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BULGARIA: ENERGY EFFICIENCY STRATEGY
TO MITIGATE GREENHOUSE GAS EMISSIONS
RELEVANCE TO GEF
1. The project is clearly relevant to the global warming area of GEF. It will improve the efficiency of energy supply and use in Bulgaria, through enhancing the technical capacity of municipal governments, and providing information and financing opportunities for projects in the country. GEF funding will also be used for three demonstration projects: improved street lighting, district heating and buildings in the service sector. Implementation of the project will reduce carbon dioxide emissions from reduced fossil fuel and electricity consumption in the three sectors.
OBJECTIVES OF THE PROJECT
2. The project objectives are well stated and the specific objectives are clear. The project's basic objective is to improve the efficiency of energy use in Bulgaria. This will be achieved through improving the capacity of municipal governments for energy efficiency improvements, by providing financing opportunities and through demonstrations in three sectors: district heating, street lighting and building energy use. These objectives are worth pursuing, since Bulgaria'' central planners had neglected improving energy efficiency throughout the energy sector. The potential for negative cost improvements is large and the proposal documents the many barriers to these improvements, which would be overcome through activities implemented as part of this project.
APPROPRIATENESS OF THE PROJECT APPROACH
3. The project approach takes into consideration stake-holder interests and is not centrally driven. Thus it has the potential to be implemented better and faster with broad acceptance among all the participants. One barrier that the project needs to address more carefully is the lack of metering at the customer level. Most energy supply, natural gas and steam/hot water from district heating, is not metered at the point of delivery. This is a major disincentive to more efficient energy use. The project notes this as a barrier without focusing on approaches to overcoming it. It is important that the approach incorporate ways to address this issue.
ACTIVITIES
4. The activities noted in the proposal are appropriate for the implementation of the proposed project. Please see the approach section above, where activities should be created to address the issue of customer-level metering and pricing of energy.
COUNTRIES
5. The proposal is for Bulgaria so no other countries are involved. Successful demonstration of the concept in Bulgaria would be useful to help spread the innovative approaches to most Former Soviet Union and Eastern European countries.
OMISSIONS IN BACKGROUND DISCUSSIONS
6. The background section is well documented. One issue that requires some clarification is the type of fuel that is sued for peak power generation. The proposal notes that it is a mix of hydro and fossil fuel. The background section should include information on the types of fuels used, and the fraction of peak-power generation that is fossil-fuel based in a typical year.
7. A second topic has to do with the economic value of electricity, which is noted elsewhere in the proposal, to be US$0.052/kWh. Since the avoided electricity is on-peak, it is necessary to use the on-peak marginal cost of generation. Most likely this will be higher than the presumably average value noted above, which should lead to higher economic savings than estimated in the proposal.
8. The proposal uses a surprisingly low value for the carbon content of lignite. An explanation of this low value would be useful.
INSTITUTIONAL ARRANGEMENTS
9. The proposal makes note of many institutions which will either provide baseline funding or will play a role in project implementation. While the proposed institutions seem appropriate to implement the project, a more thorough evaluation should be done at the project document stage. Also, letters of support for the baseline funding should be required prior to project implementation.
FUNDING
10. The proposal calls for $8.575 million total funding. GEF share of this will be $2.575 million with baseline funding provided by the Bulgarian government, USAID and PHARE. It is difficult to determine the GEF share of the project funding without seeing the detailed explanation of why GEF funds, rather than government funds, are needed. The proposal needs to provide this information in order to justify the share of GEF funds.
11. The incremental cost estimates show negative costs for each of three demonstration projects. A better approach to the estimation would have been to distinguish between fuel savings and capacity deferment brought about by the energy efficiency project. The results, I believe, would still show negative costs for each project, although the savings amounts would be different.
INNOVATIVE FEATURES
12. The project approach incorporates several innovative features. It will provide funds for three programs that are clearly innovative and have not been implemented in Bulgaria. In addition, the funds will be used for evaluating and implementing innovative financing packages to promote energy efficiency in the country.
Annex III, List of Supporting Letters Available Upon Request
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