Kosovo Energy Efficiency & Renewable Energy Project

The Kosovo Energy Efficiency & Renewable Energy Project (hereafter Project) supported by a US$31 million IDA credit to provide the necessary investment financing and policy support in order to meet the project development objectives and government energy efficiency (EE) and renewable energy (RE) targets.

The project development objectives are to reduce energy consumption and fossil fuel use in public buildings through energy efficiency (EE) and renewable energy (RE) investments, and to enhance the policy and regulatory environment for RE and EE.

To achieve projectdevelopment objectives, the project consists of three components:

1. EE and RE investments in public buildings
2. Policy and regulatory support for RE/EE
3. Project implementation support

1. Energy Efficiency and Renewable Energy investments in public buildings:
Under this Component, EE and RE investments would be undertaken in public facilities (both central-owned and municipal government buildings). It is expected that such subprojects will generate demonstrable energy cost savings and social co-benefits (e.g., improved indoor temperature and comfort, reduced occupant sick days, better indoor air quality, and reduced local/global pollution).

First component of the project consists four sub- components:
(a) EE and RE investments in central government buildings (US$22.0 million). Centrally owned buildings span several ministries, with the main users being Education, Health, Justice and Culture. All these buildings have very high energy use and most meet or exceed norms for internal comfort levels, with estimated energy savings potential of over 40 percent. Under this subcomponent, it is proposed to finance eligible EE and RE investments in central government buildings about 140 buildings thereby significantly reducing energy use and public expenditures in heating and power services.
(b) Pilot EE investment program for municipalities (US$6.0 million). The program involves 1-2 rounds of competitive calls in the latter years of the project for municipal proposals for grants to support building and street lighting improvements with some co-financing requirement, or possibly a budgetary mechanism to recover part of the funds.
(c) Technical studies and supervision (US$1.36 million). This subcomponent would include consultancies to support the investment component, including development of detailed designs and bidding documents, construction supervision, and project commissioning /passports.
(d) Training of firms (US$0.20 million). This subcomponent would support targeted training of design firms, construction companies and other EE/RE service providers to ensure adequate technical competencies and learning lessons from early projects, such as reasons for variations from energy audits and commissioning, typical technical design and construction weaknesses, etc.

2 Policy and regulatory support for RE/EE
Second component of the project consists two sub- components:
(a) Support to ERO for RE and EE development (US$1.6 million). This subcomponent will focus on four areas: (i) support for the regulatory regime as it relates to RE, including FiTs, and consumption-based DH tariffs to ensure an effective and economically efficient policy and regulatory regime; (ii) streamlining the permitting and licensing process, including mechanisms to monitor applications; (iii) support for formalizing the grid integration rules, including grid balancing, curtailment, etc.; and (iv) further analyses on FiT cost recovery mechanisms and impacts on consumer affordability.
(b) Support to MoED for EE secondary legislation and implementation (US$0.70 million). Under this subcomponent, support will be provided to MoED to: (i) develop a sustainable municipal EE financing scheme (e.g., revolving EE fund) to scale-up the municipal EE pilot program under Component 1b; and (ii) review of public procurement rules as they relate to energy efficient equipment and services (e.g., ESCOs). In addition, support to MESP under the project will be provided to: (iii) develop an implementation plan for the new obligation to establish homeowner associations (HOAs) and help pilot some to implement EE measures.

3 Project implementation support (US$ 0.64 million)
The project will also support the main implementing agency, KEEA, to help ensure effective project implementation of the other two components. This would include: (i) creation of a project implementation unit (PIU) within KEEA to carryout Components 1-2, including support for procurement, financial management, technical oversight, project monitoring and reporting, and financial audits; and (ii) training of KEEA and PIU staff to ensure effective implementation of the project and sustainability of project activities and goals.