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EBRD's Netherlands Carbon Fund finances renewable energy deals in Bulgaria

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Harmful greenhouse gases are responsible for climate change.

Bank, donors also target energy efficiency in Bulgarian residential buildings

The Netherlands Carbon Fund administered by the EBRD is financing two new projects in Bulgaria to increase energy efficiency and to bring about a substantial reduction in harmful greenhouse gases (GHG), responsible for climate change.

In the first of the two new projects finalised in September 2007, nine small hydropower plants will be implemented along the river Iskar, about 40 km north of Sofia, with the aim of cutting 336,462 tonnes of CO2 by 2012 by replacing fossil fuels otherwise used to generate electricity with hydropower capacity that is a renewable, zero-emission energy source. The second project entails the production of electricity and heat at the Kubratovo wastewater treatment plant, 20 km outside Sofia. The methane produced at the plant, which would otherwise have been emitted into the atmosphere, will be captured and used in a combined heat and power plant for electricity and heat production. It is expected that by 2012, emission of CO2 equivalent will be reduced by as much as 1.1 million tonnes.

In a separate development targeting the development of sustainable energy usage in Bulgaria, the EBRD and the Bulgarian government unveiled plans to support increased investments in energy efficiency of residential buildings in Bulgaria and reduce the energy intensity of the economy.

The EBRD/Dutch partnership dates back to 2003, when the Netherlands and the Bank created one of the first carbon trading programmes focussing on projects in transition economies. The Netherlands Carbon Fund was established with €35 million to invest in ‘climate-friendly’ projects in the EBRD countries of operations. Since then, it has contracted seven projects: five in Bulgaria, one in Romania and one in Ukraine.

The EBRD Director for Energy Efficiency & Climate Change, Jacquelin Ligot, points out that not only do the deals cut emissions and help to combat climate change, but they also help to secure and diversify Bulgaria’s fuel supply mix by maximising generation from renewable sources. He also stresses that the ability to provide both project finance and “carbon finance” gives the Bank a competitive edge. Clients like this “one stop shop” and the additional “free money” derived from selling carbon credits.

New carbon projects in Bulgaria and across the region will be developed under a joint EBRD-EIB fund: the Multilateral Carbon Credit Fund (MCCF). This will facilitate the purchase of carbon credits from projects across the high energy intensity countries in the region. Typical projects will include industrial energy efficiency, fuel-switch, renewable energy (for example, biomass, wind and mini-hydro) and landfill gas extraction and utilisation projects.

The EBRD is particularly eager to work on energy efficiency and renewable projects in its countries of operations and in May 2006 the Bank launched its Sustainable Energy Initiative to focus more intensely on energy projects in the EBRD region.

Typical of many central and eastern European economies where endemic energy wastage remains a legacy of the communist past, Bulgaria consumes twice as much energy per capita on a purchasing power parity basis compared with the average in the 25 countries making up the EU before the accession of Bulgaria and Romania in 2007.

With studies showing that at least 35% of Bulgaria’s energy saving potential is in the household sector, the residential sector was another obvious choice for EBRD investments. Many buildings need external thermal insulation, modernization of the interior pipes network and windows replacement. Despite the huge technical and economic potential for investment, various barriers prevent these improvements from being made.

For this reason the EBRD and the Bulgarian government announced plans in September to increase investments to improve the energy efficiency of residential buildings in Bulgaria and reduce the energy intensity of the economy, with donors who support a fund for the decommissioning of Bulgaria’s Kozloduy nuclear power station agreeing to increase their financing for residential energy efficiency projects by €4.60 million to €14.60 million.

The funds are used partly to provide financial incentives to households investing in EBRD-sponsored energy efficiency measures. These incentives, provided in the form of grants,  are being raised from 20% of the EBRD-sponsored loan to 30% where residents of apartment blocks join together to pursue energy efficiency measures that have an impact on the whole building.

By Anthony Williams, Head of Media Relations
Photos: EBRD
Contact: Energy Efficiency and Climate Change

19 November 2007