EBRD helps Russia save energy

By Lucia Sconosciuto

Halving energy costs is one of those achievements that can really make a difference to a small company. One Russian asphalt producer knows this from experience and has become more profitable by replacing old electric heaters and fuel oil burners with modern gas burners. This also leads to around 500 tonnes of CO2 emissions less each year.

To achieve this, the company received a loan from NBD Bank, a relatively small regional bank specialising in lending to small and medium-sized enterprises (SMEs), under the EBRD’s US$ 300 million Russian Sustainable Energy Financing Facility (RuSEFF) credit line. (A video on RuSEFF's work in the residential sector is above.)

The facility channels technical support (funded by Germany and the EBRD Shareholder Special Fund) and loans for small-scale energy efficiency projects to industrial companies and small businesses via partner banks.

The EBRD has put the promotion of energy efficiency at the top of its agenda in Russia. The need for action is growing: the country ranks fourth among the world’s largest CO2 emitters and its energy intensity is estimated to be about 2.5 times higher than the average of all other countries. As such, the opportunities to reduce Russia’s carbon footprint across all sectors are immense. But so are the challenges.

Embracing the business development opportunity and in the spirit of self-sustainability, as a ‘first mover’, the NBD Bank has established long-term energy-efficiency lending activities that continue today with its own funds.

Much effort went into actively creating demand for energy saving investments, a strategy that has paid off. Having supported more than 50 companies to introduce energy saving technologies and having helped to reduce annual CO2 emissions by 65,000 tonnes (equivalent to the annual greenhouse gas (GHG) emission of 13,500 cars), in April 2013, NBD Bank was awarded with the “Green Rouble” award for the best ecologically responsible financing product by the Ministry of Ecology and Natural Resources of the Nizhniy Novgorod region.

As the work with NBD Bank shows, RuSEFF uses a strategic approach to build the capacity of local financial institutions to market and finance sustainable energy as well as in spreading awareness and belief in the value of GHG emission reduction projects.

The EBRD has therefore broadened the scope of RuSEFF and expanded it to new partner banks. It is also mainstreaming sustainable energy in another energy intensive sector, the residential one, the second largest energy consumer after industry.

The residential focus of RuSEFF, which is supported through technical cooperation funded by the Austrian Federal Ministry of Finance, was officially launched in Moscow in the spring. Centre-Invest Bank, based in Rostov-on-Don, is the first bank to have signed up to this new EBRD programme, borrowing 750 million roubles for on-lending to its clients in southern Russia.

“The Bank is focusing on Russian regions with vast potential for energy improvements in buildings but limited access to sustainable energy financing,” explains Ksenia Brockmann, Principal Manager in the Bank’s Energy Efficiency team. “The Southern, Urals and Volga Federal Districts have a high level of urbanisation (56.8 million inhabitants) and well developed local manufacturing industries that can contribute to the production and installation of energy efficiency technologies for the residential sector.”

The timing of this initiative could not be better. According to a joint EBRD/IFC study funded by the Global Environment Facility (GEF), about 60 per cent of Russian multi-family apartment buildings are now in need of urgent capital repair. Energy efficient improvements could be carried out as part of the due renovations.

In a bid to achieve critical mass in the sector’s energy efficiency, the Bank is helping the government improve the regulatory architecture and construction standards for residential buildings and to introduce financing instruments able to provide the necessary capital for modernisation.

Many Russian homes will be more comfortable places in which to live and, thanks to cuts on energy bill, more affordable too.