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URBAN HEATING REFORM IN EUROPE AND EURASIA: EXPERIENCES AND FUTURE AGENDA
Goals and Objectives
Methodology
Issues and Trends
Lessons Learned and Case Studies in Heating Sector Reform
Donor/IFI Programs
Country Analysis
Goals and Objectives
The United States Agency for International Development (USAID) and the Alliance to Save Energy (the Alliance) have undertaken an assessment of the experiences with urban heating in the Europe & Eurasia (E&E) region titled "Urban Heating Reform in Europe and Eurasia: Experiences and Future Agenda." The assessment is a reference document for USAID and other donors and IFIs for understanding key issues related to urban heating in order to inform their respective donor/lending strategies. The study focuses on urban heating - district heat as well as decentralized systems.
The examined policies cover the legal and governmental measures taken during the last 15 years to address heat sector problems and needs, including energy policy strategies, laws and regulations, and institutional restructuring and reform. The examined programs focus on the technical assistance and associated investment programs that enable private investment and commercial viability in the heating sector while ensuring that social and economic needs of consumers are addressed.
The assessment focuses on analyzing how the region’s current institutional and policy frameworks influence the end-use of heat. The assessment explores how district heating has changed and where it is going in terms of heat pricing and regulation, supplier-consumer relations, competition with other heat sources, affordability and long-term market viability. It considers what the implications are for USAID’s and other donors’ programs supporting social, democratic and economic development in the E&E region and beyond. It recommends steps and actions that donors, investors and other influential actors can take to address the most critical needs for reform, investment and/or intervention in the region’s urban heating sector.
Solutions to the critical heating issues vary within the E&E region based on key factors such as heating load; population density; tariff and billing practices; and economic conditions/investment climate. Thus, solutions were identified by sub-region (e.g., accession countries; Southeast Europe; Russia/Ukraine; Moldova/Caucuses; CAR).
Methodology
The study was carried out by the Alliance with active participation from USAID and input from energy efficiency and heating sector experts in the region. An external experts review group was established with representatives from donor organizations, IFIs, multilateral agencies, and the private sector. The experts group reviewed basic parameters of the study, commented on drafts of interim deliverables, and participated in workshops to discuss key findings. The Alliance held a workshop on March 27-28, 2007 in Kiev, Ukraine which brought together experts on urban heat and served to promote discussion and stimulate comments and questions from the audience. Presentations from this workshop are available online.
The ASE team carried out the study by reviewing earlier studies conducted by donors and IFIs, supplemented as necessary with limited primary research, to distill key issues and trends. ASE prepared numerous case studies and highlighted the lessons learned. The study consists of three major sections: 1) Issues and Trends. 2) Lessons Learned and Case Studies in Heating Sector Reform. 3) Implications for Donor Programs.
Issues and Trends
The study examines the following topics in as many of countries or sub-regions as possible:
Subsidies, Financial Sustainability, and Budgetary/Investment Implications: This section reviews the level of national and local subsidies paid, further segmented by direct subsidies, cross-subsidies, and indirect subsidies (e.g., from non-collections). The budgetary implications of the subsidies on national and local budgets, the financial sustainability of heating systems were examined. The assessment also characterized the ability of heating enterprises to finance investments.
Municipal/National Authorities and Regulatory Framework: This section examines the governance framework for heating enterprises, including ownership, regulation, and opportunities for (or barriers to) private sector participation and ESCOs, including a review of environmental requirements and EU directives.
Cost/Quality of Service and Market/Fuel Competition: This section reviews the cost of providing heat service as well as the ability to provide adequate levels of heat and examines issues associated with disconnection and substitution of heating sources, including factors motivating such actions and the financial consequences to consumers and to heat providers.
Losses and Potential for Energy Efficiency: This section characterizes the level of technical and commercial losses in heating systems. The section also examines the potential for energy efficiency within the distribution system and among end-users.
Lessons Learned and Case Studies in Heating Sector Reform
This section presents a series of best practices concerning various aspects of heating sector reform. Case studies have been collected for each sub-region and successful reform cases in the E&E graduate countries examined for lessons learned. Each case study addresses the following topics:
- Policy, Legal and Regulatory/Price Reform
- Institutional Restructuring and the Role of Municipal Authorities
- Private Investment and Management
- Consumers, Housing Reform and Community Involvement
- Environmental and Social Costs and Benefits
Donor/IFI Programs
The conclusions of the study provide guidance to efforts by donors and IFIs in the heating sector. The following subjects are highlighted:
- Critical Countries/Sub-regions for Attention
- Institutional Development Needs
- Ownership/management
- Tariff setting, subsidy removal, and regulation
- Metering, billing, collections
Financing Requirements for Rehabilitation and Moderninzation
- Within heating networks
- Within end-users
Public Private Partnerships
- Importance to successful heating system reform
- Feasibility of different PSP options by country or sub-region
Commercial Opportunities
- Types and sources of equipment needed
- Export opportunities for U.S. industry
Links with Other Municipal and Local Government Programs
- Encouragement of decentralization of authority
- Assistance in controlling municipal budgets
- Improved delivery of municipal services (communal services, education, health care)
Country Analysis
The country analysis has been carried out in Armenia, Bulgaria, Croatia, Macedonia, Moldova, Poland, and Russia. Each paper is now available for viewing. Please send your comments to Astghine V. Pasoyan at apasoyan@ase.org.
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