4. Energy Policy in South East Europe
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Energy Community Treaty
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Guiding the energy policy in SEE
Signatories: EU and the countries of SEE
Energy Community
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extends the EU internal energy (electricity and gas) market to South East Europe and
beyond
overall framework to guide the necessary reforms and promote investments
makes a significant contribution to security of supply in the wider Europe
Energy Community Secretariat
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supports the Contracting Parties in fulfilling their obligations and has established a
number of working groups and task forces to facilitate their efforts: Gas, Oil, Electricity,
Investments, Energy Efficiency, Renewable Energy, Security of supply, Competition,
Environment, Regional Energy Strategy.
EU Enlargement
5. SEE 2020: RE and EE Targets
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Energy efficiency:
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Renewable energy:
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savings of 9% of final energy consumption, by 2018
to be achieved by 2020
Albania 38 %, Bosnia and Herzegovina 40 %, Croatia 20 %, Former Yugoslav
Republic of Macedonia 28 %, Montenegro 33 %, Serbia 27 %, Kosovo* 25 %
Energy intensity of GDP: reduce to the World average (in 2010: 0.25 tonnes of
oil equivalent per 1000 USD (2005) of GDP).
Unit cost of energy: decrease by improving average electricity thermal
generation efficiency to 38% and increasing utilization rates to over 74%.
Terms of trade in energy: improve (natural gas import price to NBP index and
electricity export prices to over EEX average).
Hydro power: create more value by increasing share of variable energy to over
45%.
EU Enlargement
6. Importance of Infrastructure Investments
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Instrument for Pre-Accession (IPA) recognises that
infrastructure investments are vital for:
• socio-economic growth;
• integration of the region into the EU’s internal market
for energy (ECT); and
• to facilitate diversity and security of supply for the EU
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Support has been available under national IPA and
multi-beneficiary (regional) IPA
EU Enlargement
7. Projects of Energy Community Interest
(PECIs)
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Priority energy infrastructure investments
Endorsed by all SEE6 beneficiary countries
Used to determine eligibility for grant support
Mirroring similar PCI list of the EU
However, SEE6 not having the equivalent
Connecting Europe Facility: available to EU MS as
grants for studies, special lending, various forms of
loan guarantees, risk sharing facilities, eventually
project bonds
EU Enlargement
9. Programming of IPA 2
Sectoral approach
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Component structure replaced by comprehensive country strategies
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Move towards a logic of (co)financing policy strategies instead of
individual projects
Single pipeline
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Rolling investment plans for each sectors linking to regional strategies
(TEN-T Transport, Energy)
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Coherence of assistance and IFI/donor coordination
Increased role of WBIF
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High Level Meeting confirmed central role of WBIF as main vehicle to
reinforce cooperation on investments in the region
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More resources to be channelled through WBIF
EU Enlargement
10. IPA 2: Figures
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Total IPA budget ~€12 billion
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7 bio for TR, 5 bio for SEE6 /7 years
715 mio for SEE 6 p.a. /6 countries
120 mio for SEE 6 per country p.a. /2 (REG vs. NATL)
60 mio for per country annually for regional IPA
Estimated investments needed in energy: between
€ 30-40 bio over 2014-2020
EU Enlargement
11. What is the WBIF?
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Western Balkans Investment Framework:
overarching financial vehicle of regional IPA
WBIF blends grants and loans to expedite priority
investments in key sectors
WBIF Stakeholders: beneficiary countries, EC, IFIs
and bilateral donors
Applications for support come from beneficiary
countries
EU Enlargement
13. WBIF Operating Framework –
Application Process
Project
Preparation
Joint Lending
Facility
•Technical
Assistance
•Feasibility studies
•Loans
•Designs
•EC IPA
•Investment grants
National and
regional
projects
Joint Grant
Facility
•Tender
documentation
•Government
funding
•Interest rate
subsidies
Resources
Bilateral donors
EU IPA
IFI grants
EU Enlargement
•Assistance to
financial
intermediaries
•Supervision
•Assistance to
PIUs
Construction
Beneficiaries
14. WBIF Operating Framework –
Governance Structure
WBIF Secretariat – DG Enlargement
Supports the administration of the WBIF
Technical Assistance
Infrastructure Project Facilities I, II and III
IFI Coordination Office
EU Enlargement
15. Select achievements – WBIF grants to
date
169 grants supported by WBIF
300 M€ grants allocated to approved projects
More than 2.7 billion € loans signed to date
WBIF pipeline contains more than 13 billion € total
estimated investments
EU Enlargement
21. Energy in the WBIF
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41 grants awarded for energy related projects
Grant support € 71.8 million, 27% of all grants
Total signed loans € 270 million; estimated total
investment € 3.6 billion
Projects include electricity transmission (11), gas
transmission (8), district heating (7), renewable
energy (10), energy efficiency (5)
EU Enlargement
22. Growth in signed loans by sector
(€ billion)
EU Enlargement
Data for November 2011, 12, 13
23. Growth in total estimated investment of WBIF pipeline
(€ billion)
Data for November 2011, 12, 13
EU Enlargement
24. Select achievements – WBIF pipeline
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Pipeline has grown steadily over total 10 rounds of
calls for proposals
Pipeline of loans currently 3 times larger than
original target
Project preparation is progressing
Signed loans increasing, currently at > €2,7 billion
from 2,3 billion in 2012
34 projects at tendering/construction
EU Enlargement
25. Investment Facilities:
Regional EE Program (REEP)
Initiated 2013 with EBRD. Total EC contribution €23,5 mio.
Window I – Policy Dialogue
• €6m for technical assistance, facilitate policy dialogue with all the authorities
• regulatory frameworks, market barriers, investment in EE, ESCO markets
Window II – Credit Line (WeBSEFF II)
• €75m credit line framework
• to local financial institutions for onlending to smaller EE and RE projects; private,
public
• WBIF in addition provides €11.5m grant funding for TA and investment incentives
Window III – Direct Financing (WeBSEDFF)
• €50m to replenish WeBSEDFF funding
• medium scale RE and EE improvements in industrial enterprises; ESCO projects
• Grants to the amount of €6.35m to fund TA and investment incentives
EU Enlargement
26. Investment Facilities:
Green for Growth (GGF)
Initiated 2009 with EIB, KfW. Total EC contribution €20
mio.
Difference: investment fund.
EU's 20/20/20 energy targets: financing for EE and RE
projects to reduce CO2 emissions and energy consumption
Credit lines via local commercial banks
Direct financing
TA Facility
EU Enlargement
27. Select achievements in EE and RE:
Example 1: Plum Factory (WBIF/REEP, Serbia)
Example 2: Furniture Factory (WBIF/REEP, Serbia)
Example 3: Wind Farm (WBIF, Macedonia)
EU Enlargement
28. Select achievements – WBIF projects
under construction
Wind Park Bogdanci – the Former Yugoslav Republic of Macedonia
Installation of 16 machines with a capacity of 36.8MW and an annual
output of 100GWh of renewable energy
Will eventually grow to 25 machines with a capacity of 52.5MW
WBIF support: i) Feasibility study; ii) Wind measurement studies; iii)
Environmental and social impact analysis; iv) Optimal machine
positioning and site layout
Finances
i) WBIF- IPA grant: € 400,000
ii) IFI loan (KfW): € 33,000,000
Estimate total investment: € 75,000,000
Project partners: ELEM | KfW
Status: Constructed – Wind Park stated operations in Summer 2013
EU Enlargement
29. WBIF Going Forward: Adapting to a
Changing Operating Environment
EU Enlargement
30. Macro-economic Outlook – Growth
projections in the SEE6
• Recession in Euro area has affected growth
prospects for SEE6 countries.
• IMF predicting very modest economic recovery.
• Will affect:
Investments - public and private
Private Consumption
Scope for government activities
EU Enlargement
31. Issues Arising
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Immense scale of financing required
Rising public debt, several countries nearing or
exceeding 60% of GDP
Impact of IMF programmes
Current expenditure increasing, capital expenditure
being cut
Overall investment climate & competitiveness
Limited fiscal space & scarcity of grant funds
EU Enlargement
34. Macro-economic Outlook – Implications
for the WBIF
Austerity programmes were implemented mainly at
the expense of public infrastructure development.
Greater
emphasis on the need for proper
prioritisation of investment projects (current and
planned)
Enhance links with regional, national and sectoral
policies and strategies (SEE 2020, ECT, Transport.
CEFTA etc)
Shift of focus to expediting priority investments
under preparation
EU Enlargement
35. WBIF Task Force – Main Tasks
•Detailed Review of the WBIF Pipeline
•Assess options to use innovative financing facilities
(starting with PPPs)
•Recommend changes to WBIF structures and
procedures to take account of lessons learnt &
impact of external environment & processes
EU Enlargement
Over 85% of grants by number are TAs. Numbers are TAs 131; Investment grants 19; IRS 5 (linked to TAs); FF 2. Average size of TA is 0.86 million and average investment grants is 5.0 million. By value TAs are less 40% with Investment grants 35% And Financing facilities 20%. 5% IRS
Reasonable overall balance between sectors both by number and by value for infrastructure projects
PSD has only two grants but of course one of these is the EDIF SME grant which is 34 million and 20% of portfolio by value
Reasonable balance. Croatia has become active over last two years and Kosovo has increased its number due to the addition of World Bank as lead IFI.
Regional projects have been pushed hard at three NIPAC workshops but the number remain modest although significant.
45 projects have signed loan agreements
39 grants have had project preparation services completed
34 projects are at tendering/construction stage
20 are under construction
Growth in signed loans from 800 million to 1,600 million in last two years (April to April). Loans are listed in Tab
Report is structured into these three parts
The total debt for the region almost doubled in absolute values in 2012 compared to 2006.
average annual growth rate of about 1.8% as expected for 2013-14 is insufficient to stimulate socio-economic development and sustain the build-up of growth-enhancing infrastructure.
National saving in the Western Balkans is generally insufficient to maintain a healthy rate of growth through self-sustaining real capital formation, whose financing still depends decisively on foreign direct investments, foreign lending, external financial support (grants, loans from IFIs), and remittances.
The challenge is to mobilise continuous and possibly expanding funds for ensuring access to capital for growth to finance activities such as infrastructure investments, SMEs and innovation in the region, and for generating positive spillovers for the EU.
all available assessments of infrastructure needs as well as tentative estimates of possible financing gaps point to substantial shortages in socio-economic infrastructure in the Western Balkans relative to the average or standard provision of infrastructure services in the EU.
