East Europe wants to be greener

1 October 2010

A large number of new and prospective green projects in eastern Europe owe their existence to the active promotion and enthusiastic take-up of renewables technologies in the region.

When it comes to the power sector, it certainly pays to be green in eastern Europe right now. The London-based European Bank for Reconstruction and Development (EBRD), whose mandate is to bring sustainable development to eastern Europe and central Asia, has been especially active in promoting green energy across the region. In May, for instance, it issued a Euros90 m funding project for green energy in Slovakia, bringing the amount granted to the country in the past three years to Euros150 m, to finance 280 efficiency and renewable energy projects in industrial and residential sectors. It is just one of a series of financing projects the bank has taken forward that will ‘green’ energy systems in countries that have had a reputation for electricity generation waste and pollution. More widely, the EBRD has now committed over Euros900m to sustainable energy finance facilities in Bosnia & Herzegovina, Bulgaria, Georgia, Hungary, Kazakhstan, Macedonia, Romania, Moldova, Montenegro, Russia, Serbia and Ukraine. And this year Montenegro, Georgia and Croatia all became signatories to IRENA, the International Renewable Energy Agency, a new intergovernmental organisation, committing themselves to a transition to wide and sustainable renewable energy usage.

‘The countries of south-eastern Europe, and Turkey, realise unequivocally how important renewable energy is’ said Ricardo Puliti, EBRD managing director for energy and natural resources. ‘They are trying their best in different economic circumstances to create frameworks that help renewable energy companies.’

It can be easier to get green energy off the ground in these countries because it is happening at the same time as their outdated electricity industries are finally being overhauled and updated. Inadequate power links and interconnectors plague the region, as do capacity problems, trans-frontier bottlenecks, congestion and missing links and poor interoperability. According to the EBRD, green energy initiatives can step into the reconstruction gap, combining fundamental reforms of the sector with major environmental improvements.

‘The upgrading and replacement of old equipment is going on in parallel with the development of renewable energy’ said Mr Puliti, who acknowledges that the EBRD’s push is linked to the region’s notoriety during the Communist era for wasteful and inefficient energy production. ‘In the past 20 years the energy intensity of their economies has decreased enormously. Owing to the conversion of these countries from very inefficient heavy industries to a different economic market their energy use has reduced.’

Energy efficiency

The countries of eastern Europe and the Balkans remain among the most energy intensive economies in the world when measured by carbon emissions per unit of GDP. According to the EBRD, Romanian energy use is 3.5 times more intense than the EU average; in Serbia that figure is five times; Moldova is nine times more energy and carbon-intensive, and the Ukraine three times more. Outdated district heating systems in Ukraine account for 20% of carbon dioxide and 81% of methane emissions produced by fossil fuel combustion in the country.

Renewables have been identified as one of the primary means of increasing energy production in the region. Nearly 30% of electricity in south-eastern Europe is already generated by hydropower plants. ‘Wind, biomass and solar energy are the emerging new sources of energy. The region has huge benefits to gain by using these sources’ says Milko Kovachev, senior adviser in the EBRD’s power and energy team.

In response, the EBRD has set up the EU/EBRD energy efficiency finance facility, a grant-supported financing line. The intention is to maximise energy savings, mitigate the impact of rising energy prices and to improve overall competitiveness. In Bulgaria, the EBRD is investing in the construction of a wind farm and nine small hydropower plants, supporting a local company, Petroville, while in Turkey its funds have helped local company Zorlu to establish a 250 MW windfarm.

In Romania this spring, the bank issued a new r10 m loan to Banca Comerciala Romana, specifically designated to further lend to private companies seeking to improve their energy efficiency. So far, such loans have enabled the Romanian bank to finance 14 energy efficiency projects, which enabled BCR clients to reduce their energy bills and cut emissions by up to 60% and improve overall productivity.

Cableteam SRL, a Romanian electric cables company based in Sighisoara, used a Euros 90 000 grant to capture waste exhaust heat from an air compressor and use it for producing hot tap water and to modernise a wiredrawing machine. This reduced energy consumption from 720 MWh/year to 480 MWh/year, giving a payback time of less than three years.

In another Romanian project Sterk Plast, which manufactures over 200 types of household plastic items in Medgidia, used a Euros345 200 grant to raise production capacity while reducing energy. Measures included replacing extrusion blow moulding machines and installing two new plastic injection machines that feature automatic command, control by LCD display, closed circuit water-cooling with control system, and automatic loading and drying of raw materials. Savings amount to 2878 MWh/year.

In Serbia, drawing on a model from Sweden, district heating systems have been modernised in five major cities, significantly reducing pollution. Another initiative , a r5 m installation of new dust filters, has reduced air pollution from Kostolac power station by more than 90%. In 2008, the EU’s European Reconstruction Agency provided r28 m to renew the boiler ash disposal system at Serbia’s biggest power station, Nikola Tesla B, reducing pollution and improving water quality.

In Kosovo, district heating systems have been restored, and rendered much more efficient, in Pristina, Mitrovica, and Gjakova/Djakovica, three of the most heavily populated areas. But challenges remain: at Kosovo B power station, Pristina, the electro-static filter system was refurbished, drastically reducing pollution. But the disposal of ash from the plant remains to be addressed.

Grant system

Some countries, such as Moldova, have turned to the EBRD to invest in energy efficiency in the context of rising energy prices and the global financial crisis.  In Moldova, the EBRD has developed a r20 m sustainable energy financing facility, lending to banks in Moldova through dedicated credit lines. These banks will use the loans to finance energy efficiency and renewable energy projects in the industrial sector, small and medium-sized businesses, commercial properties and heat-generating renewable energy projects. An internal EBRD report on Moldova shows that the greatest potential lies in the residential sector, which is the highest consumer of energy and could achieve savings of up to 45%.

The EBRD is not the only western European partner financing green projects in the region. Germany provided a r46 m grant towards the building of Bosnia’s first wind farm, to improvements in waste water disposal and in upgrading hydro-power plants and the country’s power distribution network. In February this year, the Bosnian government announced plans to construct six thermal plants and wind power stations and 16 hydro stations. According to Bosnia’s federal ministry of energy, the country’s wind power capacity is between 1000 and 1200 MW.

The EBRD is adamant that renewable energy will create jobs and makes sound economic sense. ‘The aim is to develop an industry that will create jobs in the future’ said Mr Puliti, ‘at manufacturing, technological and operational levels. This will also benefit major European companies in the field.’

A key challenge, however, is the lack of technical expertise in a region with no established history of renewable energy, and, in places, an absence of basic equipment. Ukraine’s fourth largest city, Odessa, has embarked on an EBRD-backed r21.9m project to revamp its inefficient district heating; the network has no meters, meaning that calculations of heat sales, boiler efficiency, and network losses are purely theoretical.

‘The main challenge is the establishment of adequate policies, so that renewable energies can develop properly’ says Hélène Pelosse, director-general of IRENA. ‘The quick rate of ratification of IRENA shows that the member states are very eager to participate in its action.’

‘From a technical viewpoint, these are turnkey projects’ said Mr Puliti. ‘Whoever applies for a licence will come with their own technical advisors. The key is for these countries to make the regulatory regime for green energy favourable.’

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