Feasibility Study for “ECO-LOANS” Program

Until the early 1990s, Serbia enjoyed a significant surplus of energy supply. However, by the end of the 1990s, the country had to start importing power regularly in winter months because of high inflation, overdue final-consumer prices adjustment impeded by social issues and a lack of proper maintenance and investments in power generation facilities.   Serbia’s economy is highly energy-intensive, consuming 2.7 times more energy per unit of output than the OECD average. Although energy efficiency is a priority in Serbia’s energy strategy, it has not yet adopted the planned framework law aimed at enforcing rational energy use.   Over the past few years, Serbia’s increasingly close ties with the EU and its intention to join the EU have served as a major driving force for the development of its energy sector. Its government adopted and partially implemented a number of energy-related policies. However, it is yet to be seen whether the goals of these policies will be achieved. The responsibility for accomplishing the targets has been rather loosely defined and assigned, and there are doubts about the responsible bodies’ willingness to take the initiative to improve energy efficiency and generate savings.   Energy and fuel prices remain distorted. Currently, the low energy pricing is in no way an incentive for final customers to invest in energy efficiency measures. The existing legal framework does not require mandatory implementation of challenging norms and standards aimed at more efficient energy use.   Since 2008, KfW has been actively promoting EE/RE measures among Serbia’s of micro, small and medium-sized enterprises (MSMEs), private households and municipalities. The purpose of the various credit lines supported by the German government is to broaden and enhance access to EE/RE for these potential customers, thereby contributing to the development of Serbia’s financial sector and climate-change mitigation efforts by reducing its energy consumption and CO2 emissions.

Econoler was mandated to support KfW in developing a new “Eco-Loans” program to broaden and enhance access to EE/RE finance for MSMEs, private households and municipalities.   To develop the program concept, Econoler conducted a field study to gather the information and data required by covering the following key areas in detail:

• The situation in the energy sector (supply, demand, and the regulatory framework);
• KfW’s target client group: MSMEs, households and municipalities (their roles in the economy, specific energy needs, potential for energy savings and available EE-supporting businesses);
• The financial sector (current EE/RE lending products, banks’ motivation, assessment of potential demand for EE/RE lending and needs of partner banks, etc.)

  Based on the data and findings of the study, Econoler developed a project-concept proposal recommending the following parameters for the new KfW “Eco-Loans” program:

• Additionality of EE-lending (“What kinds of investment need special promotion to tap the energy-saving potential not yet realized?”);
• Impact of the program on the financial sector;
• Anticipated risks related to the implementation of this program;
• Parameters of the lending products and incentives that can foster investments in EE/RE in a context of low energy pricing;
• Project-selecting and savings-measuring processes that make it very easy for banks to handle various energy  calculations and technical assessments;
• Awareness-raising;
• Impact indicators; and
• Criteria for selecting partner banks.