL marketing
campaign targeting
the residential
sector established
by Moscow city
government and
manufacturers
Target-setting
agreements with
industry signed
CFLs installed in five
demonstration apartment
buildings in Moscow
National energy
management
standards
introduced
Policies compatible with
ISO energy management
standard
Market demand for
EE goods and
services increased
Informational campaign,
recognition program,
targeted incentives
through preferred
suppliers
Capacity of energy
managers enhanced
to optimize
industrial systems
and increase EE
Expert-level training
Agreements with 75
energy-intensive firms in
4 or more industrial
sectors
Dedicated financing Investments in EE
mechanism for EE technologies and systems
investments
optimization projects
established
Total project costs
54,935,000
13
360,700,000
87
415,635,000
* List the $ by project components. The percentage is the share of GEF and Co-financing respectively to the total amount for the component.
** TA = Technical Assistance; STA = Scientific & technical analysis.
3
B. INDICATIVE FINANCING PLAN SUMMARY FOR THE PROJECT ($)
GEF Grant
Co-financing
Project Preparation
NW Buildings:
140,000
Public Buildings:
215,000
Residential Buildings:
165,000
Standards & Labeling (S+L):
150,000
Efficient lighting:
140,000
Industrial EE:
225,000
Subtotal: 1,035,000
NW Buildings:
200,000
Public Buildings:
200,000
Residential Buildings:
200,000
S+L:
250,000
Project
NW Buildings:
5,840,000
Public Buildings:
9,210,000
Res. Buildings:
9,670,000
S+L:
7,810,000
Efficient lighting:
7,020,000
Industrial EE:
15,385,000
54,935,000
NW Buildings:
23,250,000
Public Buildings:
62,700,000
Res. Buildings:
86,500,000
S+L:
32,000,000
Agency Fee
Total
NW Buildings:
NW Buildings:
589,000
6,578,000
Public Buildings: Public Buildings:
942,500
10,367,500
Res. Buildings:
Res. Buildings:
983,500
10,818,500
S+L:
S+L:
796,000
8,756,000
Efficient lighting: Efficient lighting:
716,000
7,876,000
Industrial EE:
Industrial EE:
1,561,000
17,171,000
5,597,000
61,567,000
NW Buildings:
23,450,000
Public Buildings:
62,900,000
Res. Buildings:
86,700,000
S+L:
32,250,000
Efficient lighting:
600,000
Subtotal: 1,700,000
Efficient lighting
20,500,000
Industrial EE:
135,750,000
360,700,000
Efficient lighting
20,750,000
Industrial EE:
136,350,000
362,400,000
2,735,000
415,635,000
250,000
Industrial EE:
Total
5,597,000
423,967,000
* Please include the previously approved PDFs and planned request for new PPG, if any. Indicate the
amount already approved as footnote here and if the GEF funding is from GEF-3.
C. INDICATIVE CO-FINANCING FOR THE PROJECT BY SOURCE ($), IF AVAILABLE
UNDP Sources of Co-financing
1
Project Government Contribution
(cash)
Project Government Contribution
(in-kind)
Private Sector2
NGO3
Others4
Total co-financing for UNDP projects
1
NW Buildings
S&L
EE Lighting
Total
6,979,750
8,100,000
14,050,000
29,129,750
1,055,250
1,400,000
14,565,00
850,000
16,000,000
1,400,000
5,350,000
32,250,000
23,450,000
2,455,250
6,700,000
20,750,000
37,265,000
2,250,000
5,350,000
76,450,000
In the NW Buildings project, the Government co-financing will come from matching federal and regional funds allocated in line with
the national co-financing practices in the framework of the federal target programmes on housing. Regional funding will be allocated
through the regional energy funds established in 2005 in support to the regional energy efficiency programmes. Since 2005, financing
through the regional energy funds has been steadily increasing. In 2006 the level of funding in the pilot regions came to: in the
Arkhangelsk region – $1.85 mln (50 mln roubles), in Vologda region - $3 mln (82 mln roubles), in Pskov region - $0.8 mln (22 mln
roubles), mainly invested into district heating systems. In 2007 these allocations increased by 25% and included resources for energy
auditing. In 2008-2010 regional financing to energy efficiency programmes will be doubled (including capital investments).
4
In the standards and labeling project, the government co-financing includes federal government budget and Regional government budget.
The federal financing is planned under the ongoing federal program "Research and development of priority areas towards improvement
of science and technology in Russia for 2007-2012 - total amount $7,895,000 $ (cash 6,495,000 and in kind $1,400,000). In addition, the
government of Moscow is planning further budgets for energy efficiency programs.
2
In the NW Buildings Project, private sector co-financing to energy efficiency projects will come through public and residential
construction projects and through the concessions on building maintenance (management). In the Standards and Labeling Project, these
are estimated contributions by manufacturers and retailers of energy efficient products (increased marketing efforts etc)
3
In the NW Buildings project, NGO co-financing is sought from the North-West Association, Agency for development and investment
promotion, regional funds for municipal development and others. Co-financing commitments will be leveraged during the PPG phase.
4
In the Standards and Labeling project, other co-financing comes from the following sources: Russian electricity company, Gasprom.
Norilnikel, Lukoil, etc. The co-financing is planned under the energy efficient programs implemented in these companies and will be
primarily used for the introduction of energy efficient procurement models. The total amount is estimated to $5,350,000.
Sources of Co-financing for Type of Co-financing
EBRD and UNIDO projects
Project Government Contribution
Unknown at this stage
Project Government Contribution
In Kind
EBRD/UNIDO
Industrial EE
Amount
Loans
EBRD
Credit lines
EBRD
Grants
300,000
EBRD
Unknown at this stage
500,000
UNIDO
Unknown at this stage
500,000
UNIDO
Grants
300,000
120,000,000
62,000,000
34,000,000
50,000,000
Unknown at this stage
1,700,000
700,000
800,000
62,900,000
86,700,000
13,700,000
136,350,000
Total co-financing
200,000
EBRD
Residential
Buildings
Amount
200,000
1,050,000
EBRD
Private Sector
EBRD Public Buildings
Amount
Financing in the Residential Buildings will be supplemented by parallel financing in the form of direct financial support for
the construction of residential buildings through the Russian Municipal Housing Reform Fund.
D. GEF RESOURCES REQUESTED BY FOCAL AREA(S), AGENCY (IES) SHARE AND COUNTRY(IES)
(in $)
GEF
Agency
Focal Area
Country
Name/
Global
EBRD
Climate Change Russia
UNDP
Climate Change Russia
UNIDO Climate Change Russia
Total GEF Resources
Project
Preparation
492,500
430,000
112,500
1,035,000
Project
Agency
Fee
26,226,250 2,671,875
20,670,000 2,110,000
8,038,750 815,125
54,935,000 5,597,000
Total
29,390,625
23,210,000
8,966,375
61,567,000
PART II: PROJECT JUSTIFICATION
A. STATE THE ISSUE, HOW THE PROJECT SEEKS TO SOLVE IT, AND THE EXPECTED GLOBAL
ENVIRONMENTAL BENEFITS TO BE DELIVERED:
The Russian economy has been experiencing steady growth that is likely to continue and to bring with it a growing demand for
energy. The latter trend is alarming, as the Russian economy remains among the most energy intensive in the world. The energy
intensity of Russia’s economy is twice as high as the world average, it is three times higher than in Western Europe, 2.3 times
higher than in the United States, and two times higher than that of China. Along with economic growth, the level of
greenhouse gas emissions in Russia has been steadily increasing since 1999 (2,152.4 million tons of CO 2 equivalent in5
2004 alone2). The energy saving potential of Russian economy through increased energy efficiency is equally substantial. It is
assessed at 35-40 percent, or 360-430 million tons of oil equivalent annually.
The findings of a rapid assessment of Russia’s energy saving potential by sector are presented in the table below. As
demonstrated in the table, the Russian building sector represents the highest energy saving potential. At the same time, this
sector faces a series of deeply-rooted problems that hamper its reform and the inflow of private sector investments. The
majority of existing industrial and building infrastructure was designed and constructed during the Soviet governance. The
perception of low energy prices affected the design, construction and exploitation of buildings and the selection of industrial
processes and technologies. In the residential and public buildings sector, complex and inefficient management and ownership
frameworks create risks and barriers for private investments in energy efficiency projects. As a result this sector is dragging
behind industrial sectors in applying energy efficiency practices and technologies. However, industrial sectors also hold
significant untapped potential energy savings, both because efficiency measures are not identified by energy managers, and
because energy efficiency considerations are not “mainstreamed” into the Russian commercial lending sector. These and other
barriers to energy efficiency are described in Section C below.
The scope and complexity of problems faced by the Russian economy are very extensive and cannot be addressed through a
single GEF project. A broader programmatic multi-agency approach is required. This is why this Umbrella Programme is
proposed as a coordinated intervention of key Russian sectoral agencies.
Table: Energy Saving Potential in Russia3
Sector
Unit of
measure
Electric power industry
Heat supply systems
Industry
Buildings
Residential
million toe
million toe
million toe
million toe
Million GCal
Billion kWh
Million GCal
Billion kWh
Billion kWh
million toe
Public
Street and indoor lighting
Total:
Baseline
energy
consumption
355
679.0
152.0
360.0
74.0
20.0
970
Technical
potential
of energy
savings
Savings of
natural
gas
(bln m3)
68.3
87.4
89-106
360.0
95.0
166.0
19.0
6.0
370-390
Saving
potential
(%)
23-38
70.6
Share of the
total energy
saving
potential (%)
18.4
23.5
23.9
34.2
25-30
31.0
18.0
18.0
3.6
53.0
62.5
46.1
25.7
16.3
8.7
7.5
1.7
172-177
38.3-40.1
100.0
In accordance with the GEF Climate Change strategy, the proposed umbrella program will cover the entire spectrum of the
building sector, including the building envelope, the energy-consuming systems and appliances used in buildings for heating,
cooling, lighting, including appliances, as well as building operation and energy consumption during building operation. In
industry, the project will promote the deployment and diffusion of energy-efficient technologies and practices in industrial
production and manufacturing processes, focusing on GHG-intensive industries.
Priority threats/root causes and barriers to be addressed
Energy efficiency of Russia’s building and appliances sector is hampered with a combination of barriers and perverse
incentives, including policy and legal barriers, market and financial barriers, institutional, social and behavioral barriers. In
industry, prospects for improving energy efficiency remain limited because only limited information is available on what
improvements can be implemented. There is also little support or encouragement to management to help shift the emphasis
away from increased production and more towards cost efficiency and sustainability. Detailed and specific barrier analysis is
presented in the attached individual project PIFs. The following broader barrier categories can be identified:
Policy and legal barriers: Key policy documents that will drive national energy efficiency investments are still under
development. The regulatory framework that should operationalize new policies in the construction and communal housing
sectors is inadequate. Specific examples include absence of compulsory energy efficiency labeling schemes or binding
regulations for sectoral/agency procurement. Also, most of the Russian regions and municipalities are lacking long term energy
efficiency programmes that hampers inflow of investments. The UNDP NW Buildings project, the EBRD Municipal Buildings
Project, and the EBRD Residential Buildings project will all address these barriers. In addition, the UNDP S&L project will
address the lack of a supportive regulatory and legal framework for setting standards and labeling energy-efficient appliances.
2
3
Russia’s Report on demonstrating progress under the Kyoto Protocol, 2006.
Centre of Energy Efficiency (CENEf), 2006, Rapid assessment
6
The EBRD-UNIDO industrial energy efficiency project will address the lack of national industrial energy efficiency targets and
specific policies designed to improve energy efficiency in industry.
Institutional capacities: The barriers include insufficient coordination and lack of clear leadership among government agencies
in implementation of energy efficiency policies related to market transformation and demand side management. There is a lack
of viable institutional experience (both state and NGO) in introducing market incentives and labeling systems for appliances
and other equipment used in the buildings sector. The UNDP S&L project will address this barrier, as will the EBRD-UNIDO
project component on establishing market incentives for improving industrial energy efficiency..
In addition, management expertise and effective institutional networks are lacking at the regional and municipal level in both
the standards sector and in the more general area of identifying and designing energy efficiency projects for existing and
planned building stock. All proposed projects will address this barrier by working with regional and local partners.
Market barriers: On the supply hand, the market of professional services (energy audits, business planning, energy
management) is not well developed, and there are few local professional engineering companies that can offer energy-efficient
construction. The UNDP NW Buildings project will address this barrier. The EBRD-UNIDO project will focus on
strengthening the skills of energy managers to include the identification and implementation of energy-saving measures in
GHG-intensive industries.
On the demand side, barriers include a shortage of capital for investment and a lack of incentive to make up-front investments
in energy-efficient construction and retrofitting and to undertake efficient maintenance practices. Barriers are rooted in
relatively low energy prices, lack of attractive financing, and an artificial separation of energy efficiency from ongoing
investments in housing, public facilities, home appliances, and building equipment. The EBRD Municipal Buildings Project,
the EBRD Residential Buildings Project, the UNDP S&L project, and the EBRD-UNIDO project will address these barriers.
Technical and knowledge barriers: Insufficient technical capacity and know-how in energy efficiency technologies, the design
and introduction of energy performance standards, sustainable labeling schemes, and the design and certification of highlyefficient buildings. testing methods and effective consumer campaigns. These barriers inhibit scaling up successful initiatives
and replicating innovative energy efficinecy technologies introduced in pilot projects. These barriers are adressed in all of the
proposed projects.
The strategy of the Russia Energy Efficiency Program that has driven the choice of individual projects is threefold:
-
Sector-specific barrier removal: Specific projects will analyze and address barriers to energy efficiency in the following
sectors: construction of new buildings, residential housing, municipal buildings, appliances, lighting, energy-consuming
building equipment, and industrial processes. Building on best regional practices and pilots, the project will also reduce
institutional and information barriers for up-scaling and replicating innovative energy efficiency technologies.
-
Mainstreaming energy efficiency into government investment frameworks for buildings sector: The Russian Government
has prioritized the reform in the housing sector and announced it among three national priority projects. Development of
innovative technologies, including energy and construction sectors, is another priority pursued through the national
investments. National financing is channeled through federal target programmes designed and managed by specific sectoral
agencies, including the Ministry of Regional Development (federal programme on housing), Federal Agency for Science
(priority innovation programmes), Ministry of Civil Defence and Emergencies (recovery of urban settlements), etc..
Besides federal investments, regional governments allocate financing for the modernization of housing sector through
regional budgets. The GEF programme through individual projects will partner with the key sectoral and regional agencies
to influence decision making and embed energy efficiency principles into these national investments.
-
Capacity building: As a result of administrative reform the management authority over the majority of housing stock has
been transferred to regional and local governments. Given Russia’s vast geographic expansion, climatic diversity and
decentralized governance, the role and involvement of provincial and local governments in promoting energy efficiency is
very important. Acute capacity constrains at that levels (in particular at the local municipal level) and lack of professional
expertise are major factors hampering promotion of energy efficiency. Development of long-term municipal energy
efficiency programmes and establishment of regional energy efficiency centres in the most advanced provinces proved to
be decisive factors for the success of pilot energy efficiency projects. The programme will build institutional and technical
capacities of municipal and regional energy managers in both the public and the private sectors and facilitate access to
local market of professional services in the field of building energy efficiency.
The Goal of the Russia Energy Efficiency Program is to reduce greenhouse gas emissions from energy consumption in the
Russian economy and the appliances and equipment used in a variety of facilities. The program objective is to promote
energy-efficient technologies and practices in the buildings and appliance sectors. This objective will be achieved through 7
implementation of a series of energy efficiency projects in the Russian building sector that will work together to deliver the
following Outcomes:
1.
2.
3.
4.
5.
6.
7.
8.
Improved energy efficiency in construction sector and several GHG-intensive industrial sectors, including both new
construction and retrofitting/process upgrades.
Enhanced institutional capacities for long-term municipal energy planning and reduced energy consumption in
municipal buildings.
Enhanced institutional capacities for long-term commercial energy management and reduced energy consumption in
GHG-intensive industries.
Embedding energy efficiency practices and technologies into ongoing national investments in urban development,
housing reform, and procurement.
Reduced barriers to energy efficiency in the residential housing sector.
Increased market penetration of energy-efficient technologies, products, and materials in the residential and
commercial building markets through introduction of energy efficiency standards and labeling.
Market transformation of public, commercial and household lighting.
Market transformation of GHG-intensive industries.
Project selection:
Projects have been selected based on the following criteria:
 Geographic region: since the Russian Federation is the largest country in the world spanning 11 time zones it is
necessary to select projects which are able to address both local needs, as well as provide the opportunity for
significant cost effective replication throughout the country.
 Projects should address the broad scope of end-use sectors in energy efficiency in buildings, and address the particular
barriers that these end-use sectors experience.
 The projects should fit together logically, so that each achieves necessary objectives but benefits from achievements
from the other projects. They should not however be inextricably linked to each other which would increase project
risks as a whole.
 The projects should play to the strengths, experience and comparative advantage of each GEF agency.
 The projects should maximize cost effectiveness.
The following individual project proposals (PIFs) have been developed and are submitted along with the programme outline:
1. NW Buildings: Localizing solutions to improved building energy efficiency in the North West of Russia: capacity
building and demonstrations, UNDP-GEF
2. Public Buildings: Improving Efficiency in Public Buildings in the Russian Federation, EBRD-GEF
3. Residential Buildings: Improving Urban Housing Efficiency in the Russian Federation, EBRD-GEF
4. Standards and Labeling (S&L): Standards and Labeling for Promoting Energy Efficiency in Russia, UNDP-GEF,
PIMS 3550
5. Efficient Lighting: Transforming the market for Efficient Lighting, UNDP-GEF
6. Industrial EE: Market Transformation Programme on Energy Efficiency in GHG-intensive industries in Russia,
EBRD-UNIDO
Comparison by Selected Characteristics
Geographic
Region
EBRD Municipal
Buildings Project
EBRD Urban Housing
Project
Municipalities to
be determined
during PPG
Khanty-Mansi
autonomous region,
Siberia
National scope for
Housing Fund work
UNDP NW
Buildings
Project
Three oblasts in
the NW
Russian admin.
territory
UNDP
Standards/Labels
UNDP Efficient
Lighting
EBRD-UNIDO
Industrial EE
Regions to be
determined.
National scope
with
demonstration
activities in Nizhny
Novgorod and
Moscow
National, by
industry and
company
National scope for
labeling
8
End-Use
Sector
EBRD Municipal
Buildings Project
EBRD Urban Housing
Project
Public
administration
buildings
New public and private
urban residential
buildings
UNDP NW
Buildings
Project
Buildings in all
sectors
UNDP
Standards/Labels
UNDP Efficient
Lighting
EBRD-UNIDO
Industrial EE
Household
appliances
Efficient lighting in
all sectors
GHG-intensive
industries
Federal EE
programme
Government cofinancing
Government
co-financing
Product retailers
CFL producers
Private Sector
(Designated
Financing
Mechanism)
Absence of
institutional
arrangements for
S&L and efficient
procurement
Will establish
norms for
appliances and
equipment
Local production
and standards
EE not reflected
In facilities
Management or
investments
Knowledge
center,
procurement,
local production
support
Training,
Targets,
Preferred
suppliers
Public awareness
campaign
Public awareness
and marketing
Outreach to
industry
Other equipment
Public facilities
(educational and
healthcare)
Lighting
Public lighting
Co-financing
Both new and
existing buildings
EUR 10-50 million
in credit to
municipalities
Forfaiting
mechanism for
suppliers
Key Barrier
Addressed
Finance gap for
municipalities
Activities to
define and
support
“energyefficient”
technologies
Will develop
criteria for
prioritizing EE
investments
TA
Mechanisms
Support for project
preparation
USD 34 million in
EBRD loans
USD 50 million EBRD
line of credit
Russian Housing
Municipal Reform Fund
Under-representation
of EE in municipal
planning and housing
policy
Will establish criteria
for “EE buildings”
Federal target
programmes on
housing
Regional EE
funds
“Policy-topractice” gap
Will develop
criteria for
certification of
EE buildings
Will develop
criteria for
municipal EE
norms
Tendering Unit
Guidance to state fund
Support for municipal
energy planning
Three
demonstration
projects
Curriculum
Focus of
Capacity
Developmen
t Efforts and
Target
Group
Project ID and
preparation (for
municipalities and
public facilities)
Planning (for
municipalities)
Mainstreaming (for fed
govt)
Professional
training
Capacity to
support EE
buildings in
policy and
implementation
(Oblast govts)
Project prep (entities)
Replication:
Strategy and
Scope
Lessons learned
shared with
participating
municipalities
Federally through the
Housing Fund; to other
oblasts/okrugs through
IA activity
Forfaiting
mechanism
scaled up to
additional
municipalities
Disseminate best
practice for “highly
efficient buildings and
in municipal energy
planning
Training
(professionals;
trainers)
Lesson from
demos in 3
oblasts shared
at the territorial
(okrug) and
federal level
Professional
training
Demonstration of
implementation
Education
(households,
buyers, sellers)
Institutional
mechanisms
(federal govt)
Policy at federal
level, and then
Trials at oblast
level
Professional
training
Producers
Energy
managers
Commercial
buyers
Policy-makers
City and regional
procurement
Commercial
lenders
Building of
national capacity
for local
ownership
Agreements
with
key sectors
and
firms
Demonstration in
Moscow and
Nizhny Novgorod
9
B. DESCRIBE THE CONSISTENCY OF THE PROJECT WITH NATIONAL PRIORITIES/PLANS:
The project is highly relevant to the major priorities of the 2003 Energy Strategy of the Russian Federation for the period up to
2010. The significant potential for both energy and budgetary savings in public building energy efficiency (The Russian
Federal, Regional, and Local Governments spent approximately USD 10 billion on energy in 2005, with an estimated potential
saving of 30-40%) and in households, means that efficiency in this sector is important. This strategy includes:
 The reduction of specific costs for generation and use of energy resources be means of rational use, application of
energy saving technologies and equipment, losses reduction;
 The improvement of financial sustainability and efficiency of the use of a energy sector potential, increase of the
labour productivity.
 Maximally efficient use of natural fuel-energy resources and energy sector potential for economic growth and
improvement of the quality of living of citizens.
C. DESCRIBE THE CONSISTENCY OF THE PROJECT WITH GEF STRATEGIES AND STRATEGIC PROGRAMMES:
The Russian Energy Efficiency Program is submitted under the GEF Focal Area Climate Change-Mitigation, Strategic
Programme 1 “Promoting Energy Efficiency in Residential and Commercial Buildings”. The Program fully fits with the GEF-4
Focal Area strategy paper and contributes to the achievement of GEF CC mitigation objectives. In compliance with the GEF-4
strategic programming outline, the program will reduce institutional and capacity barriers to energy efficiency in Russia and
promote increased market penetration of energy-efficient technologies, practices, products, and materials in the residential,
commercial, and industrial sectors.
Fit with national priorities: Improved energy efficiency is one of the key priorities for the national economy for the coming 510 years and is clearly outlined in national policies, including the Federal Law on Energy Saving (1996) and a number of
regional (provincial) laws and programmes. The government has set a goal of reducing energy intensity of the economy in 2007
by 26-28% compared with 2000 partly through structural changes in the economy and partly through improved energy
efficiency and institutional measures. In addition, the government is in the process of developing a federal target program,
“Energy efficient economy for the period until 2015,” and a new edition of the Energy Strategy for the period until 2020.
D. OUTLINE THE COORDINATION WITH OTHER RELATED INITIATIVES:
The projects under the Russia Energy Efficiency Program will build on initiatives of other GEF projects including the UNDPGEF “Energy Efficiency in the Russian Education Sector”, and the UNDP-GEF project “Capacity Building to Reduce Key
Barriers to Energy Efficiency in Russian Residential Buildings and Heat Supply.” As the co-ordinating agency, UNDP will be
responsible for overall communications, including those with other GEF initiatives in Russia, such as the GEF projects led by
the World Bank (IFC) and UNEP (regional initiative in financing). The program will also build on the experiences of other
funders including the World Bank, NEFCO (Norway), and the European Commission’s TACIS programme. Co-ordination with
the USAID activities in Federal Energy Management (efficient federal energy buildings), regulations and institutional support
to enhance efficiency in budget-funded buildings including pilot projects will also be ensured.
The efficient lighting project will cooperate closely with and aim to learn from the GEF-UNEP-UNDP initiative “Global
Market Transformation for Efficient Lighting”. This co-development will benefit the development of the national project,
which can take account of global strategies and the interaction with international industries that take place there, whilst the
global project can learn from the practical implementation issues that emerge during the national project design stage, and take
these into account for its project development.
Further co-ordination of the proposed projects with ongoing initiatives will be explored as part of project preparation activities
of the individual projects.
E. DISCUSS THE VALUE-ADDED OF GEF INVOLVEMENT IN THE PROJECT DEMONSTRATED THROUGH
INCREMENTAL REASONING:
While it is difficult to calculate specific emission reductions during the initial design phase of the proposed projects, it is
expected that investments made in energy-efficient construction will generate savings of at least 30% over current building
stock and operations & maintenance practices. In industry, Initial estimates from an EBRD market demand study and model
for Russia indicate that a dedicated financing facility of 120 million USD, assuming 80% debt financing for projects, could
generate energy savings of 5600 GW per annum and emission reductions of up to 1.35 million tonnes CO2e per annum. Over a
10-year equipment lifetime this would result in 13.5 million tonnes, and a carbon cost per tonne of 9 USD / tCO 2eq.
In addition to the direct outcomes of the individual projects, the Russia Energy Efficiency Program should provide additional
global environmental benefits because it will increase the dissemination of successful practices across the projects and broaden
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the information and financing options available to municipalities, regions, and businesses participating in individual projects.
F. INDICATE RISKS, INCLUDING CLIMATE CHANGE RISKS, THAT MIGHT PREVENT THE PROJECT OBJECTIVE(S)
FROM BEING ACHIEVED, AND IF POSSIBLE INCLUDING RISK MEASURES THAT WILL BE TAKEN:
The Programme is being developed in partnership with the key Russian sectoral agencies and builds upon national investments
into energy efficiency, construction and development sectors. The Programme is supported by a constituency of stakeholders
and national expert networks. These factors will mitigate the risks to the effectiveness and sustainability of the programme. A
broad description of potential risks and a mitigation strategy are presented below. A more detailed description of risks is
presented in the individual project PIFs attached herewith.
Risk description
A complex multi-agency
programme structure.
Rating
L
Opposition from national
producers to the introduction
of international energy
efficiency practices and
standards as they will require
additional investments into
modernization
If energy prices remain low,
some of the energy efficiency
products and technologies
will not be cost-effective.
L
Insufficient capacities at the
municipal management level.
M
L
Mitigation
A coordination committee will be established to monitor and coordinate
implementation of the Umbrella Programme. Each individual project included in the
programme will be governed by a sectoral national executing agency represented in
the Programme Coordination Committee. He choice of national executing agencies
will be made based on technical expertise and responsibilities over the management
of national sectoral investments. This structure will ensure that any duplication and
inter-agency tensions are avoided.
This risk might affect plans for introducing energy efficiency standards and labeling
schemes and procurement standards. It will be mitigated through the involvement of
the Russian union of entrepreneurs and chamber of commerce to develop “adaptation
schemes” for the national producers. In addition to that, the project strategy will
utilize a strong government commitment towards reduction of energy intensity of
Russian industries to create effective policy environment for the change.
The prices for energy resources on the local market has been gradually growing over
the last years. Energy bills are becoming a noticeable component in the family
budgets. The labeling project will assess cost effectiveness of various technologies
and will focus its pilot phase on the equipment/technologies that generate biggest
savings. Large consumers (municipalities and companies) are motivated to reduce
energy use even at the current level of energy prices.
Capacity building will be included in all individual project proposals. In particular,
capacity building for municipal energy managers will be a core element of the EBRD
Municipal Buildings project, the EBRD Residential Buildings project, and the UNDP
NW Buildings project. For each individual project a set of criteria for the choice of
pilot regions and projects will be developed that would include political and financial
commitment of the regional and municipal authorities and presence of professional
agents/engineering companies or energy efficiency centres.
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1
G. DESCRIBE, IF POSSIBLE, THE EXPECTED COST-EFFECTIVENESS OF THE PROJECT (e.g. $/ton of CO2 abated). IF
COST-EFFECTIVENESS IS NOT PRESENTED, OUTLINE THE STEPS THAT PROJECT PREPARATION WOULD
UNDERTAKE TO PRESENT COST-EFFECTIVENESS AT CEO ENDORSEMENT:
Sector
Estimated cost effectiveness
Buildings in NW Russia
With the total funding of $29 mln, this suggests high cost-effectiveness of GHG abatement
measures of approximately $5.8/tCO2. Additional impact is expected through the replication
of project solutions to other regions through out the Russian Federation.
Public Buildings
Experience shows that investments in buildings energy bills have been reduced by around
40%. Details of cost effectiveness (and emission reductions per USD spent) will we
determined during PPG execution.
Urban Housing
Energy savings and avoided emissions can be substantial in an urban housing efficiency
project. For example, as result of a shift to a more rigorous, performance-based code in
1999, the city of Moscow realized estimated energy savings of 0.7 TWh, with equivalent
emission offsets of 120,000 tons in two years (Matrosov, 2004). Based on current operating
conditions and the proposed performance of the buildings in the project, EBRD estimates
that the refurbishment of housing stock within the context of the project will generate a
emission reduction of 30% relative to the situation at the start of the project.
Standards and Labeling
The project is projected to realize energy savings of 15-20 TWh/year (10-15 MtCO2/year) by
the end of the project, and 30-35 TWh/year (25-30 MtCO2/year) by the end of the impact
period.
The total GEF requested contribution is USD 7.96 million, leading to a cost-effectiveness of
USD 0.08/ton CO2, which is extremely cost-effective in comparison to most other GEF CC
projects.
Efficient lighting
Total savings amount to approximately 62 Mton cumulatively for this project, against a
requested GEF-allocation of USD 7.5 million, resulting in an estimated cost-effectiveness of
$ 0.12 per ton CO2.
Industrial Energy Efficiency
Initial estimates from an EBRD market demand study and model for Russia indicate that a
dedicated financing facility of 120 million USD, assuming 80% debt financing for projects,
could generate energy savings of 5600 GW per annum and emission reductions of up to 1.35
million tonnes CO2e per annum. Over a 10-year equipment lifetime this would result in 13.5
million tonnes, and a carbon cost per tonne of 9 USD / tCO 2eq. For the GEF grant of 15.6
million USD this would represent a highly cost effective direct impact of about 1.2 USD /
tCO2eq. The project would also generate additional savings through the standards and
agreements components.
H. JUSTIFY THE GEF AGENCY COMPARATIVE ADVANTAGE (LEAVE BLANK IF GEF AGENCY IS WITHIN THE
COMPARATIVE ADVANTAGE MATRIX)
The role of UNDP as the coordinating agency for the Russia Energy Efficiency Program fits well with its emphasis on capacity
development and technical assistance. The proposed interventions are in line with UNDP comparative advantages as presented
in GEF comparative advantage matrix. The project is focused on local capacity building and transferring energy efficiency
know-how and tools to the local level decision-makers and professionals. Capacity building at the local and provincial levels is
seen as a prerequisite to market transformation and effective energy demand management.
The EBRD has a long-term experience in working with public bodies in Russia, and significant regional experience in
Municipal Finance and the Construction sector. EBRD has mainstreamed energy efficiency activities across all investment
operations, and it has a substantial private sector portfolio in Russia in key industrial sectors. Energy efficiency is the
cornerstone of the EBRD’s Sustainable Energy Initiative, launched in 2006. It aims to double EBRD investments in sustainable
energy to €1.5 billion in the period 2006-2008.
Both EBRD and UNIDO have been recognized as having comparative advantages for industrial energy efficiency by the GEF
Secretariat. EBRD would complement UNIDO’s industrial energy efficiency capacity and expertise with its experience with
energy efficiency project financing mechanisms.
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