In 2004, Bulgaria was three years away from the EU accession and was foreseen to become the EU’s most energy intensive economy. In addition, the shutdown of the oldest units of the Kozloduy Nuclear Power Plant, producing 40 per cent of the country’s electricity, was about to commence.
In this challenging context, the EBRD inaugurated in Bulgaria a new model of energy efficiency finance – credit lines to private sector, which aimed to make businesses and households more energy efficient and replace the lost generation capacity with renewable energy production.
Sustainable Energy Financing Facilities (SEFFs) combine the EBRD credit lines to local participating financial institutions (PFIs) with donor-funded advisory package and investment incentives to borrowers and PFIs.
Setting the template for SEFFs
The Bulgarian Energy Efficiency and Renewable Energy Credit Line (BEERECL) was the Bank’s first SEFF and targeted industrial and commercial borrowers. Launched in 2004, it combined €155 million of EBRD funds lent to eight participating financial institutions (PFIs) with a €35.2 million investment incentives fund from the Kozloduy International Decommissioning and Support Fund (KIDSF).
The investment incentives component had three main purposes. First, it supported market awareness of the benefits of sustainable energy investments and advised borrowers on their sustainable energy projects. Secondly, it supported an independent verifier to confirm the completion of the funded projects. Upon confirmation, the investment incentive worth 15-20 per cent of the loan provided by a PFI would be refunded to the borrower.
Replicating market models
BEERECL became a “one-stop-shop” model to open up the local lending market for sustainable energy investments. The Bank replicated this model in more than 20 countries of operations. The overall signed funding for all SEFFs exceeds €2 billion.
BEERECL concluded its operations in February 2014. 10 years since its launch it has financed nearly 300 projects mobilising €230 million of total investments.
98 renewable energy loans range in size between €30,000 and € 2.5 million (average size of €877,000) covering hydropower, wind, biomass, biogas, solar electric and solar heat projects.
195 energy efficiency loans between €11,000 and €2.5 million covered replacement of machinery, co-generation of heat and power, thermal insulation of production halls.
All together the BEERECL projects are estimated to save nearly 1.1 million MWh per year. This is equivalent to the residential electricity use of 893,000 Bulgarians, which is about one eighth of the country’s population. The annual CO2 emission reduction of 710,000 tons is equal to the emissions from 390,000 passenger cars.