Removing barriers to energy efficiency in municipal heat and hot water supply



We are just beginners in the global energy saving

Juridical newspaper of Kazakhstan

We are just beginners in the global energy saving. Program for housing infrastructure modernization reaches its midst but still raises many questions. Valery Vlachkov, a Bulgarian expert of UN, came to Kazakhstan and shall assess how to save money and the health.


Bulgaria adopted the law on energy and energy efficiency in 1999. Surprisingly but we are around two years faster in adopting the laws than Bulgarians. Kazakhstan adopted the state program for energy saving in 1996 and later on the law on energy saving in 1997. But faster does not mean better. UN experts suppose that neither the program nor the law had any intelligible results for Kazakhstan. They put no specific missions, no subordinate regulatory acts issued and no administrative agency founded to implement the programs on energy saving. But the most important is that no efficient economical incentives have been provided for energy saving. New draft law on energy saving shunts between the parliament and the government from June 2009 and till now.

Midst of the 90-s the housing stock in the cities of Bulgaria was not better than our today. The construction reached its top in the 60-70-s. Basic energy infrastructure was developing in the same time. More than 30 years since built the dilapidation of the houses and the utilities was hardly avoidable. Most of the houses in Bulgaria are private but in the middle of the 90-s both the private owners and the state were out of their budget to save the housing.


A range of measures to save utilities infrastructure has been undertaken. Price reform was one of them. It helped the companies to save money for repair and replacement of standard pipes by pre-insulated ones and install latest heating units. Resulted from those measures the losses of heat supply system reduced today to 8% compared to 35% in the midst of the 90-s.

One of the first energy saving programs was installation of heat meters and regulators of heat supply on the radiators in apartments. Since 1999 based on the law heat and water meters became the property of energy companies which dealt with their installation and replacement. Once that work was completed the companies reduced the losses and saved money what made modernization of utilities possible. The consumers meanwhile could control the temperature in their apartments themselves.

“In a difficult time the state financed energy companies. The amount of grants was decreasing step-by-step. Price reform challenged energy companies to achieve the level of actual expenditures connected with their activity. Since 2007 there were no more grants”, Vlachkov says.

To finance energy saving measures taken for residential houses the government introduced some tools like tax privileges, loan guaranties and lax credits. For instance, purpose loans guaranties from the banks to replace windows and radiators with energy efficient ones and for heat insulation of outer walls and roofs.

PAID $2000, GOT $400-600 BACK

Thanks to the project of UN development program and Global Environmental Facility (UNDP/GEF) a fund of energy efficiency enhancing was founded in Bulgaria. It stood a sponsor for the purpose loans to state entities, NGOs, small business, individuals and banks. One of the main conditions was that the return of investments into the project should not exceed five years. The banks started granting with partial repayment in case of success. For example, the cost of replaced old windows in your house by energy efficient ones was $2000. Once the project is completed the bank returns you $400 and if it involved several consumers, everyone gets $600 back.

The heating units work as follows: one heat meter for the whole house is installed in a cellar. Each radiator is equipped with a regulator which allows adding the capacity or reducing it. Besides the radiators are equipped with electronic controller. It displays how much heat is consumed by each apartment. Everyone pays as much as has consumed. As a result of heat metering system introduced in 2007 in Bulgaria the saved energy amounted to 645 GW/h. This is 15% from the final heat consumption. Thanks to what money were saved for construction of a 150 MW block of new heating plant.

For the social protection of consumers the government approved differentiated prices and system of standards for quality assessment of energy consumed, services rendered and supplies. Moreover there is a standard to assess how prompt the claims from consumers were satisfied.

The legislation has been amended once the energy strategy for 2001-2004 was introduced. In 2004 new law on energy was issued in Bulgaria. A separate law was issued for energy efficiency. It paid high attention to aligning the national standards with EU standards. The agency for energy efficiency was reorganized into the agency for sustained development in 2011. Its main mission is to elaborate the programs on energy efficiency, energy saving and rational use of natural resources.


We are not in Bulgaria. And not in Germany all the more where the tenants of multi-apartment house being a condominium at the same time can receive a credit with low interest rate. But the delay could result in collapse of housing stock. Thus a program for housing infrastructure modernization has appeared.

— The program on removing barriers to enhancing the energy efficiency in municipal heat supply is a required step, — Alexandr Belyi, UNDP/GEF Project Manager says. — Pricing policy became rhetorical question along ago. The higher prices result in the worse social relations. Meanwhile they can not be fixed as it will cause the collapse of heat supply system. We should find the compromise. The big problem for today is stimulating the feasible heat consumption by residential multi-apartment houses. What can force the consumer to install energy saving equipment and heat meters? Trying to persuade him helps little. Administrative incentive in most cases cannot help too. There is only one way — economical incentive. Energy saving equipment and technology must be profitable for the consumer.

As Alexandr told, an optimal payback period of a loan for heating system modernization in European countries makes three to five years. In Kazakhstan it makes more than ten. If required measures are more expensive, like heat insulation of the building, this period will be extended up to 30 years! A bank hardly would wish to take a million risk for the sake of a quite far prospect. That is why a possibility of low interest loans should be found, probably involving the state money. The program for housing infrastructure modernization is a first step. Still there is a question weather the owners wish to invest into energy efficiency of their houses if savings are not material and payback period is long though. It means we have to change the approaches to pricing policy and make it economical profitable for the consumer to save the energy. Not in the least it should result in higher household running costs.

Valery Vlachkov shall review our legislation with regard to energy, natural monopolies and work of condominiums. Besides the Bulgarian expert intends to look through the achievements of an energy service company supported by UNDP in Karaganda. Afterwards Mr. Vlachkov will be able to prepare his priority recommendations for Akimats, heat suppliers and condominiums to enhance economical incentives of energy saving.

Stanislav Nam