First two municipalities implement ESCO projects
Makedonska Kamenica and Chesinovo Obleshevo are the first two municipalities in North Macedonia to implement Energy Savings Performance Contracts (ESCO). With Makedonski Telekom as an Energy Service Company (ESCO), they will work on developing energy efficient street lighting.
The EBRD helped facilitate this through Regional Energy Efficiency Programme (REEP), funded by the EU and supported by the Energy Community.
ESCOs use specific model contracts that enable the implementation of energy efficiency projects for street lighting, industry and energy supply (heat and electricity).
These financing and legal solutions are beneficial because they recover investments from savings in energy costs, without requiring upfront payment by the beneficiary.
Makedonski Telekom will pay for the total investment needed for replacing old lighting with high quality LEDs, while the municipalities will repay the whole investment exclusively through energy savings guaranteed by the ESCO.
The contract period is around six years, during which the ESCO company undertakes the responsibility of proper installation and maintenance of the equipment. Upon completion of the contract term, all energy savings and equipment will remain with the municipalities.
The mayor of Makedonska Kamenica, Sonja Stamenkovska, welcomed the opportunity to participate in ESCO projects: “It will allow us to reconstruct and modernise the lighting infrastructure in our towns and, at the same time, achieve long-term energy savings”.
Reforming energy efficiency legal framework
The implementation of ESCO projects is possible in North Macedonia thanks to a new Energy Efficiency Law that the country passed at the end of February.
This breakthrough in North Macedonia’s energy efficiency area came as a result of the ongoing work between the Ministry of Economy and the EBRD through the Western Balkans Regional Energy Efficiency Programme (REEP), supported by the European Union and implemented in partnership with the Energy Community Secretariat.
Remon Zakaria, Associate Director of the EBRD Energy Efficiency and Climate Change team, explains: “The support provided under REEP has contributed to creating the enabling environment for ESCOs in North Macedonia.
REEP leverages EBRD’s well-tested business model, combining policy dialogue, technical assistance and financing to promote market development and deliver green investments.”
Transforming the Western Balkans energy market
As a party to the Energy Community Treaty, North Macedonia, like other Western Balkans countries, is obliged to implement the EU energy acquis in force, which implies the extension of EU rules and principles to the Western Balkans region, allowing for the creation of an integrated, pan-European energy market. REEP supports this transformation and the alignment with EU legislation.
“Achieving energy efficiency remains a key challenge in the Western Balkans countries, where energy usage is estimated to be up to 2.5 times higher than the average in the EU.
These countries must make significant investments and reform their energy-related legal frameworks to improve the current situation and we support them in these efforts”, said Nicola Bertolini, Head of Cooperation Section, EU Delegation to the Republic of North Macedonia.
“In addition to financing green projects in the Western Balkans, the EBRD is also very active in engaging with national governments to reform legal and policy frameworks and help them align with the EU acquis to create an environment which enables further energy efficiency investments,” adds Zsuzsanna Hargitai, EBRD Head of Western Balkans.
Thanks to the support of the EU and other donors, the REEP has contributed to creating a sustainable market for energy efficiency in the Western Balkans.
Over €104 million in investment grants and €512 million in loans have been channelled through REEP in renewable energy and energy efficiency projects in the residential, public and commercial/ SMEs sectors, either directly from the EBRD or through local financial institutions.
The EU’s Green Agenda for the Western Balkans, which is currently being drafted and due to be presented at the EU-Western Balkans summit in May in Zagreb, is expected to enhance the participation of REEP as an implementation tool that can cater for the full scope of green issues that the region needs to address.
Violeta Kogalniceanu, Energy Community Secretariat, Head of Infrastructure and Energy Efficiency Unit, explains: “Energy efficiency is the best solution to a multitude of problems in the Wester Balkans and North Macedonia: economic competitiveness, balance of payments for energy use, security of energy supply, energy poverty, quality of live in residential sector, quality of air, healthy education facilities, sustainable transport, etc.
Implementing energy efficiency policy measures (law and regulations, programmes) should go hand in hand with investments. And this is what REEP brings under a single, unique regional programme.
North Macedonia has understood the benefit of having a modern Law on Energy Efficiency covering all aspects, from industry, to buildings and appliances. It is at the core of removing investment barriers and opening the path for energy services delivered by private companies (ESCOs) in public sector’s facilities”.
