World Bank Energy and Extractives Global Practice ECA region ROADMAP FOR THE IMPLEMENTATION OF ENERGY EFFICIENCY IN PUBLIC BUILDINGS OF THE KYRGYZ REPUBLIC April 2019 Copyright © 2019 The International Bank for Reconstruction and Development/THE WORLD BANK GROUP 1818 H Street, N.W. Washington, D.C. 20433, U.S.A. All rights reserved The findings, interpretations, and conclusions expressed in this paper are entirely those of the author(s) and should not be attributed in any manner to the World Bank, or its affiliated organizations, or to members of its Board of Executive Directors or the countries they represent. The World Bank does not guarantee the accuracy of the data included in this publication and accepts no responsibility whatsoever for any consequence of their use. 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Contents Figures ....................................................................................................................................... ii Tables ........................................................................................................................................ ii Acknowledgements ................................................................................................................... iii Abbreviations ........................................................................................................................... iv Executive Summary .................................................................................................................... 6 1 Energy Efficiency Potential in the Kyrgyz Public Buildings Sector ........................................... 26 1.1 Public Buildings Inventory ................................................................................................... 26 1.2 Energy Efficiency Potential in the Public Buildings Sector .................................................. 28 1.3 Costs and Economic Benefits of an EE retrofit .................................................................... 30 2 Institutional, Legislative and Financial Framework................................................................ 32 2.1 Institutional Structure ......................................................................................................... 32 2.2 Legislative and Regulatory Framework for Energy Efficiency ............................................. 37 2.3 Budgeting in the Public Buildings Sector............................................................................. 44 2.4 Public Procurement ............................................................................................................. 47 2.5 Financing of Energy Efficiency in the Public Buildings Sector ............................................. 48 3 Energy Efficiency Supply and Service Market ........................................................................ 50 3.1 Energy Services, Buildings Design and Construction Services ............................................ 50 3.2 EE Equipment Suppliers ...................................................................................................... 51 4 Summary of Key Barriers to Public Sector EE Implementation............................................... 54 5 Vision 2040 for an Energy-Efficient Public Building Stock ...................................................... 56 6 Roadmap for an Energy-Efficient Public Building Stock ......................................................... 58 6.1 Catalogue of Recommended Measures .............................................................................. 60 6.2 Operationalizing the Roadmap ........................................................................................... 70 Annexes ................................................................................................................................... 74 Notes ....................................................................................................................................... 89 Roadmap for the Implementation of Energy Efficiency in Public Buildings of the Kyrgyz Republic i Figures Figure 1.1. Public Buildings in Kyrgyz Regions, by Population Distribution .................................................... 27 Figure 1.2. Public Buildings: Stock Age and Current Degree of Energy Efficiency Retrofit ............................. 27 Figure 1.3. Ownership Structure of Public Buildings in Kyrgyz Republic ......................................................... 28 Figure 2.1. Institutional Structure for Energy Efficiency ................................................................................. 32 Figure 2.2. Overview of Existing and Planned Normative Legal Acts (NLAs)................................................... 39 Figure 2.3. Procedure of Facility Budget Planning by Local Authorities.......................................................... 47 Figure 3.1. Energy Services Value Chain .......................................................................................................... 50 Figure 3.2. Suppliers of Energy-Efficient Materials and Equipment ............................................................... 52 Figure 6.1. Roadmap for Improving the Energy Efficiency of the Public Buildings Sector .............................. 59 Figure 6.2. Key Requirements and Elements of a Public Buildings Agency..................................................... 71 Figure 6.3. Illustrative Financing Ladder for Public Sector EE Projects ........................................................... 73 Tables Table 1.1. Catalogue of Energy Efficiency Intervention Measures.................................................................. 29 Table 1.2. Applicability of Advanced EE and RE Technologies ........................................................................ 30 Table 1.3. Energy Savings Potential in Public Buildings................................................................................... 30 Table 1.4. Costs and Expected Results of Energy Savings Interventions in Public Buildings........................... 31 Table 2.1. Overview of Responsibilities for Management of Public Buildings ................................................ 34 Table 2.2. Stakeholders and their Roles .......................................................................................................... 36 Table 2.3. List of Accepted and Developed Regulations in the Context of EE in Public Buildings .................. 42 Table 2.4. Requirements for Specific Energy Consumption in Buildings (kWh/m²) ........................................ 43 Table 2.5. Requirements for U-values of Building Structures for New Buildings ............................................ 44 Table 2.6. Comparison of Expenditures by Budget Line Items........................................................................ 45 Table 3.1. Overview of Available Service Suppliers and Capacities ................................................................ 51 Table 3.2. Energy Service Suppliers: Capacity Levels ...................................................................................... 53 Table 4.1. Barriers to EE Implementation in Public Buildings in the Kyrgyz Republic ..................................... 54 Table 6.1. Catalogue of Recommended Measures ......................................................................................... 60 Table 6.2. How EPCs Can Help to Overcome the Key Barriers in Public Sector Energy Efficiency .................. 72 Roadmap for the Implementation of Energy Efficiency in Public Buildings of the Kyrgyz Republic ii Acknowledgements This report has been prepared under the guidance of Christian Mahler (Energy Specialist, World Bank ESMAP), with additional input from Yun Wu (Senior Energy Specialist, World Bank EAP Energy Unit), Kathrin Hofer (Senior Energy Specialist, World Bank ECA Energy Unit) and Katharina Gassner (Senior Energy Economist, World Bank ECA Energy Unit). Rainer Behnke (Senior International Energy Efficiency consultant) and the staff of the Kyrgyz consulting firm Unison Group (Nurzat Abdyrasulova and Darika Sulaimanova) prepared the information related to the local market in the Kyrgyz Republic. The financial support by the Energy Sector Management Assistance Program (ESMAP)―a global knowledge and technical assistance program administered by the World Bank—is gratefully acknowledged for this work. Please visit www.esmap.org for more information. Roadmap for the Implementation of Energy Efficiency in Public Buildings of the Kyrgyz Republic iii Abbreviations ARIS Community Development and Investment Agency of the Kyrgyz Republic BAT best available techniques BREF “best available techniques” reference (document on energy efficiency in buildings) CAPEX capital expenditure CoP coefficient of performance DH district heating EUAU Eurasian Economic Union EBRD European Bank for Reconstruction and Development EE energy efficiency EERF energy efficiency revolving fund EPC energy performance contracting ESPC energy savings performance contract ERIK Enhancing Resilience in Kyrgyzstan (World Bank project) ESA energy service agreement ESCO energy service company EU European Union FESTI Fuel and Energy Sector Transparency Initiative GHG greenhouse gas GOSSTROY State Agency for Architecture, Construction, and Housing (Kyrgyz Republic) GOST CIS technical standards GWh gigawatt-hour HC housing cooperative HP heat pump HSIP Heating Supply Improvement Project (World Bank) HVAC heating, ventilation, and air conditioning (unit) IFI international financial institution K Kelvin KGS Kyrgyz som (national currency), applied change rate: US$ 1 = KGS 70 KPI key performance indicator KR Kyrgyz Republic kWh kilowatt-hour kWth kilowatt thermal KyrSEFF Kyrgyz Sustainable Energy Financing Facility LED light-emitting diode LGA local governmental authority LRAIC long-run average incremental cost M&V monitoring and verification MWh megawatt-hour NDC Nationally Determined Contribution (UN SDGs) NEHC National Energy Holding Company NGO nongovernmental organization NZEB net-zero energy building O&M operation and maintenance OJSC open joint stock company PBMA Public Buildings Management Agency PIU project implementation unit PPP private-public partnership PV photovoltaic RE(S) renewable energy (sources) RKDF Russian Kyrgyz Development Fund SB supervisory board SDGs Sustainable Development Goals (UN) SHW sanitary hot water SNiP technical standard or norm SPMH State Property Management Fund Roadmap for the Implementation of Energy Efficiency in Public Buildings of the Kyrgyz Republic iv toe tonne(s) of oil equivalent TA technical assistance TRACE Tool for Rapid Assessment of City Energy UDP World Bank Urban Development Project UN United Nations UNDP United Nations Development Programme UNFCCC UN Framework Convention on Climate Change W watt Barrier types RB legislative and regulatory barrier IB institutional barrier BB budgetary barrier CB capacity barrier FB financing barrier MB market barrier Glossary Aiyl Okmot local planning and budget commission Kenesh local council (also “City Kenesh”) Applied change rate: US$1 = KGS 70. Roadmap for the Implementation of Energy Efficiency in Public Buildings of the Kyrgyz Republic v Executive Summary The objective of this document is to provide guidance for the development and implementation of a national energy efficiency (EE) investment program for public buildings in the Kyrgyz Republic. It begins by assessing the country’s energy efficiency potential; analyzing its institutional, legislative and financial frameworks; reviewing the market for EE supply and services; and summarizing current barriers to EE implementation in the public sector. It then provides two forward-looking chapters: • A Vision 2040 list of medium- and long-term targets for a sustainable, climate-resilient, safe and low- carbon stock of public buildings in the Kyrgyz Republic by 2040, with reference to the UN Sustainable Development Goals and the draft “Concept for the Development of the Fuel and Energy Sector of the Kyrgyz Republic until 2040”; and • A Roadmap and accompanying catalogue of recommended measures that sets out the steps and timeframe necessary to: • Improve the political and regulatory framework for EE; • Strengthen the delivery capacities of relevant institutions and sectoral stakeholders; and • Scale up the nation’s EE investments in the country. The following is an extended summary of the overall report. 1 Energy Efficiency Potential in the Kyrgyz Public Buildings Sector In the Kyrgyz Republic, the term public buildings refers to buildings and facilities designated for public use, including those occupied by authorities and administrative bodies. Construction design standard (“SNiP”) 1 KR 31-04-2001, “Public Buildings and Structures,” 2 lists the following public building types: • Educational buildings (buildings used as premises for child-rearing and personnel training); • Research institutions, project and public organizations, and offices; • Health and recreation institutions; • Physical culture, health, and sports facilities; • Cultural, educational, and entertainment institutions; • Trade, public catering, and consumer services enterprises; • Transport enterprises providing direct services to the population (stations); • Public utilities (except for industrial, storage, and transport buildings and structures). 1.1 Public Buildings Inventory In May 2018, an analysis of the Kyrgyz public buildings stock was conducted to develop a public buildings inventory and to identify the overall energy efficiency potential and the corresponding investment demand 3 in the sector. The inventory encompasses buildings that are owned by the government – that is, state or municipal property, usually referred to as state-financed institutions. This includes buildings that are privately owned but of social significance (schools, kindergartens) and have an appropriate legal status. The analysis found that there are 9,780 public buildings in the Kyrgyz Republic. The number of buildings correlates with the distribution of the Kyrgyz population: most buildings are located in the Chui Oblast, which hosts 32% of the country’s population, whereas the least number of buildings can be found in the Talas Oblast, home to only 4% of the Kyrgyz population. The public buildings inventory defined three main categories: Roadmap for the Implementation of Energy Efficiency in Public Buildings of the Kyrgyz Republic 6 • Educational buildings (schools, kindergartens, higher and other education facilities); • Healthcare buildings (hospitals, policlinics, 4 and other small health facilities); and • Other buildings (including administrative buildings and social protection). One-third of the public buildings stock are educational facilities, representing 60% of the overall heated floor area. The health sector exhibits the smallest floor area of the three categories but with a high number of small buildings. On average, the condition of buildings is considered to be satisfactory. However, about 50% of the building stock considered within the research was built between 1950 and 1980, which means it has been in operation for 40-60+ years; thus, only a minor share of buildings benefitting from the retrofits that have occurred during the last 15 years. 1.2 Energy Efficiency Potential in the Public Buildings Sector Public buildings in the Kyrgyz Republic consume about 850 GWh of energy annually. 5 This is equivalent to 10% of the country’s primary energy consumption (10% of national power consumption and 11% of overall coal consumption) and makes the public buildings sector one of the largest energy end-consumers. However, the sector is plagued by energy supply shortages, resulting in underheating of public buildings during winter with comfort conditions far below norm requirements. The specific energy consumption currently averages 162 kWh per square meter of floor area, while demand averages 250 kWh per square meter. Approximately 70 to 88% of energy use in public buildings can be attributed to space heating, and electricity is used for space heating in 60% of all public buildings. Based on a number of energy audits in schools and hospitals (as well as the previously developed buildings inventory), the overall theoretical energy savings potential for the implementation of selected energy efficiency measures amounts to 50–60% of total energy consumption, or 500 GWh/year. This retrofit effort would require investments worth US$1.085 billion and would bring the entire public buildings stock into compliance with Class B energy performance requirements – which, according to Kyrgyz national legislation on building energy performance, are the current minimum requirements for energy efficiency performance. Standard and Advanced EE Scenarios Energy efficiency potentials were determined on the basis of two scenarios: (i) a standard energy efficiency (EE) technology scenario and (ii) an advanced EE technology scenario. Standard EE technologies are recommended in order for buildings to comply with the minimum energy- performance requirements (Class B) in the Kyrgyz Republic. This approach follows domestic best practice and comprises commonly applied technologies for building retrofits in the country. Advanced EE technologies were assessed in terms of the following criteria: • Innovative in the Kyrgyz context and capable of delivering additional energy savings and ensured economic viability; • Domestic representation through suppliers and reference projects in the local market, and through the existence of sufficient local capacity to design, install and operate equipment; • Technical feasibility and applicability of the selected building; • Low levels of operational risk; • Potential to increase the level of the building’s function, safety and value; • Potential for country- and sector-wide scalability. Roadmap for the Implementation of Energy Efficiency in Public Buildings of the Kyrgyz Republic 7 Assessment of Appropriate Technologies Five advanced technologies were identified (in a separate World Bank market assessment) as most appropriate for the Kyrgyz public buildings context. They can be implemented in 70–80% of all existing public buildings in addition to the standard energy efficiency measures: 1. Heat pumps for space heating can replace electric boilers and save up to 65% of current electricity consumption for space heating. Heat pumps have very good economic viability. 2. Heat pumps for sanitary hot water (SHW) can replace electric boilers and save up to 73% of current electricity consumption for hot water production. This technology has the best economic viability of all water heating equipment in the country. 3. Lighting control systems include daylight and movement sensors to control the lighting intensity according to the demand in particular rooms. This technology is recommended for application in public buildings with varying room-occupancy rates, such as large health or education administration buildings. 4. Ventilation systems with heat recovery are necessary to ensure air exchange; these can reduce heat losses (through controlled air exchange) by up to 60%. 5. Combined PV / battery systems for hospitals or policlinics – to replace emergency diesel generator sets and increase building-operation resilience by providing baseline power supply and emergency power supply during power outages. The main report (Table 1.2) summarizes the applicability of various advanced EE and renewable energy (RE) technologies. 1.3 Costs and Economic Benefits of an EE retrofit The public building stock in the Kyrgyz Republic covers almost 10,000 buildings, of which approximately 5,000 are deemed retrofittable. 6 The estimated investment demand for those buildings amounts to US$1.085 billion and would deliver energy savings of between 55 and 75%. With 3,350 units, educational buildings represent the largest share of buildings in need of rehabilitation, in terms of both floor area and number of buildings. As Table 1.4 (in the main report) shows, specific investment costs for the complete package of standard and advanced EE measures range between US$140 and US$190 per square meter. 7 Considering the average lifetime of the material and equipment of the EE retrofit package, the projected energy savings can be achieved over a period of 30 years. 8 The ratio of the invested CAPEX for the EE retrofit to the forecasted lifetime energy cost savings is at a level of US$0.05 per kilowatt-hour (3.6 KGS/kWh); this means that for every kilowatt-hour saved, US$0.05 (5 U.S. cents) of investment is needed. A calculation of energy cost savings – based on the Kyrgyz long-run average incremental cost (LRAIC) 9 – generates approximately US$69 million in annual savings for the whole public buildings investment program, with a simple economic payback period of between 11 and 13 years. This is a good level of profitability for public infrastructure retrofit projects; it would also create additional economic benefits in terms of building comfort, function and safety. Roadmap for the Implementation of Energy Efficiency in Public Buildings of the Kyrgyz Republic 8 2 Institutional, Legislative and Financial Framework 2.1 Institutional Structure The promotion of efficient energy end-use is a low priority in the Kyrgyz government, especially in the context of the strong, countervailing lobbying effort that exists in support of low-cost energy generation, transmission and distribution. The liquidation in 2015 of the Ministry of Energy and Industry (and rearrangements of its control structures), the establishment and consolidation of the National Energy Holding Company (NEHC), and the division of responsibility for energy efficiency into separate institutions have further weakened the sector as a whole and resulted in a loss of institutional memory. Also, energy efficiency as a cross-sectoral topic requires effective intergovernmental communication and cooperation. However, the Kyrgyz public buildings sector is plagued by fragmented institutional responsibilities with diverging interests that hamper a more unified approach to improving building function and energy efficiency performance. Further, there is insufficient information exchange and adaptation of efficient work routines in terms of communication, document and data management, norm compliance, and other areas. Governmental Agencies Responsible for Energy Efficiency Responsibility for energy and energy-efficiency policies and regulation is shared by two government agencies. The State Committee for Industry, Energy and Subsoil Use (the “State Energy Committee”) is responsible for energy efficiency governance, along with energy saving and the development of alternative energy. The regulation covering the State Energy Committee 10 contains a wide range of functions to do with energy efficiency policy, regulation and control. The State Agency for Architecture, Construction, and Housing (Gosstroy) 11 is responsible for the implementation of energy-savings and energy-efficiency policies in the construction and building sectors. Institutionally, agencies under Gosstroy are separate entities coordinated by the general management. In addition, the State Inspectorate for Environmental and Technical Safety is a third state body directly involved in the implementation of energy savings and energy efficiency policies in public buildings. Its functions include the verification of the technical safety of heating systems in public buildings and the availability of energy passports 12 of buildings. The Inspectorate is also in charge of issuing energy passports for public buildings. Ownership and Technical Management of Public Buildings The general management of public buildings is the responsibility of the related sector ministry (Health, Education, etc.), while responsibility for building operations is usually shared between central and local governmental authorities. Technical inspections, including energy, are conducted by the central government through the State Inspectorate for Environmental and Technical Safety. Recent Developments and Outlook on Institutional Framework In response to demand from energy efficiency stakeholders, a meeting was held in December 2017 to create a Coordination Council for Energy Efficiency under the auspices of the State Energy Committee. Efforts are underway to determine the Council’s composition, structure, and mechanisms for cooperation and activities. 13 Roadmap for the Implementation of Energy Efficiency in Public Buildings of the Kyrgyz Republic 9 A good example of a sound coordination council is the Supervisory Board of the Fuel and Energy Sector Transparency Initiative (FESTI SB), which existed between 2010 and 2015 under the Ministry of Energy and Industry of the Kyrgyz Republic (see Box 1 in the main body of the report). Other Stakeholders Given the challenge of climate change, energy conservation is becoming increasingly important for the agenda of the government of the Kyrgyz Republic and in programs implemented by international financial institutions and private sector. Following the introduction in 2012 of new legislation governing energy efficiency in buildings, and the improvement of the investment climate in this sector, the number of energy efficiency projects in the country increased and, accordingly, the number of stakeholders in the private sector, public organizations and academia has increased too. One of the key players is the European Bank for Reconstruction and Development (EBRD), which for many years has supported the Kyrgyz government’s efforts to develop and improve the legislation for energy efficiency in buildings. Since 2009, with the technical consulting support of Gosstroy, the Law on Energy Performance of Buildings and a number of related by-laws and technical documents have been developed and implemented. In addition, the government has made extensive efforts to increase the capacity of governmental agencies and specialists in the construction industry. Table 2.2 (in Chapter 2) presents an overview of the main stakeholders in energy efficiency in the Kyrgyz Republic, including their roles and limitations. 2.2 Legislative and Regulatory Framework for Energy Efficiency This section addresses the Kyrgyz Republic’s legislative and regulatory framework with regard to three areas: • Energy efficiency programs; • Energy efficiency legislation; and • Building-related technical regulations, norms and standards. Energy Efficiency Programs As a cross-cutting issue, energy efficiency is affected by various governmental programs and reflected in numerous plans, concepts and strategies; these are detailed in Chapter 2 (Section 2.2) of the main report. In particular, in 2015 the Ministry of Energy and Industry developed and adopted the Program of the Government of the Kyrgyz Republic on Energy Savings and Energy Efficiency Policy Planning for 2015- 2017 14 within the framework of the Sustainable Energy Program for Central Asia (CASEP) 15 and with advisory support from the European Union. The program defined the main priorities for the development of energy efficiency and set general targets for the entire economy of the country. These targets include achieving: • Energy savings of 2.23 million tonnes of oil equivalent (toe) by 2017; • A reduction of energy losses of 4.1 million toe by 2020 by promoting the use of energy-efficient technologies and materials in the production, transmission and consumption of power and gas; • A reduction of energy intensity by 30% and annual energy consumption by 5% (generating energy savings of up to 8 million tonnes of fuel equivalent), through a “restructuring” of the economy over the period 2015-2025; and • A reduction of greenhouse gas emissions (in CO 2 equivalents) of up to 20% by 2020, in accordance with the Kyrgyz Republic’s obligations to the UN Framework Convention on Climate Change (UNFCCC). 16 Roadmap for the Implementation of Energy Efficiency in Public Buildings of the Kyrgyz Republic 10 The Program highlights the importance of a mechanism for reinvesting the energy savings retained by public organizations as a result of implementing energy savings measures. However, the document contains no further energy efficiency targets by sectors (industry, buildings, transport) and does not specify the instruments or provisions required to implement the program and meet the specified targets. In the context of the program, the Kyrgyz government did provide some instructions, 17 in particular to achieve energy savings by reducing energy losses or supply. The program expired in 2017, but no information on the results of its implementation is officially available and the attainment of those targets remains questionable. Experience shows that monitoring and reporting of program implementation is usually not carried out due to lack of specific targets, methodologies and capacities. In fact, incomplete activities are commonly carried over to subsequent programs. There are no additional energy-saving programs developed for state or local administrations or other sector institutions or stakeholders, with two exceptions: • Municipal Energy Efficiency Plans in the cities of Toktogul, Sulukta, and Balykchi were prepared in 2015 in the context of the World Bank Urban Development Project. • The Kyrgyz Sustainable Energy Financing Facility (KyrSEFF) 18 contributed an estimated 4% 19 of the total planned savings by 2017. A new Concept for the Development of the Fuel and Energy Sector of the Kyrgyz Republic until 2040 is currently under development and should provide a strategy with a wider scope and specific targets for a longer-term horizon. The current draft concept foresees increasing energy efficiency by focusing efforts on supply-side (generation, transmission, and distribution) facilities managed by energy companies. The demand side – including energy efficiency in public buildings – is still under development and has been identified as an entry point for the analysis and recommendations of this roadmap document. Figure ES-1 provides an overview of the structure of existing and planned normative legal acts (NLAs). A few leading NLAs exist (marked in blue), while several NLAs are currently being developed (gray). According to current governmental initiatives, several more NLAs are at the planning stage (red). Recommendations for further specifications and NLAs are provided in Chapters 4 and 5. Roadmap for the Implementation of Energy Efficiency in Public Buildings of the Kyrgyz Republic 11 Figure ES-1. Overview of Existing and Planned Normative Legal Acts (NLAs) Legend: Blue = existing NLAs Gray = NLAs currently being developed Red = planned NLAs planned for development Energy Efficiency Policy and Energy Energy saving targets by Sectoral plans/programs Efficiency Policy Planning industry for energy saving Law on Energy Efficiency of Law on Energy Saving Buildings Regulation on qualification Regulations on qualification certification of energy auditors certification of specialists Regulation on supervision and control Regulation on monitoring the over the effective use of fuel quality of work Regulation on accounting and NLA System information Regulations on the state register of + methodology for calculating the certificates, reports and specialists amount / volume of energy / FEC Regulation on Energy Certification Regulation on energy audit (industry) Regulation on Periodic Monitoring (Technical Systems) Regulation on state expertise Energy efficiency requirements for In the Law on Government products Procurement Regulation on governmental support Roadmap for the Implementation of Energy Efficiency in Public Buildings of the Kyrgyz Republic 12 Energy Efficiency Legislation The Kyrgyz Republic's energy efficiency legislation is based on two primary laws – the Law on Energy Saving (1998) and the Law on Energy Performance of Buildings (2011) – and on related secondary legislation, such as government decrees, technical norms and regulations. However, it should be noted that as a cross-cutting issue, energy efficiency is affected by several other laws, many of which are outdated or lack effective implementation in the area. The most important laws in this context are as follows: • The Law on Energy (1996) • The Law on Electricity (1996) • The Law on Renewable Energy (2008) • The Law on Oil and Gas (2004) Law on Energy Saving The Law on Energy Saving 20 contains the following key declarations of the country's general energy savings policy: • Establishment of an economic and regulatory framework for energy saving and energy efficiency; • Development of state programs and projects for energy savings, energy efficiency and renewable energy; • Activities to raise awareness and build capacity to implement energy savings; • Development and roll-out of databases for generation and utilization of energy resources; • International cooperation to foster effective use of energy resources. The law was enacted in 1998 and has not been significantly changed since. It announces the development of mechanisms, regulatory provisions and procedures that remain undeveloped to this day, such as: • Rules and procedures governing the energy efficiency of economic development projects (Article 10); and • The establishment of a fund for energy savings and new energy equipment (Article 20). Following an agreement on technical assistance between the State Energy Committee and the European Bank for Reconstruction and Development, draft amendments to the Law on Energy Saving were suggested in October 2017 to harmonize the law with the more recent Law on Energy Performance of Buildings. The draft law is undergoing an extended process of inter-ministerial and public consultations prior to parliamentary approval; this is planned to take place in 2019. Law on the Energy Performance of Buildings The Law on the Energy Performance of Buildings 21 governs the energy performance of buildings in the Kyrgyz Republic during design and construction (for new buildings) as well as for major renovations (existing buildings). It was developed in 2011 with support provided by the European Bank for Reconstruction and Development. At the time of its adoption, the law was a unique normative act based on the successful practice of promoting energy efficiency in the European Union and adapted to the conditions and regulatory framework of the Kyrgyz Republic. It was one of the first laws in Central Asia in which market-based energy efficiency management mechanisms replaced specialized requirements from the post-Soviet era at the level of technical regulations and standards. It introduced obligatory minimum energy-efficiency classifications applicable to both the design and construction phases in new buildings and to major renovations in existing buildings. Each building’s energy efficiency class 22 is identified through its energy certificate, which includes Roadmap for the Implementation of Energy Efficiency in Public Buildings of the Kyrgyz Republic 13 information on the current energy consumption baseline and energy efficiency potential. This allows the building owner to determine which measures to introduce in the building and to plan future savings. The law is complemented by by-laws and technical documents, and further efforts are underway to improve the legislation and its enforcement. 23 Decree on the Rational Use of Energy Decree No. 255 – "On the Approval of Limits for the Consumption of Heat, Electric Energy, Natural Gas, Water and the Intake of Wastewater for 2005-2006 for Public Organizations and on Measures for the Rational Use of Funds Allocated to Budget Organizations for Utilities Cost," 24 dated June 2, 2005 – is directly linked to the rational use of energy. With this regulation the government annually determines the supply limitations of energy consumed by regions and responsible agencies. 25 As a result, many public buildings operators reduce energy supply in order to comply with the government order, which leads to lower and often sub-standard comfort levels (in such areas as indoor temperature and lighting). The order is provided either in physical terms (e.g. electricity amount in kWh or fuel amount in liters) or monetary terms (the cut in the energy supply budget, in KGS) and often forces building operators to switch to lower-cost types of energy (coal, for example) to maintain a certain level of heating. Table 2.3 (in the main text) lists other regulations applicable to EE in public building in the country. Energy Certification and Energy Passports The purpose of the energy passport, which is based on Decree No. 255 (discussed in the previous section), limits the consumption of energy by public organizations. The purpose of a public building’s energy passport is to collect building data from municipalities and energy companies in order to determine energy demand and energy supply limits. Energy passports are the basis for imposing a limit on the consumption of energy resources by public institutions. They are not intended to monitor or improve the energy efficiency of buildings. The passport is prepared by the institution itself, sometimes with the support of local power utility experts. The accuracy of its content must be verified by the State Inspectorate for Environmental and Technical Safety – although due to a lack of staff and monitoring, data reliability is poor. Energy performance certificates, 26 on the other hand, are issued for new construction and building rehabilitation. The Law on the Energy Performance of Buildings obliges public building operators to prepare energy passports for public buildings and boiler houses and lays out the provisions and verification procedures. Due to the absence of certified energy efficiency specialists (see Chapter 4), very few new or retrofitted buildings have been certified up to now. After a building is retrofitted it will need to meet the energy performance certification of class “B” in accordance with the building’s type, function and location in a climatic zone. Despite the existence of a legislative basis for energy performance certification, a responsible state institution for implementation and enforcement as well as a pool of qualified experts is not yet available. Building-related Technical Regulations, Norms and Standards The Law on the Energy Performance of Buildings presupposes the application of minimum energy efficiency norms to buildings – meaning that the structures and components of new and retrofitted buildings 27 must adhere to minimum requirements for thermal conductivity. These standards and requirements are rooted in “SNiPs” (construction standards and regulations) originally used in the former Soviet Union to regulate building construction; the Kyrgyz Republic uses them in part through its accession to the Eurasian Economic Union (EUAU) in 2015. Many of those SNiPs are outdated, and there is an urgent need to update them to Roadmap for the Implementation of Energy Efficiency in Public Buildings of the Kyrgyz Republic 14 reflect best-practice energy-efficiency technologies and materials in building design and implementation. Some areas, such as building-integrated renewable energy, are not covered by SNiPs. Due to insufficient institutional capacities, limited efforts have been made to reform technical construction and equipment standards, resulting in a mixture of SNiP and technical norms. Moreover, there is a large gap between the level of implementation and policy as project design and construction companies rely on existing technical documents that are outdated in terms of compliance with politics and the market. Also, contractors and design institutions usually apply all norms/standards to comply with the requirements, leading to very high retrofit costs. 2.3 Budgeting in the Public Buildings Sector Operational Expenditures Operational expenditures (including the cost of energy) for the public buildings sector are paid for mostly out of the central government budget of the Kyrgyz Republic but channeled through different municipalities and oblast administrations, depending on the responsibility for building operation. 28 Local funding originates from local taxes and is kept locally. Due to the low economic development of most Kyrgyz regions, most oblasts and municipalities are heavily subsidized by the central budget. The distribution of funds for building operations follows the budget classification and is intended to provide the basic function of the public service (education, health care, administration, etc.). Municipalities can reallocate funds according to demand and availability. Reduced spending in one sector – such as energy bills – does not reduce budget transfers. However, retaining those savings is not possible which represents a barrier to increased energy efficiency investments by municipalities. Financing of public buildings energy supply is subject to annually adjusted limits determined on the basis of the previous year's consumption of energy resources (coal, electricity, etc.), and agreed for the subsequent heating season. 29 The current setup for funding operational expenditures is heavily bureaucratic and can cause disbursement delays (and, consequently, liquidity shortages) on the side of the municipalities. This can increase municipal debt to energy utilities and ultimately result in power cut-offs. 30 Despite the existence of an effective procedure for planning local budgets, there are several factors that constrain the development of sound public buildings energy budgets, such as: • Incomplete or missing data to confirm real energy demand and consumption, such as energy passports, or technical passports of power equipment; • Failure of the management of public organizations to submit draft budgets containing precise forecasts to the local council (the “City Kenesh” or the “Kenesh”) in writing; and • Failure of the Kenesh to scrutinize draft budgets on building expenditures. Public building operators and responsible departments in the local administration often cannot determine the real demand of energy and respective expenditure for the next heating season. As a result, budgeting of energy expenditure is often done on a provisional basis. The Open Budget Portal of the Ministry of Finance discloses budget and expenditure data for each agency and according to budget categories. 31 32 An analysis of the data reveals that housing and utility expenditures amount to 1.43% of the central government budget and 3.25% of the local budget. Roadmap for the Implementation of Energy Efficiency in Public Buildings of the Kyrgyz Republic 15 Local Budget Development Proposals for and approvals of national and local budgets are conducted publicly during open sessions of the Kenesh and public hearings. The main body of this report describes this process in detail. 2.4 Public Procurement Sound public procurement can help improve energy efficiency through methodologies that consider the potential energy consumption and related costs of procured equipment and services. All budget organizations procure goods and/or consulting services in accordance with the Law of the Kyrgyz Republic on Public Procurement of April 2015. 33 Tender procedures are conducted through the official web portal for public procurement 34 and according to different procurement methodologies to determine price and quality. A tender commission – i.e. an entity like the Planning and Budget Commission, which focuses on tenders and public procurement – ensures the sound process and compliance of the proposal with the terms and conditions of the technical specifications. Procuring entities develop procurement plans on the basis of requests from the operators of the country’s public buildings (kindergartens, schools, and hospitals). The plans contain information on the subject of public procurement, its quantity and expected prices, and the timing of procurement. There is no mandatory energy efficiency performance requirement of the purchased goods by law, but the procuring entity can add energy efficiency requirements to the tender specifications. Most tender procedures select the winner by choosing the lowest-price offer; in other words, restrictive procurement rules are biased towards lowest- price procurement and do not reflect the full cost of ownership (i.e. lifecycle cost). The current public procurement regulation does not consider criteria for reduction of building-operation or energy-supply costs. With respect to energy efficiency, the criteria for lowest life-cycle costing could be applied to reflect this, but the concept remains theoretical due to (i) a lack of life-cycle cost-benefit assessment, (ii) insufficient capacities to establish an EE project investment case, and (iii) a lack of detailed analysis for the evaluation. Consequently, the lowest initial price remains the decisive criterion. Another challenge for scaling up energy efficiency through procurement is that budgets in the public sector are submitted and approved on a single-year basis rather than on an extended (e.g. five-year) basis. This makes multi-year planning for facility upgrades quite difficult and, in general, can impede the multi-year contracting. An annual budget over one year is too short for adjusting expenditure priorities. This is particularly problematic for energy performance contracting (EPC), since such contracts require several years of energy savings before the investments are recovered. Multi-year budgeting could ensure that commitments made by governments are consistent with the medium-term fiscal outlook. Multi-year budgeting would also allow for better connections between policies, planning and budgeting. 2.5 Financing of Energy Efficiency in the Public Buildings Sector Because the potential positive macroeconomic effects of energy efficiency are not well known in the Kyrgyz Republic, there is a lack of financial resources allocated for large-scale energy efficiency rehabilitation in the public buildings sector. Funds allocated to the renovation of buildings usually do not include measures for improving energy efficiency and most renovation programs entail replacing only windows, lighting and heating systems. Building operators can tap into different funding sources for building renovation, such as municipal or regional budgets and central government funds (partly through the Community Development and Investment Agency of the Kyrgyz Republic, ARIS). At the request of local authorities, schools can apply for “stimulating” grants provided by the Ministry of Finance. 35 These funds are provided by the national Roadmap for the Implementation of Energy Efficiency in Public Buildings of the Kyrgyz Republic 16 budget on a competitive basis that requires co-funding from local budgets. Funds can also be allocated from the District Development Funds, which are formed as a 2% share of the total tax paid by the country’s mining companies. 36 Usually, funds are allocated for urgent repairs of buildings, but mainly the funds are allocated to the needs of social facilities through village or district administrations. The Kyrgyz government also has a program called "Safe Schools and Pre-School Educational Organizations,” which aims to build or rebuild more than 2,000 schools and kindergartens in 2015-2024 37 at an overall cost of almost 50 billion KGS. With help from donor agencies, the government has also piloted EE projects using purely grant or budget financing. These projects have generally demonstrated high levels of energy savings and good payback periods considering the low electricity costs. In addition, such projects provide substantial co-benefits including building modernization, improved comfort, and increased awareness. However, the main lessons learned from these projects indicate that there can be very limited replication of donor pilot programs and grant financing without substantial investments; a sustainable, scalable financing mechanism; and the participation of the private sector. At the same time, energy efficiency investment in large public buildings or bundles of investment projects could generate cash flows from cost savings that can be used to repay the initial investment costs. Various countries have implemented a range of sustainable financing and implementation options, to enhance the financial leverage of public funds and/or to better transition to commercial funding for public sector EE projects by involving the private sector. In the Kyrgyz Republic, however, there are currently no financial products offered by commercial banks targeted at EE rehabilitation in the public buildings sector. This is chiefly because: • Public buildings do not generate income; • Public buildings are state property and cannot be used as a real estate collateral; • For any work or service involving a public building, building managers must obtain permits from the relevant line ministry representatives (Ministry of Education, Ministry of Health, etc.); • The budgeting code does not allow a public agency to retain energy cost savings; and • Alternative obligations to increase a public borrower’s performance 38 under a loan agreement (such as bail, guarantees, or penalties for late payments) are considered complex procedures by local commercial banks and usually not applied. 3 Energy Efficiency Supply and Service Market The private sector is an important actor for developing a market for energy efficiency products and services and to eventually scale up energy efficiency in the public buildings sector. The energy efficiency market in the Kyrgyz Republic is still in its infancy and currently focused on providing services and equipment for project preparation and implementation, such as for energy auditing and construction services or energy efficiency equipment providers. Due to a lack of norms and quality performance criteria, there is a high variability of quality and cost across the different technologies and services offered. Also, while demand exists throughout the Kyrgyz Republic, most of the companies are located in Bishkek and Osh, which restricts access for rural communities to those technologies and services. As illustrated in Figure ES-2, the energy services value chain encompasses a wide range of activities. Figure ES-2. Energy Services Value Chain Energy Design and Equipment Installation Operation & Facility Energy as Financing Auditing Engineering Procurement Commissioning Maintenance Management a Service Roadmap for the Implementation of Energy Efficiency in Public Buildings of the Kyrgyz Republic 17 There are many different types of energy service providers that may provide some or all of the elements of the value chain; these are commonly referred to as energy service companies (ESCOs). An ESCO generally performs these services using a performance-based approach known as energy performance contracting, or EPC. The main characteristics of EPC as offered by ESCOs are as follows: • An ESCO provides or arranges a wide-ranging package of services comprising many or all of the elements of the energy services value chain. • The services are offered using business and financing models under which customers effectively pay for the energy services from the energy cost savings achieved. • Payments to the ESCO are contingent upon achieving guaranteed performance. • Most of the project risks are assumed by the ESCO. 3.1 Energy Services, Buildings Design and Construction Services Starting in 2013 and according to the Law of the Kyrgyz Republic on "Licensing", 39 the design and auditing of public buildings, as well as construction and installation works, are subject to mandatory licensing of the service provider. This means that building designers, seismologists, engineers, and so on must all obtain a qualification certificate issued by the Kyrgyz government. However, although there are approximately 70 experts in energy efficiency and HVAC (heating, ventilation, and air conditioning) technologies in the Kyrgyz construction sector, there are no specialists in building energy efficiency. While regulatory requirements exist for energy performance certification of buildings and monitoring of equipment, the lack of an approved qualification certification by Gosstroy means that specialists have officially not yet been trained. Energy auditing is not regulated, and no obligatory licensing is required for this service. One of the origins of this problem is the lack of an institution in charge of standardization. The construction sector is better represented and organized. More than 700 construction companies are registered in the Kyrgyz Republic, with the largest concentration of developers in Bishkek. While many construction companies participate in the energy efficiency market, only a few have a well-educated labor force capable of installing thermal insulation such as rock wool and EE windows. Building companies are graded according to their ability to perform work of a certain degree of complexity. 40 In order to obtain a license, the company must present the following information: • Information about the enterprise’s state registration, tax payments, and insurance premiums; • General information about the organization, such as the qualifications of its managers, specialists, and workers and information about its technical base; and • Procedures for ensuring quality control and production safety. A legal entity must have at least one specialist with the appropriate certification for each type of requested activity and work. Licenses are issued without limitation of the term and territory of action. In 2015, the State Construction Committee of the Kyrgyz Republic initiated an initiative on electronic licensing 41 to reduce the costs for applicants and budget expenses for the purchase of forms and delivery. It is important to note that the leading construction organizations that carry out the construction of complex buildings are usually not interested in the construction of public buildings. Instead, they focus on the construction of facilities with short payback periods. Companies that compete for public-buildings works are often founded for the express purpose of participating in public tenders, and work quality is often lower due to lower levels of experience. Roadmap for the Implementation of Energy Efficiency in Public Buildings of the Kyrgyz Republic 18 Table 3.1 (in Chapter 3) provides a summary overview of market actors, including their respective capacity levels. 3.2 EE Equipment Suppliers The market for energy-efficient materials and equipment in the Kyrgyz Republic is relatively well developed. However, most energy-efficient materials and equipment must be imported. There are only a few domestic producers of energy-efficient materials. In accordance with the requirements of the Eurasian Economic Union and the Law on Technical Regulations for the Safety of Construction Materials, Products, and Structures, energy-efficient equipment is exempted from mandatory conformity assessment. This means there are no performance requirements for the energy efficiency of imported equipment that could prevent the import of low-energy-efficiency performance technologies. Similarly, equipment classified as a "renewable energy source" (RES) is exempted from custom duties in accordance with the Law on Renewable Energy Sources (since 2008). However, the definition of RE technology is weak. A survey of technology suppliers showed that the interpretation of equipment differs. More advanced heating technologies, such as heat pumps, are not explicitly exempted from import duties. Most of the companies are located in Bishkek, in the City of Osh, as well as in regional centers. Companies located in regional cities usually purchase equipment through dealers in Bishkek. Some advanced technologies (heat pumps, solar systems) are available for sale in Bishkek only. The market for plastic windows is the most developed of all the energy-saving technologies: approximately 1,000 companies supply, produce, or install windows in the Kyrgyz Republic. An important challenge with respect to window manufacturing (and to boilers and thermal insulation material) is the absence of a domestic laboratory to certify the heat coefficient (U-value) of windows. Domestic manufacturer thus need to rely on laboratories abroad – but because this is expensive and often not feasible for small manufacturers, it ultimately means that few producers can obtain energy efficiency certificates for their products. 4 Summary of Key Barriers to Public Sector EE Implementation International experience shows that the main barriers to public EE implementation can be classified as follows: • Legislative and regulatory barriers (RB) • Institutional barriers (IB) • Budgetary barriers (BB) • Capacity barriers (CB) • Financing barriers (FB) • Market barriers (MB) With reference to this classification, Table 4.1 (in Chapter 4) contains an extensive summary of the major barriers to public sector EE implementation in the Kyrgyz Republic. 5 Vision 2040 for an Energy-Efficient Public Building Stock The government of the Kyrgyz Republic has committed to achieving the UN Sustainable Development Goals (SDGs). SDG 7 is to “ensure access to affordable, reliable, sustainable and modern energy” by 2030 – Roadmap for the Implementation of Energy Efficiency in Public Buildings of the Kyrgyz Republic 19 specifically by increasing substantially the share of renewable energy, doubling the rate of energy efficiency improvements, enhancing international cooperation to facilitate access to clean energy research and technology, promoting clean energy technology and energy efficiency investment, and expanding infrastructure and upgrading technology for supplying modern and sustainable energy services. 42 In December 2015 the Kyrgyz Republic submitted its Nationally Determined Contribution (NDC) to the UN Framework Convention on Climate Change (UNFCCC), which foresees a reduction in “business-as-usual” (BAU) levels of greenhouse gas (GHG) emissions in the range of 11.5 -13.75% by 2030 and 12.7 -15.7% by 2050. The general economic and energy sector development targets of the Kyrgyz Republic, like those for energy efficiency and renewable energy, are not well-formulated. It is thus important to develop a vision for an energy-efficient public buildings sector and define specific targets for its implementation. Several key energy policy objectives are set by the Kyrgyz government according to the draft “Concept for the Development of the Fuel and Energy Sector of the Kyrgyz Republic until 2040” document. However, while these energy policy priorities offer an entry point for increased energy efficiency action, the main challenge is to make public buildings energy efficiency a priority among the relevant institutions of the Kyrgyz government. This report thus suggests the following “Vision 2040” list of medium- and long-term targets for a sustainable, climate-resilient, safe and low-carbon public buildings stock in the Kyrgyz Republic by 2040. The medium-term targets (through 2030) are designed to establish a supportive policy and regulatory framework and to develop and strengthen institutional capacities – so as to provide the basis for scaled-up investments in the sector. Medium-Term Targets (by 2030) • Establish and implement a target to reduce annual energy consumption in the public buildings sector by at least 25-30% (or 250 GWh) compared to the baseline year of 2017. • Amend laws, budget codes, procurement rules, and energy efficiency performance requirements and norms to stimulate EE scale-up of retrofits and new construction. • Develop, budget and launch a dedicated public buildings investment program to address retrofit needs in at least 5,000 public buildings, including upgrading of all public buildings to performance Class B from a current performance class of D or lower. • Establish and operationalize a dedicated public entity (unit/institution/agency/department) to manage the public buildings stock and the investment program and to play a lead role in coordinating and building capacity in market stakeholders and sectoral institutions. • Develop and operationalize a financing mechanism to encourage energy efficiency investments in the public buildings sector (e.g. by combining existing budget lines for building operation and retrofit with external financing). Long-Term Target (by 2040) Upgrade at least one-third of the public building stock to Class “A” (net-zero-energy buildings, or NZEBs), with the remainder upgraded to at least Class “B”. 6 Roadmap for an Energy-Efficient Public Building Stock In order to address the identified barriers and operationalize the Vision for an energy-efficient public buildings sector by 2040, it is important to develop a roadmap that sets out the steps and timeframe necessary to: Roadmap for the Implementation of Energy Efficiency in Public Buildings of the Kyrgyz Republic 20 • Improve the political and regulatory framework for EE; • Strengthen delivery capacities; and • Scale up EE investments by developing and implementing instruments. The following roadmap – along with the accompanying catalogue of recommended measures – recommends a time-bound sequence of measures that are grouped according to the three areas – policy, legislation and regulation (in orange); institutional and technical delivery capacities (in green); and implementation mechanisms and investments (in blue) – and structured as short-term (1-3 years), medium- term (4-8 years) and long-term (10-15 years) measures. Although the State Committee for Industry, Energy and Subsoil Use (the “State Energy Committee”) plays a crucial role in setting the cross-sectoral framework for EE, local authorities can stimulate EE investments and accelerate implementation through their own sound strategies and policies. Roadmap for the Implementation of Energy Efficiency in Public Buildings of the Kyrgyz Republic 21 Figure ES-3. Roadmap for Improving the Energy Efficiency of the Public Buildings Sector Year 1 Short-term (years 2-3) Medium-term (years 4-8) Long-term (years 9-15) Adoption of roadmap and Integration of EE into the Energy Concept 2040 Establishment of an inter-ministerial working group as coordinating body for the management of public buildings Training programs for governmental staff, local administrations, private sector Media campaign and information events for public-building managers Amending the law "On Energy Saving" to strengthen focus on public buildings Regulatory act to set up a Public Buildings Management Agency (PBMA) Establishment of a Public Buildings Management Agency (PBMA) Amendment of the Law on Public Procurement to consider EE performance and lifecycle costing Secondary legislation for energy audits as amendment to the regulation on public buildings certification; update of construction norms (SNiPs) Regulatory act to set up an EE investment program for public buildings Development and operationalization of a delivery and financing mechanism for the public buildings investment program (EE fund, EPC, Guarantee Fund) Mobilization of climate finance to operationalize the investment program Establishment of a training center; courses for energy service suppliers Training and procedures for certification of energy auditor specialists Establishment of a state register and benchmarking system for energy efficiency performance of public buildings Secondary legislation for energy performance contracting (EPC) Development of secondary legislation for "net-zero energy buildings" (NZEB) Stimulating dissemination of EE and RE technologies by improving import conditions and domestic production of equipment and materials Development and offering of energy management courses in higher education Upgrade at least one-third of the public building stock to net-zero-energy buildings (NZEBs) or Class ‘A’, with the remainder upgraded to at least class ‘B’. Legend: Policy, Legislation and Institutional and Technical Implementation Mechanisms & Regulation Delivery Capacities Investments Roadmap for the Implementation of Energy Efficiency in Public Buildings of the Kyrgyz Republic 22 Catalogue of Recommended Measures In addition to the roadmap, the main body of this document contains an extensive catalogue of recommended measures (Table 6.1 in Chapter 6) designed to address the specific barriers identified earlier. Operationalizing the Roadmap The public buildings sector is plagued by highly fragmented institutional responsibilities, regulatory gaps and lack of coordination. In order to operationalize the preceding roadmap and implement the numerous measures laid out in the roadmap catalogue of measures, it is important to first address the most rampant deficiencies and establish an enabling environment. The following four immediate actions are recommended to empower the government of the Kyrgyz Republic to implement the roadmap: • Strengthening the coordination of relevant agencies • Strengthening the regulatory framework • Establishing a public enterprise for public buildings management • Developing financing mechanisms 1. Strengthening the Coordination of Relevant Agencies The government should establish a Coordinating Council for Energy-Efficient Public Buildings as an inter- ministerial working group under the State Energy Committee. As a model, it could use the existing World Bank HSIP Project Selection Commission (which comprises representatives from the Ministry of Emergency, the Ministry of Health, the Ministry of Economic Development, the Ministry of Finance, the State Property Management Fund (SPMF), the State Committee on Penalty Control, etc.). The Council should have the following functions: • Sector-wide coordination of, and consensus-building toward, the development of energy efficiency retrofit investments in the public buildings sector; • Facilitation of the measures and regulatory acts necessary to address identified barriers; • Coordination of support, assistance and funding instruments and projects by international donors in the EE sector; and • Supporting legislation related to a national energy efficiency investment program for public buildings (see next section) and a regulation governing the establishment of a dedicated implementation body. 2. Strengthening the Regulatory Framework The current draft “Concept for the Development of the Fuel and Energy Sector of the Kyrgyz Republic until 2040” offers an opportunity to integrate the findings of this roadmap to showcase the enormous energy-saving potential in the Kyrgyz public building stock. The following legislative and regulatory changes are urgently needed to establish the right legislative framework for energy efficiency: • An amendment to the "Resolution of the Government of the Kyrgyz Republic on the Preparation of the Economic Sectors and the Population for the Autumn-Winter Period (May 24, 2018, No. 249) to introduce the obligation to verify the energy efficiency performance of public buildings; • A new regulatory act or law establishing a comprehensive energy-efficiency investment program for public buildings; and • Amendments to the Law "On Energy Saving" with a strengthened focus on public buildings and secondary legislation for energy services and energy performance contracting, including amendments to relevant public procurement laws Roadmap for the Implementation of Energy Efficiency in Public Buildings of the Kyrgyz Republic 23 3. Establishing a Public Enterprise for Public Buildings Management In order to institutionalize and streamline the responsibility for public buildings, it will be important to set up an agency that has the political mandate and appropriate budget to work across stakeholder institutions. Setting up the agency as new, unified state enterprise on a cost-accounting basis and as a ‘one-stop-shop’ for management of all buildings can pool the authority: • for purchasing and payment for utilities (energy); • for management of building maintenance; • for preparation of building retrofit investments (with a focus on energy efficiency), including energy audits; • for implementation of building retrofit investments (acting as a Program Implementation Unit; • to implement accompanying information and capacity-building measures, such as guidelines and training for subordinated project institutions and suppliers; • to accumulate revenues from energy savings and allocate them to project reinvestment; and • to monitor, evaluate and report on financial flows, results and achievement of targets. Once the government decides to establish a dedicated implementation agency, it will need to: • prepare a regulatory act establishing an agency responsible for the management of public buildings and task it with the necessary responsibilities, supervisory board and functional operations budget; • conduct business planning, including: developing tasks and targets for program preparation and implementation; analyzing the market and determining the extent of the investment program; and establishing rules, procedures, instruments and financing mechanisms; and • engage key staff by (i) nominating the supervisory board members and (ii) identifying and hiring key experts of the agency, 43 starting with the director and key engineers and economists. Given the current institutional structure of public building management in the country, it is recommended to focus initially on educational and health facilities (schools, hospitals/policlinics), with later expansion to social and municipal public buildings (kindergartens, etc.). There are various options for the organizational structure of an implementation agency: • A dedicated administrative unit within the Ministry of Energy or State Energy Committee; • A dedicated administrative unit within the Fund on State Property Management; or • An independent entity of governmental state enterprises in the form of an Energy Agency. Figure ES-4. Key Requirements and Elements of a Public Buildings Agency POWERS Mandate and statute Stakeholder commitment and collaboration agreements Access to data Rights and legitimacy TASKS CAPACITIES PRE-CONDITIONS - Program Implementation Unit - Qualified staff - Business plan - Coordination and facilitation - Instruments and tools - Management chart - Project preparation - Local network - Funding - Information and promotion - Twinning arrangements - Technical assistance - Monitoring and evaluation with similar foreign agencies Roadmap for the Implementation of Energy Efficiency in Public Buildings of the Kyrgyz Republic 24 4. Development Financing Mechanisms Judging from the audits conducted in 14 buildings under the World Bank’s Heating Supply Improvement Project (HSIP) and Urban Development Project (UDP) in the Kyrgyz Republic, EE investments have to date demonstrated solid energy savings of 60-70%. This means the techniques implemented will significantly reduce the energy cost for respective central and local governmental agencies. However, despite the positive results of these pilot projects, there is limited replication potential because grant financing is scarce. It is generally recognized that such grant and budget financing is not sustainable in the long term, and that EE projects generating cost savings can be used for repayment of the investment costs. Various countries have implemented a range of different sustainable financing and implementation options to enhance the financial leverage of public funds and/or to better transition to commercial funding for public sector EE projects. A review of international experience with public sector financing reveals various options for providing financing for public buildings. Perhaps the best such option is energy performance contracting (EPC), under which an energy service company (ESCO) finances energy efficiency investments and, subsequently, is repaid through the full or partial annual energy savings achieved throughout the contract period. Under an EPC, the revenues obtained from energy savings should be used both to refinance obligations and to fund other EE interventions. Hence, the EPC could establish a corridor through which EE savings can flow from one project to another. EE investments under the EPC scheme would first need to take initial steps to lay the groundwork for project implementation, including development of the EPC framework, setting up guarantees, and outlining expected results following execution of EE measures. Thereafter, private ESCOs can help overcome barriers in scaling-up implementation of EE projects in the public sector. Figure ES-5 illustrates the different financing options in the form of a “financing ladder” for public sector projects. The ladder includes the various options identified in Annex B of this document plus the two non-sustainable options (grant financing and budget financing). At the bottom of the ladder are options that rely almost entirely on public financing (such as budget and grant financing), while the top of the ladder represents mostly private financing using commercial lenders. Moving up the ladder leads to increasing levels of private financing and requires increasing levels of market maturity. Figure ES-5. Illustrative Financing Ladder for Public Sector EE Projects Roadmap for the Implementation of Energy Efficiency in Public Buildings of the Kyrgyz Republic 25 1 Energy Efficiency Potential in the Kyrgyz Public Buildings Sector In the Kyrgyz Republic, the term public buildings refers to buildings and facilities designated for public use, including those occupied by authorities and administrative bodies. Construction design standard (“SNiP”) 44 KR 31-04-2001, “Public Buildings and Structures,” 45 lists the following public building types: • Educational buildings (buildings used as premises for child-rearing and personnel training); • Research institutions, project and public organizations, and offices; • Health and recreation institutions; • Physical culture, health, and sports facilities; • Cultural, educational, and entertainment institutions; • Trade, public catering, and consumer services enterprises; • Transport enterprises providing direct services to the population (stations); • Public utilities (except for industrial, storage, and transport buildings and structures). 1.1 Public Buildings Inventory In May 2018, an analysis of the Kyrgyz public buildings stock was conducted to develop a public buildings inventory and to identify the overall energy efficiency potential and the corresponding investment demand 46 in the sector. The inventory encompasses buildings that are owned by the government – that is, state or municipal property, usually referred to as state-financed institutions. This includes buildings that are privately owned but of social significance (schools, kindergartens) and have an appropriate legal status. The state- financed institutions in this document are as follows: • Educational institutions under the Ministry of Education; • Health facilities under the Ministry of Health; • Public administrative buildings under the State Property Management Fund; • Social institutions under the Ministry of Labor and Social Development; and • Buildings occupied by rural clubs, libraries and other cultural establishments under municipalities and local self-government authorities. The analysis found that there are 9,780 public buildings in the Kyrgyz Republic. The number of buildings correlates with the distribution of the Kyrgyz population: most buildings (mainly schools, kindergartens, and government offices) are located in the Chui Oblast, which hosts 32% of the country’s population, whereas the least number of buildings can be found in the Talas Oblast, home to only 4% of the Kyrgyz population (Figure 1.1). The public buildings inventory defined three main categories: • Educational buildings (schools, kindergartens, higher and other education facilities); • Healthcare buildings (hospitals, policlinics, 47 and other small health facilities); and • Other buildings (including administrative buildings and social protection). One-third of the public buildings stock are educational facilities, representing 60% of the overall heated floor area. The health sector exhibits the smallest floor area of the three categories but with a high number of small buildings. Roadmap for the Implementation of Energy Efficiency in Public Buildings of the Kyrgyz Republic 26 Figure 1.1. Public Buildings in Kyrgyz Regions, by Population Distribution On average, the condition of buildings is considered to be satisfactory. However, about 50% of the building stock considered within the research was built between 1950 and 1980 and, which means it has been in operation for 40-60 years; thus, only a minor share of buildings benefitting from the retrofits that have occurred during the last 15 years (Figure 1.2). Figure 1.2. Public Buildings: Stock Age and Current Degree of Energy Efficiency Retrofit As Figure 1.3 shows, the sectors with the largest floor area – namely, schools and kindergartens – have a relatively fragmented ownership structure. A small share of kindergartens, schools and small health facilities is in commercial ownership. Roadmap for the Implementation of Energy Efficiency in Public Buildings of the Kyrgyz Republic 27 Figure 1.3. Ownership Structure of Public Buildings in Kyrgyz Republic 1.2 Energy Efficiency Potential in the Public Buildings Sector Public buildings in the Kyrgyz Republic consume about 850 GWh of energy annually. 48 This is equivalent to 10% of the country’s primary energy consumption (10% of national power consumption and 11% of overall coal consumption) and makes the public buildings sector one of the largest energy end-consumers. However, the sector is plagued by energy supply shortages, resulting in underheating of public buildings during winter with comfort conditions far below norm requirements. The specific energy consumption currently averages 162 kWh per square meter of floor area, while demand averages 250 kWh per square meter. Approximately 70 to 88% of energy use in public buildings can be attributed to space heating, and electricity is used for space heating in 60% of all public buildings. Based on a number of energy audits in schools and hospitals (as well as the previously developed buildings inventory), the overall theoretical energy savings potential for the implementation of selected energy efficiency measures amounts to 50–60% of total energy consumption, or 500 GWh/year. This retrofit effort would require investments worth US$1.085 billion and would bring the entire public buildings stock into compliance with Class B energy performance requirements – which, according to Kyrgyz national legislation on building energy performance, are the current minimum requirements for energy efficiency performance. Energy efficiency potentials were determined on the basis of two scenarios: (i) a standard energy efficiency (EE) technology scenario and (ii) an advanced EE technology scenario. Standard EE technologies are recommended in order for buildings to comply with the minimum energy- performance requirements (Class B) in the Kyrgyz Republic. This approach follows domestic best practice and comprises commonly applied technologies for building retrofits in the country. Advanced EE technologies were assessed in terms of the following criteria: Roadmap for the Implementation of Energy Efficiency in Public Buildings of the Kyrgyz Republic 28 • Innovative in the Kyrgyz context and capable of delivering additional energy savings and ensured economic viability; • Domestic representation through suppliers and reference projects in the local market, and through the existence of sufficient local capacity to design, install and operate equipment; • Technical feasibility and applicability of the selected building; • Low levels of operational risk; • Potential to increase the level of the building’s function, safety and value; • Potential for country- and sector-wide scalability. Table 1.1 shows EE measures grouped by “packages” that address the different investment needs of the Kyrgyz public buildings and are the result of the on-site energy audits. Table 1.1. Catalogue of Energy Efficiency Intervention Measures Standard EE technologies Advanced EE technologies Package A. Building envelope retrofit Replacement of windows Replacement of outside doors Insulation of external walls Insulation of roof ceiling (attic) Insulation of floor ceiling Room ventilation system Ventilation system with heat exchanger Package B. Space-heating system retrofita Renewal of heating network and radiators Electric boiler replacement Heat pump for space heating (replacing the Coal boiler replacement standard technology solution) Installation of a modern district heating (DH) substation (in case of DH supply) IR ceramic heaters (room based) Package C. Lighting system and sanitary hot waterb LED lighting, indoor and outdoor Replacement of electric devices (such as kitchen and education equipment) Replacement of boilers or network of sanitary hot water Heat pump for sanitary hot water (replacing the standard technology solution) Solar collector for sanitary hot water Energy monitoring and management system (optional for large facilities) a Renewal of the heat generation (e.g. electric or coal boiler) is recommended for most buildings. Rehabilitation of the building internal heating system (pipes, radiators, thermostat valves) is usually necessary to i) ensure a balanced distribution of heat to the rooms according to demand, ii) to reduce heat energy and hydraulic losses, iii) to enable room-based temperature control (to set-point of 20° C) and avoid over-heating and energy losses. b The renewal of kitchen equipment and other electric devices (such as education and IT equipment) are not taken into consideration. Five advanced technologies were identified (in a separate World Bank market assessment) as most appropriate for the Kyrgyz public buildings context. They can be implemented in 70–80% of all existing public buildings in addition to the standard energy efficiency measures: 49 1. Heat pumps for space heating can replace electric boilers and save up to 65% of current electricity consumption for space heating. Heat pumps have very good economic viability. 2. Heat pumps for sanitary hot water (SHW) can replace electric boilers and save up to 73% of current electricity consumption for hot water production. This technology has the best economic viability of all water heating equipment in the country. Roadmap for the Implementation of Energy Efficiency in Public Buildings of the Kyrgyz Republic 29 3. Lighting control systems include daylight and movement sensors to control the lighting intensity according to the demand in particular rooms. This technology is recommended for application in public buildings with varying room-occupancy rates, such as large health or education administration buildings. 4. Ventilation systems with heat recovery are necessary to ensure air exchange; these can reduce heat losses (through controlled air exchange) by up to 60%. 5. Combined PV / battery systems for hospitals or policlinics – to replace emergency diesel generator sets and increase building-operation resilience by providing baseline power supply and emergency power supply during power outages. Table 1.2 summarizes findings for key technologies (by public building type) from the aforementioned World Bank public-buildings inventory and market assessment. It also displays the applicability of various advanced EE and renewable energy (RE) technologies. Table 1.2. Applicability of Advanced EE and RE Technologies Energy consumption purpose Schools Pre-schools/ kindergartens Hospitals/ policlinics Ventilation Ventilation with heat Room based ventilation Ventilation with heat exchange via central HVAC with heat exchanger exchange via central HVAC Energy management Building energy management system Sanitary hot water SHW heat pump SHW heat pump SHW heat pump Space heating Large heat pump + Large heat pump + heat Large heat pump + ventilation via HVAC network ventilation via HVAC or Large heat pump + heat network Lighting control Lighting control (including LED lighting) Emergency power Rooftop PV + battery unit Note: HVAC = heating, ventilation, and air conditioning unit. PV = photovoltaic. SHW = sanitary hot water. 1.3 Costs and Economic Benefits of an EE retrofit The public building stock in the Kyrgyz Republic covers almost 10,000 buildings, of which approximately 5,000 are deemed retrofittable. 50 The estimated investment demand for those buildings amounts to US$1.085 billion and would deliver energy savings of between 55 and 75%. With 3,350 units, educational buildings represent the largest share of buildings in need of rehabilitation, in terms of both floor area and number of buildings. Table 1.3. Energy Savings Potential in Public Buildings CAPEX for Estimated Building Average energy number of stock floor Energy savings energy savings buildings for area for potential savings retrofit (US$, Building type EE retrofit retrofit (m2) (MWh/yr) ratio (%) millions) A: Education (schools, 3,350 3,270,322 280,225 60-65 458 kindergartens, higher and other education facilities) B: Healthcare (hospitals, policlinics, 400 210,668 18,637 55-70 344 other small health facilities) Roadmap for the Implementation of Energy Efficiency in Public Buildings of the Kyrgyz Republic 30 C: Other (Administrative buildings, 1,250 1,811,347 191,501 60-75 283 Social protection, other, etc.) Total 5,000 5.3 million 490,363 55 -75 1,085 (i.e. about 500 GWh/year) Note: Data based on World Bank (2018), Analysis of Public Buildings Stock and EE Potential (internal report). As Table 1.4 shows, specific investment costs for the complete package of standard and advanced EE measures (Packages A, B and C as shown in Table 1.1) range between US$140 and US$190 per square meter. 51 Table 1.4. Costs and Expected Results of Energy Savings Interventions in Public Buildings Specific annual Specific energy saving Investment Technology type (kWh/m2) (US$/m2) Standard/ conventional EE technologies 80-110 80-100 Building envelope: Insulation of external walls, roof and floor ceiling, (~ 50% EE) replacement of windows and doors Room ventilation system Heating system: New heating boilers, retrofit of heating network, hydraulic balancing, radiators, thermostatic valves Energy-efficient lighting (LED) indoor + outdoor Innovative technologies 35-55 70-100 Ventilation system with heat recovery (additional ~ (additional Heat pumps for space heating 20% EE) costs) Sanitary hot water: Solar collectors or SHW heat pumps Building energy management systems and lighting control Overall (conventional + advanced technologies) 100–160 140-190 (60-70% EE) Considering the average lifetime of the material and equipment of the EE retrofit package, the projected energy savings can be achieved over a period of 30 years. 52 The ratio of the invested CAPEX for the EE retrofit to the forecasted lifetime energy cost savings is at a level of US$0.05 per kilowatt-hour (3.6 KGS/kWh); this means that for every kilowatt-hour saved, US$0.05 (5 U.S. cents) of investment is needed, which is a good ratio. A calculation of energy cost savings – based on the Kyrgyz long-run average incremental cost (LRAIC) 53 – generates approximately US$69 million in annual savings for the whole public buildings investment program, with a simple economic payback period of between 11 and 13 years. This is a good level of profitability for public infrastructure retrofit projects; it would also create additional economic benefits in terms of building comfort, function and safety. Roadmap for the Implementation of Energy Efficiency in Public Buildings of the Kyrgyz Republic 31 2 Institutional, Legislative and Financial Framework 2.1 Institutional Structure The promotion of efficient energy end-use is a low priority in the Kyrgyz government, especially in the context of the strong, countervailing lobbying effort that exists in support of energy generation, transmission and distribution. The liquidation in 2015 of the Ministry of Energy and Industry (and rearrangements of its control structures), the establishment and consolidation of the National Energy Holding Company (NEHC), and the division of a regulatory body into separate institutions have further weakened the sector as a whole and resulted in a loss of institutional memory. Also, energy efficiency as a cross-sectoral topic requires effective intergovernmental communication and cooperation. However, the Kyrgyz public buildings sector is plagued by fragmented institutional responsibilities with diverging interests that hamper a more unified approach to improving building function and energy efficiency performance. Further, there is insufficient information exchange and adaptation of efficient work routines in terms of communication, document and data management, norm compliance, and other areas. For example, although the various line ministries are focused on the functional demands of buildings, • The local governmental authority (LGA) struggles to allocate funds for energy supply and maintenance, • The regional administration sets energy supply limits, and • The State Inspectorate for Environmental and Technical Safety has limited capacity to ensure compliance with technical norms. 2.1.1 Governmental Agencies Responsible for Energy Efficiency Responsibility for energy and energy-efficiency policies and regulation is shared by two government agencies, shown in orange in Figure 2.1 (sectoral ministries are shown in green). 54 Figure 2.1. Institutional Structure for Energy Efficiency Sector ministries and departments (industry, transport, buildings) The State Committee for Industry, Energy and Subsoil Use The National Energy Holding and power utilities The Government of the Kyrgyz Republic The State Agency for Architecture, Construction, and Housing (Gosstroy) Source: Adapted from UN Economic Commission for Europe, National Report on the Development of EE and RES in KG (2015). The State Committee for Industry, Energy and Subsoil Use (the “State Energy Committee”) is responsible for energy efficiency governance, along with energy saving and the development of alternative energy. The Roadmap for the Implementation of Energy Efficiency in Public Buildings of the Kyrgyz Republic 32 regulation covering the State Energy Committee 55 contains a wide range of functions to do with energy efficiency policy, regulation and control, including the following: • The development, coordination and implementation of state policies and rational use of energy resources and renewable energy sources (including cooperation with energy companies and industrial enterprises for policy implementation); • The development of draft legal acts in their respective responsibilities and preparation of national legislative acts (including work on national and international standards and technical regulations and participation in the development of national and sector strategies for developing the fuel and energy sector); • The development of incentive mechanisms for energy efficiency and energy saving, and the introduction of renewable energy sources; • The attraction of foreign and domestic direct investments in the fuel and energy sector, the coordination of technical assistance for its development, and the fulfillment of obligations under conventions, projects and programs implemented with the financial and technical support of foreign donors; • The analysis of technical and economic indicators for the overall industrial sector and the fuel and energy sector, and control over the fulfillment of targets in industry and the fuel and energy sector; and • Assistance in the introduction of environmentally friendly, resource- and energy-saving technologies in industrial enterprises and in the fuel and energy sector. The State Agency for Architecture, Construction, and Housing (Gosstroy) 56 is responsible for the implementation of energy-savings and energy-efficiency policies in the construction and building sectors. Institutionally, agencies under Gosstroy are separate entities coordinated by the general management, including: • The State Department for the Examination of Design Estimates, which monitors the compliance of design estimates with current standards and regulations (including energy efficiency requirements); • The Republic Center for Certification in Construction, which monitors the compliance of the technical characteristics of construction and energy-efficient materials with the requirements of safety standards in use and other standardized parameters; and • The training school within the Republic Center for Certification in Construction, which is responsible for educating specialists in the construction sector and certifying their qualification in the future. The State Inspectorate for Environmental and Technical Safety is the third state body directly involved in the implementation of energy savings and energy efficiency policies in public buildings. Its functions include the verification of the technical safety of heating systems in public buildings and the availability of energy passports 57 of buildings. The Inspectorate is also in charge of issuing of energy passports for public buildings. 2.1.2 Ownership and Technical Management of Public Buildings The general management of public buildings is the responsibility of the related sector ministry (Health, Education, etc.), while responsibility for building operations is usually shared between central and local governmental authorities. Technical inspections, including energy, are conducted by the central government through the State Inspectorate for Environmental and Technical Safety. Table 2.1 provides an overview of the management function of public buildings by the various governmental agencies. Roadmap for the Implementation of Energy Efficiency in Public Buildings of the Kyrgyz Republic 33 Table 2.1. Overview of Responsibilities for Management of Public Buildings General Education and Pre-School Health Sector Administrative Institutions Institutions buildings Ownership The State Property Management Fund (SPMF) Ministerial functions The Ministry of Education and Science: Ministry of Health Departments and (line function) organization of the educational process, ministries, local control of funding from the state budget – authorities done through district and city education organizations including local education authorities (RONO) and city boards of education (GORONO) Building maintenance LGAs allocate funding for maintenance/renovation of buildings (for all buildings located on a settlement). Energy supply Power consumption limits are determined annually by the government and local authorities and distribution companies in accordance with technical conditions established for each facility. Building management monitors compliance of actual consumption with the established limits. For buildings heated with coal, local authorities initiate procurement. Inspection of The State Inspectorate for Environmental and Technical Safety conducts an annual technical systems inspection of the preparation of the technical systems of buildings for autumn and winter. 2.1.3 Recent Developments and Outlook on Institutional Framework In response to demand from energy efficiency stakeholders, a meeting was held in December 2017 to create a Coordination Council for Energy Efficiency under the auspices of the State Energy Committee. Efforts are currently underway to determine the Council’s composition, structure, and mechanisms for cooperation and activities.58 To date, only one meeting has been held, and the Council so far includes only representatives from state structures (the State Energy Committee, the Ministry of Economy, the NEHC, Gosstroy) and two representatives from relevant local organizations. Representatives from international organizations, business and civil society organizations are recorded in the Decree on Establishment of the Council as “by agreement”. Recent inputs by stakeholder organizations and initiatives to improve collaboration in the sector have provided momentum toward carrying out the steps necessary to operationalize the Coordination Council. A good example of a sound coordination council is the Supervisory Board of the Fuel and Energy Sector Transparency Initiative (FESTI SB), which existed between 2010 and 2015 under the Ministry of Energy and Industry of the Kyrgyz Republic (Box 1). Box 1. The Fuel and Energy Sector Transparency Initiative (FESTI) Supervisory Board Regulatory framework: Decree of the President of the Kyrgyz Republic, http://cbd.minjust.gov.kg/act/view/ru-ru/92428. Members: Four representatives of state authorities, four representatives of energy companies (upon agreement), eight representatives of civil society. Management: Two co-chairmen of state structures and the public (equal rights). Management (working body): One to two staff members of the Secretariat, on a paid basis (support was provided by the Soros Foundation-Kyrgyzstan). Organization of work: Quarterly meetings/meetings of the FESTI SB, involvement of own and external experts to analyze key issues, public discussions and extended meetings, etc. Results: Roadmap for the Implementation of Energy Efficiency in Public Buildings of the Kyrgyz Republic 34 • Achieved energy savings totaling around 200,000 KGS through the reduction of electricity losses in distribution company networks from 39% in 2010 to 22.3% in 2011. • Decreased the cost of credit projects by more than 11 billion KGS (US$200 million). This involved CASAREM (Central Asia–South Asia Regional Electricity Market) projects including "Improving Power Supply in the South of Kyrgyzstan", "Construction of Datka-Kemin Power Line", and "Modernization of Thermal Power Plant in the City of Bishkek". • Exposed corruption schemes worth more than 400 million KGS (US$5.714 million) . • Returned to consumers more than 8.5 million KGS (US$ 121,429) accrued in the form of unjustified fines or improper electricity bills (an indirect result of FESTI and FESTI SB activities) through the efforts of civil society organizations to protect the rights of energy consumers. 2.1.4 Other Stakeholders Given the challenge of climate change, energy conservation is becoming increasingly important for the agenda of the government of the Kyrgyz Republic and in programs implemented by international financial institutions and private sector. Following the introduction in 2012 of new legislation governing energy efficiency in buildings, and the improvement of the investment climate in this sector in 2013, the number of energy efficiency projects in the country increased and, accordingly, the number of stakeholders in the private sector, public organizations and academia has increased too. One of the key players is the European Bank for Reconstruction and Development (EBRD), which for many years has supported the Kyrgyz government’s efforts to develop and improve the legislation for energy efficiency in buildings. Since 2009, with the technical consulting support of Gosstroy, the Law on Energy Performance of Buildings and a number of related by-laws and technical documents have been developed and implemented. In addition, the government has made extensive efforts to increase the capacity of governmental agencies and specialists in the construction industry. Table 2.2 presents an overview of the main stakeholders in energy efficiency in the Kyrgyz Republic, including their roles, drivers and limitations. Roadmap for the Implementation of Energy Efficiency in Public Buildings of the Kyrgyz Republic 35 Table 2.2. Stakeholders and their Roles Suppliers / International Manufacturers Expert Financial of EE Materials Supplier Community Commercial Governmental Energy Institutions and lobbyist and financing Stakeholders Authorities Companies and Programs Technologies associations Universities institutions Public Buildings Private Sector Represented Government, mayor’s National Russian Kyrgyz <1,000 Union of <7 specialized 25 local banks >10,000 budget- >400,000 by entities/ offices and Energy Development organizations Builders, Union organizations financed buildings entrepreneurs institutions departments, housing Holding Fund (RKDF), of Architects; and enterprises, cooperatives (HCs), Company EU, KyrSEFF, etc. >1,147,000 LGAs (NEHC) UNDP, etc. households Drivers • Regulatory • Energy • Broad range • Mobility, • Opportunity • Understan- • Focused on • Necessity of • Interested in requirements to shortages of assistance proactivity to reflect a ding of final energy saving, cost reduction develop programs to motivates (law-making, • Open markets: consolidated energy consumers regulatory limits, and reduce energy energy consulta- China, Europe, opinion efficiency and sectors and required introduction consumption consumers tions, Russia • Simplified • Flexibility certification of of EE to seek implementa- • Willingness to procedures and variety buildings measures energy- tion, etc.) cooperate (licensing is of • Vast positive • Accumulated efficient not commercial experience in experience solutions required) products pilot projects (positive and negative) • Variety of market opportunities Limits and • Lack of personnel • Monopoly • Government • Lack of clear • Lack of real • Lack of legal • Energy • Absence of own • Lack of barriers (and rotation) and market projects lack requirements power frameworks efficiency is resources knowledge on institutional position clear energy for materials • Can only regulating not a priority • Absence of correct use of memory • Lack of efficiency • Absence of a provide the market motivating materials and • Lack of state parameters mechanism consolidated • Lack of frameworks to equipment understanding of control for certifying opinion if public promote EE • A certain benefits of energy- over the new materials associations service • Bureaucratic amount of efficient measures installation and deem it contracts barriers dependent • Lack of political will of heat equipment in necessary • Lack of • Dependent attitude to implement meters the country • Management specialized attitude towards towards pilot recommended (there is no is carried out training the installation of projects mechanisms laboratory) on a volunteer programs innovative • Absence of basis systems ESCOs Roadmap for the Implementation of Energy Efficiency in Public Buildings of the Kyrgyz Republic 36 2.2 Legislative and Regulatory Framework for Energy Efficiency This section addresses the Kyrgyz Republic’s legislative and regulatory framework with regard to three areas: • Energy efficiency programs; • Energy efficiency legislation; and • Building-related technical regulations, norms and standards. 2.2.1 Energy Efficiency Programs As a cross-cutting issue, energy efficiency is affected by different governmental programs and reflected in numerous plans, concepts and strategies, such as: • The “National Sustainable Development Strategy for 2018-2040,” 59 adopted in October 2018, which defines energy as one of five critical sectors (the strategy foresees the scaling-up of energy-savings and energy-efficiency programs for the existing building stock and net-zero-energy buildings (NZEBs) 60 for new construction); • The “Roadmap for Improving Legislation on Energy Performance of Buildings 2017-2019” (an internal document approved by Gosstroy in 2016); • A document titled “Medium-Term Tariff Policies of the Kyrgyz Republic for Electrical Energy and Heat for 2014-2017” (approved in 2014) foresees tariff increases by 20% annually for residential consumers and by 7% annually for commercial and industrial consumers; • The “Program on Energy Savings and Energy Efficiency Policy Planning 2015-2017” (approved by the government in August 2015) and “Action Plan for Implementation of the Program on Energy Saving and Energy Efficiency Policy Planning” state the general objectives for and direction of energy efficiency policy; • The draft “Concept for the Development of the Fuel and Energy Sector of the Kyrgyz Republic until 2040”; and • The draft “Program of the Development of Heat Supply Systems in Small and Medium Towns of the Kyrgyz Republic for 2017-2025”. In particular, in 2015 the Ministry of Energy and Industry developed and adopted the Program of the Government of the Kyrgyz Republic on Energy Savings and Energy Efficiency Policy Planning for 2015- 2017 61 within the framework of the Sustainable Energy Programme for Central Asia (CASEP) 62 and with advisory support from the European Union. The program defined the main priorities for the development of energy efficiency and set general targets for the entire economy of the country. These targets include achieving: • Energy savings of 2.23 million tonnes of oil equivalent (toe) by 2017; • A reduction of energy losses of 4.1 million toe by 2020 by promoting the use of energy-efficient technologies and materials in the production, transmission and consumption of power and gas; • A reduction of energy intensity by 30% and annual energy consumption by 5% (generating energy savings of up to 8 million tonnes of fuel equivalent), through a “restructuring” of the economy over the period 2015-2025; and • A reduction of greenhouse gas emissions (in CO 2 equivalents) of up to 20% by 2020, in accordance with the Kyrgyz Republic’s obligations to the UN Framework Convention on Climate Change (UNFCCC). 63 The Program highlights the importance of a mechanism for reinvesting the energy savings retained by public Roadmap for the Implementation of Energy Efficiency in Public Buildings of the Kyrgyz Republic 37 organizations as a result of implementing energy savings measures. However, the document contains no further energy efficiency targets by sectors (industry, buildings, transport) and does not specify the instruments or provisions required to implement the program and meet the specified targets. In the context of the program, the Kyrgyz government did provide some instructions, 64 in particular to achieve energy savings by reducing energy losses or supply: • For sectoral line ministries, state enterprises KyrgyzKomur and KyrgyzZhilKommunSoyuz, regional and local governments, and local state administrations, the government suggested the following: • To develop and adopt sub-programs on energy-saving policy planning for 2015-2017; and • To provide annual reduction in energy intensity by 3% in sectoral and subordinate facilities during 2015-2017 in comparison the figures from previous year. • The government suggested that the State Agency for Regulation of the Fuel and Energy Sector consider processes for economically justified energy-savings investments undertaken by energy (district heating, gas and power grids) companies. The program expired in 2017, but no information on the results of its implementation is officially available and the attainment of those targets remains questionable. Experience shows that monitoring and reporting of program implementation is usually not carried out due to lack of specific targets, methodologies and capacities. In fact, incomplete activities are commonly carried over to subsequent programs. There are no additional energy-saving programs developed for state or local administrations or other sector institutions or stakeholders, with two exceptions: • Municipal Energy Efficiency Plans in the cities of Toktogul, Sulukta, and Balykchi were prepared in 2015 in the context of a World Bank Urban Development Project. • The Kyrgyz Sustainable Energy Financing Facility (KyrSEFF) 65 contributed an estimated 4% 66 of the total planned savings by 2017. A new Concept for the Development of the Fuel and Energy Sector of the Kyrgyz Republic until 2040 is currently under development and should provide a strategy with a wider scope and specific targets for a longer-term horizon. The current draft concept foresees increasing energy efficiency by focusing efforts on supply-side (generation, transmission, and distribution) facilities managed by energy companies. The demand side – including energy efficiency in public buildings – is insufficiently developed and has been identified as an entry point for the analysis and recommendations of this roadmap document. Figure 2.2 provides an overview of the structure of existing and planned normative legal acts (NLAs). A few leading NLAs exist (marked in blue), while several NLAs are currently being developed (gray). According to current governmental initiatives, several more NLAs are at the planning stage (red). Recommendations for further specifications and NLAs are provided in Chapters 4 and 5. Roadmap for the Implementation of Energy Efficiency in Public Buildings of the Kyrgyz Republic 38 Figure 2.2. Overview of Existing and Planned Normative Legal Acts (NLAs) Legend: Blue = existing NLAs Gray = NLAs currently being developed Red = planned NLAs planned for development Energy Efficiency Policy and Energy Energy saving targets by Sectoral plans/programs Efficiency Policy Planning industry for energy saving Law on Energy Efficiency of Law on Energy Saving Buildings Regulation on qualification Regulations on qualification certification of energy auditors certification of specialists Regulation on supervision and control Regulation on monitoring the over the effective use of fuel quality of work Regulation on accounting and NLA System information Regulations on the state register of + methodology for calculating the certificates, reports and specialists amount / volume of energy / FEC Regulation on Energy Certification Regulation on energy audit (industry) Regulation on Periodic Monitoring (Technical Systems) Regulation on state expertise Energy efficiency requirements for In the Law on Government products Procurement Regulation on governmental support Roadmap for the Implementation of Energy Efficiency in Public Buildings of the Kyrgyz Republic 39 2.2.2 Energy Efficiency Legislation The Kyrgyz Republic's energy efficiency legislation is based on two primary laws – the Law on Energy Saving (1998) and the Law on Energy Performance of Buildings (2011) – and on related secondary legislation, such as government decrees, technical norms and regulations. This is the subject of this section. However, it should be noted that as a cross-cutting issue, energy efficiency is affected by several other laws, many of which are outdated or lack effective implementation. The most important laws in this context are as follows: • The Law on Energy (1996) • The Law on Electricity (1996) • The Law on Renewable Energy (2008) • The Law on Oil and Gas (2004) 2.2.2.1 Law on Energy Saving The legislation is based on a the Law on Energy Saving, 67 which contains the following key declarations of the country's general energy savings policy: • Establishment of an economic and regulatory framework on energy saving and energy efficiency; • Development of state programs and projects for energy savings, energy efficiency and renewable energy; • Activities to raise awareness and build capacity to implement energy savings; • Development and roll-out of databases for generation and utilization of energy resources; • International cooperation to foster effective use of energy resources. The law was enacted in 1998 and has not been significantly changed since. It announces the development of mechanisms, regulatory provisions and procedures that remain undeveloped to this day, such as: • Rules and procedures governing the energy efficiency of economic development projects (Article 10); and • The establishment of a fund for energy savings and new energy equipment (Article 20). Following an agreement on technical assistance between the State Energy Committee and the EBRD, draft amendments to the Law on Energy Saving were suggested in October 2017 to harmonize the law with the more recent Law on Energy Performance of Buildings. The draft amendments to the law included: • Energy efficiency and energy savings targets for energy production, energy transmission and distribution, and final energy consumption. Each target should be complemented by clear (mid- and long-term) timelines. For final consumption, energy savings should be quantified instead of energy efficiency gains. This is due to definition problems of the baseline that will change with economic development. Target achievement should be reported regularly, i.e. annually. • Obligatory metering for electricity, natural gas, and heat; and the introduction of flexible billing systems. Installation of meters is obligatory for energy suppliers/project owners for electricity, natural gas, and heat for each final consumer. All meters will have to fulfil requirements defined in secondary legislation (e.g. display of actual, not estimated, energy consumption). Particular attention will be paid to residential consumers that receive heat from district heating systems. Each consumer unit (i.e. apartment) in new buildings or buildings that undergo a major refurbishment shall be equipped with individual heat meters. Energy bills have to include certain information (energy tariff, Roadmap for the Implementation of Energy Efficiency in Public Buildings of the Kyrgyz Republic 40 actual consumption, climate data, etc.) that will be defined in corresponding regulations. Billing will be based on real consumption. • Enhancing the role of public institutions through the mandatory energy certification of large public buildings. Public buildings with a heated gross floor area greater than 6,000 square meters (such as public hospitals, educational buildings and administrative buildings) will be obliged to carry out comprehensive assessments by certified and registered experts and have to meet specific quality standards, to be defined by secondary energy efficiency legislation. These assessments must be repeated every five years. Based on the findings of the energy assessment, the institution must reduce its energy consumption by 10% every five years until the building reaches the Class B minimum requirements for energy efficiency, according the Law on the Energy Performance of Buildings. • Energy assessments will be integrated into the permitting process for large infrastructure projects. The assessments will complement existing permitting procedures for businesses and projects. Applicants will have to provide an energy assessment that is carried out by qualified/certified experts along energy efficiency assessment guidelines where the topics and methodology of the assessments are defined (by law or decree). The objective of the energy assessment is to confirm that only the best available cost-effective technology and processes will be implemented. The draft law will undergo an extended process of inter-ministerial and public consultations prior to parliamentary approval; this is planned to take place in 2019. 2.2.2.2 Law on the Energy Performance of Buildings The Law on the Energy Performance of Buildings68 governs the energy performance of buildings in the Kyrgyz Republic during design and construction (for new buildings) as well as for major renovations (existing buildings). It was developed in 2011 with support provided by the European Bank for Reconstruction and Development. At the time of its adoption, the law was a unique normative act based on the successful practice of promoting energy efficiency in the European Union and adapted to the conditions and regulatory framework of the Kyrgyz Republic. It was one of the first laws in Central Asia in which market-based energy efficiency management mechanisms replaced specialized requirements from the post-Soviet era at the level of technical regulations and standards. It introduced obligatory minimum energy-efficiency classifications applicable to both the design and construction phases in new buildings and to major renovations in existing buildings. Each building’s energy efficiency class 69 is identified through its energy certificate, which includes information on the current energy consumption baseline and energy efficiency potential. This will allow the building owner to determine which measures to introduce in the building and to plan future savings. The law is complemented by by-laws and technical documents, and further efforts are underway to improve the legislation and its enforcement. 70 2.2.2.3 Decree on the Rational Use of Energy Decree No. 255 "On the Approval of Limits for the Consumption of Heat, Electric Energy, Natural Gas, Water and the Intake of Wastewater for 2005-2006 for Public Organizations and on Measures for the Rational Use of Funds Allocated to Budget Organizations for Utilities Cost," 71 dated June 2, 2005, is directly linked to the rational use of energy. With this regulation the government annually determines the supply limitations of energy consumed by regions and responsible agencies. 72 As a result, many public buildings operators reduce energy supply in order to comply with the government order, which leads to lower and sub-standard comfort levels (in such areas as indoor temperature and illumination). The order is provided either in physical terms (e.g. electricity amount in kWh or fuel amount in liters) or monetary terms (the cut in the energy supply Roadmap for the Implementation of Energy Efficiency in Public Buildings of the Kyrgyz Republic 41 budget, in KGS) and often forces building operators to switch to lower-cost types of energy (coal, for example) to maintain a certain level of heating. Table 2.3 lists other regulations applicable to EE in public building in the country. Table 2.3. List of Accepted and Developed Regulations in the Context of EE in Public Buildings № Normative Legal Act Approved 1 Law of the Kyrgyz Republic on the Energy Efficiency of Buildings July 26, 2011, № 137 2 Regulation on the Modalities for the Energy Certification of Buildings Government Decree № 531, August 2, 2012 3 Regulation on the Procedure for Periodic Monitoring of Energy Efficiency of Government Decree № Boilers, Heating and Hot Water Supply Systems 531, August 2, 2012 4 SNiP 23-01:2013, “Building Heat Engineering (Thermal Protection of Buildings)” Gosstroy order 26.05.2013 5 SP 23-101-2013, “Design of Thermal Protection of Buildings” Gosstroy order 26.05.2013 6 Method for Calculating the Energy Efficiency of Buildings and Determining Gosstroy order Energy Efficiency Class for Energy Certification of Buildings 26.05.2013 7 Methodical instructions for conducting periodic monitoring of the energy Gosstroy order efficiency of boilers, heating systems of buildings, and hot water supply of 26.05.2013 buildings 8 Guide to the settlement application for energy certification of buildings Gosstroy order 26.05.2013 9 Plan of measures ("roadmap") for creating conditions for the practical Gosstroy order implementation of legislation in the sphere of the energy efficiency of 26.10.2016 buildings in the Kyrgyz Republic 10 (draft) Regulation on rules and procedures for the qualification certification of At the stage of discussion specialists in energy certification of buildings and the periodic monitoring of and approval the energy efficiency of boilers, heating systems, and hot water supply of buildings 11 (draft) Regulation on the State Register of At the stage of discussion • The Energy Certificates of Buildings, • Reports on the Periodic Monitoring of the Energy Efficiency of Boilers, Heating Systems and Hot Water Supply Systems of Buildings • Certified Specialists in Energy Efficiency of Buildings and on the Periodic Monitoring of Energy Efficiency of Boilers, Heating Systems and Hot Water Supply of Buildings 12 (draft) Draft amendments to the Law on Energy Efficiency of Buildings At the stage of discussion 2.2.2.4 Energy Certification and Energy Passports The purpose of the energy passport, which is based on Decree No. 255 (discussed in the previous section), which limits the consumption of energy by public organizations. The purpose of a public building’s energy passport is to collect building data from municipalities and energy companies in order to determine energy demand and energy supply limits. Energy passports are the basis for imposing a limit on the consumption of energy resources by public institutions. It is not intended to monitor or improve the energy efficiency of buildings. The passport presents a table of data on resource costs and does not contain actual data on the energy characteristics of the building and its technical systems. The passport is prepared by the institution itself, sometimes with the support of local power utility experts. The accuracy of its content must be verified by the State Inspectorate for Environmental and Technical Safety – although due to a lack of staff and monitoring, data reliability is poor. Energy performance certificates, 73 on the other hand, are issued for new construction and building Roadmap for the Implementation of Energy Efficiency in Public Buildings of the Kyrgyz Republic 42 rehabilitation. The Law on the Energy Performance of Buildings obliges public building operators to prepare energy passports for public buildings and boiler houses and lays out the provisions and verification procedures. Due to the absence of certified energy efficiency specialists (see Chapter 4), very few new or retrofitted buildings have been certified up to now. After a building is retrofitted it will need to meet the energy performance certification of class “B” in accordance with the building’s type, function and location in a climatic zone (see Table 2.4). Despite the existence of a legislative for energy performance certification, a responsible state institution for implementation and enforcement as well as a pool of qualified experts is not yet available. Table 2.4. Requirements for Specific Energy Consumption in Buildings (kWh/m²) Standardized value (minimum requirement) for energy consumption for new buildings and buildings under energy renovation - Class B (by climatic region) Building type I II III IV V VI Administrative buildings 16-31 25-50 26-52 39-77 32-64 39-78 Schools 16-32 27-53 28-55 41-81 32-64 40-79 Orphanages and nurseries, 19-38 32-63 33-66 49-97 38-76 48-94 kindergartens 2.2.3 Building-related Technical Regulations, Norms and Standards The Law on the Energy Performance of Buildings presupposes the application of minimum energy efficiency norms to buildings – meaning that the structures and components of new and retrofitted buildings 74 must adhere to minimum requirements for thermal conductivity. These standards and requirements are rooted in “SNiPs” (construction standards and regulations) originally used in the former Soviet Union to regulate building construction; the Kyrgyz Republic uses them in part through its accession to the Eurasian Economic Union (EUAU) in 2015. Many of those SNiPs are outdated and there is an urgent need to update them to reflect best-practice energy-efficiency technologies and materials in building design and implementation. They include the following: • SNiP KR 75 31-04-2001, “Public Buildings and Structures”; SNiP KR 31-08: 2013, “School Buildings”; SNiP KR 23-01-2013, “Construction Heat Engineering”; SNiP KR 20-02:2009, “Seismic Resistant Construction”; SNiP KR 35-01-99, “Designing a living environment taking into account the needs of low-mobility groups”; etc. • SNiP 2.04.05-91(as updated), “Heating, ventilation and air conditioning”; SNiP 2.01.02-85 (*) “Fire regulations”; SNiP 2.04.01 – 85 (as updated), “Internal water supply and sewerage of buildings”; MSN 2.04-05-95, “Natural and artificial lighting”; MSN 59-88, “Electrical equipment for residential and public buildings”; SNiP 2-02-01-83, “Foundations of buildings and structures”; and others. • Sanitary and epidemiological rules and standards (SanPiN) in medical and preventive organizations, educational institutions, and so on. • In addition to technical regulations, construction norms (EAEU CN) and code specifications (EAEU CS) of the EAEU countries have been put into effect in the territory of the Republic in accordance with established procedure. Some areas, such as building-integrated renewable energy, are not covered by SNiPs. Due to insufficient institutional capacities, limited efforts have been made to reform technical construction and equipment standards, resulting in a mixture of SNiP and technical norms. Moreover, there is a large gap between the level of implementation and policy as project design and construction companies rely on existing technical documents that are outdated in terms of compliance with politics and the market. Also, contractors and Roadmap for the Implementation of Energy Efficiency in Public Buildings of the Kyrgyz Republic 43 design institutions usually apply all norms/standards to comply with the requirements, leading to excessive retrofit costs. Table 2.5 summarizes some of the technical norms relevant to energy-efficient construction – specifically heat transfer coefficients, or U-values. 76 In addition, building operators are required to provide certain indoor conditions according to Decree No. 531 of August 2, 2012. 77 This decree, which is part of the Law on the Energy Performance of Buildings, stipulates an indoor room temperature of 20/22 °C, various minimums or maximums for different indoor environments (e.g. at least 50% in classrooms), an hourly air exchange rate of 0.5 per volume, and illumination levels of 300–500 lux. Due to inefficient, low-performance installations, it is almost impossible to achieve those norm values in practice for a building that has not been retrofitted. Table 2.5. Requirements for U-values of Building Structures for New Buildings Building structures U-Value (W/(m²K)) External walls 0.32 Windows in external walls and doors in spaces in which people permanent reside ≤1.5 Flat roof 0.20 Ceiling with vertical thermal flow (depending on the thermal flow direction and temperature 0.20 - 1.70 difference) Note: W/(m²K) = watts per square meter per Kelvin. 2.3 Budgeting in the Public Buildings Sector 2.3.1 Operational Expenditures Operational expenditures (including the cost of energy) for the public buildings sector are paid for mostly out of the central government budget of the Kyrgyz Republic but channeled through different municipalities and oblast administrations, depending on the responsibility for building operation. 78 Local funding originates from local taxes and is kept locally. Due to the low economic development of most Kyrgyz regions, most oblasts and municipalities are heavily subsidized by the central budget. • Educational facilities are funded by the Ministry of Education and Science based on the number of enrolled students. 79 Higher, professional and central schools are funded directly by the Ministry of Finance, while schools located in municipalities are funded through the municipal budget. • Pre-schools/kindergartens and social facilities (such as elderly homes, social hostels, dormitories, and orphanages) are funded by the budget of their respective municipality. • Healthcare facilities (hospitals/ policlinics) are funded by the health state budget through the Ministry of Health and medical insurance funds, channeled through the respective budgets of the regional administrations. • Municipal administrative buildings are funded by the respective municipal budget. • State government buildings (ministries, sub-ordinated agencies, institutes and facilities) are funded by the budget of the respective line ministry. The distribution of funds for building operations follows the budget classification and is intended to provide the basic function of the public service (education, health care, administration, etc.). Budget sub-lines include (i) costs for employees (wages, including surcharges and allowances); (ii) expenses for utility services (energy, water, waste, etc.); (iii) material and technical base of buildings (equipment and overhead and operation material); and (iv) basic building maintenance and repair. Other eligible expenditures are specific to the building function, such as car fleet operation and security. Roadmap for the Implementation of Energy Efficiency in Public Buildings of the Kyrgyz Republic 44 Municipalities can reallocate funds according to demand and availability. Reduced spending in one sector – such as energy bills – does not reduce budget transfers. However, retaining those savings is not possible and represent a barrier to increased energy efficiency investments by municipalities. Financing of public buildings energy supply is subject to annually adjusted limits determined on the basis of the previous year's consumption of energy resources (coal, electricity, etc.), and agreed for the subsequent heating season. 80 The current setup for funding operational expenditures is highly bureaucratic and can cause disbursement delays (and, consequently, liquidity shortages) on the side of the municipalities. This can increase municipal debt to energy utilities and ultimately result in power cut-offs. 81 Despite the existence of an effective procedure for planning local budgets, there are several factors that constrain the development of sound public buildings energy budgets, such as: • Incomplete or missing data to confirm real energy demand and consumption, such as energy passports, or technical passports of power equipment; • Failure of the management of public organizations to submit draft budgets containing precise forecasts to the local council (the “City Kenesh” or the “Kenesh”) in writing; and • Failure of the Kenesh to scrutinize draft budgets on building expenditures. Public building operators and responsible departments in the local administration often cannot determine the real demand of energy and respective expenditure for the next heating season. As a result, budgeting of energy expenditure is often done on a provisional basis: • Because the previous year’s energy supply was partly limited, it does not reflect the real demand to achieve indoor heating and lighting comfort; it is thus not appropriate for an accurate demand forecast. • The accuracy of energy passports is questionable. • Buildings’ energy performance certification does not determine the real energy demand. Procurement and payment of energy for municipal public buildings is the responsibility of the municipal administration. Payments for consumed electricity are based on real consumption according to meter readings in the buildings. Fuels for heating (e.g. coal) are directly procured by the municipality from local suppliers. For buildings that are supplied directly (through either district heat or an individual heating boiler operated by a district heating company) payments are made according to installed meters or based on methods of determining the demand for heat energy. The Open Budget Portal of the Ministry of Finance discloses budget and expenditure data for each agency and according to budget categories. 82 83 An analysis of the data reveals that housing and utility expenditures amount to 1.43% of the central government budget and 3.25% of the local budget (Table 2.6). Table 2.6. Comparison of Expenditures by Budget Line Items National Budget Local Budget Total budget for 2017 129 276 705 million KGS 194 525 064,9 million KGS Budget line “Housing and Utility 1,43% of the total budget 3,25% of the total budget Costs” 1 842 478 million KGS 6 321 947 million KGS (26 702 million US$) (91 622 million US$) Budget sub- line “Utilities” (energy, 0,035% of the budget line 1,3% of the budget line water, waste) 648 400 KGS 82,377 million KGS (US$9 397) (1.2 million US$) Roadmap for the Implementation of Energy Efficiency in Public Buildings of the Kyrgyz Republic 45 Budget sub-line “Acquisition of coal - 0,015% of the budget line and other types of fuel” 964 580 KGS (US$13 979) Budget sub- line "Expenses for repair 0,018% of the budget line 3,612% of the budget line works of property" 329 080 KGS 228,7 million KGS (US$4,769) (US$3.3 million) Budget sub-line "Buildings and 26,7% of the budget line 30,75% of the budget line structures" (investments into new 493,5 million KGS 1 955 million KGS buildings, major retrofit and leasing (7,152 million US$) (28,17 million US$) costs) Source: Open Budget Portal of the Ministry of Finance. The above table illustrates that the local (municipal) budget covers most expenses for utility services, renovation and construction of public buildings. The annual budget for new construction and retrofit amounts to US$35 million, of which the local/municipal budget share is 80%. Due to the absence of a detailed buildings inventory and consistent database management, it is currently impossible to disaggregate allocations to the various budget lines by building type (e.g. x KGS for the retrofit of y schools). 2.3.2 Local Budget Development Proposals for and approvals of national and local budgets are conducted publicly during open sessions of the Kenesh (local council) and public hearings. As illustrated in Figure 2.3, the procedure for local budget development is as follows: 84 1. The Kenesh discusses and comes to a preliminary agreement on priorities for local development and budget spending. 2. The local Planning and Budget Commission (Aiyl Okmot) invites the responsible sectoral authorities (education, social and health, etc.) to report on the budget expenditures of the previous period and to propose a budget for the coming year. 3. The Commission then estimates (i) budget incomes (e.g. tax revenues and transfers) and (ii) expenditures (based on the proposals and development/investment needs) to balance and refine the income and expenditure of local budgets. 4. The budget is then submitted to the appropriate local (aiyl or city) Kenesh for approval and subsequent execution, followed by transfer requests to the regional administration for allocation and approval and forwarding of the request to the Ministry of Finance. Roadmap for the Implementation of Energy Efficiency in Public Buildings of the Kyrgyz Republic 46 Figure 2.3. Procedure of Facility Budget Planning by Local Authorities Source: Unison Group, “Coal for schools’ space heating: guideline for users” brochure (Bishkek: Unison, 2016). 2.4 Public Procurement Sound public procurement can help improve energy efficiency through methodologies that consider the potential energy consumption and related costs of procured equipment and services. All budget organizations procure goods and/or consulting services in accordance with the Law of the Kyrgyz Republic on Public Procurement of April 2015. 85 Tender procedures are conducted through the official web portal for public procurement 86 and according to different procurement methodologies to determine price and quality. A tender commission – i.e. an entity like the Planning and Budget Commission, which focuses on tenders and public procurement – ensures the sound process and compliance of the proposal with the terms and conditions of the technical specifications. Procuring entities develop procurement plans on the basis of requests from the operators of the country’s public buildings (kindergartens, schools, and hospitals). The plans contain information on the subject of public procurement, its quantity and expected prices, and the timing of procurement. There is no mandatory energy efficiency performance requirement of the purchased goods by law, but the procuring entity can add energy efficiency requirements to the tender specifications. Most tender procedures select the winner by choosing the lowest-price offer; in other words, restrictive procurement rules are biased towards lowest- price procurement and do not reflect the full cost of ownership (i.e. lifecycle cost). The contracting authority must state in the tender documentation the criterion of the most economically advantageous offer as well as sub-criteria for evaluation in accordance with the nature and purpose of the specific procurement subject. The current public procurement regulation does not consider criteria for reduction of building-operation or energy-supply costs. With respect to energy efficiency, the criteria for lowest life-cycle costing could be applied to reflect this, but the concept remains theoretical due to (i) a lack of life-cycle cost-benefit assessment, (ii) insufficient capacities to establish an EE project investment case, and (iii) a lack of detailed analysis for the evaluation. Consequently, the lowest initial price remains the decisive criterion. Roadmap for the Implementation of Energy Efficiency in Public Buildings of the Kyrgyz Republic 47 Another challenge for scaling up energy efficiency through procurement is that budgets in the public sector are submitted and approved on a single-year basis rather than on an extended (e.g. five-year) basis. This makes multi-year planning for facility upgrades quite difficult and, in general, can impede the multi-year contracting. An annual budget over one year is too short for adjusting expenditure priorities. This is particularly problematic for energy performance contracting (EPC), since such contracts require several years of energy savings before the investments are recovered. Multi-year budgeting could ensure that commitments made by governments are consistent with the medium-term fiscal outlook. Multi-year budgeting would also allow for better connections between policies, planning and budgeting. 2.5 Financing of Energy Efficiency in the Public Buildings Sector Because the potential positive macroeconomic effects of energy efficiency are not well known in the Kyrgyz Republic, there is a lack of financial resources allocated for large-scale energy efficiency rehabilitation in the public buildings sector. Funds allocated to the renovation of buildings usually do not include measures for improving energy efficiency and most renovation programs entail replacing only windows, lighting and heating systems. Building operators can tap into different funding sources for building renovation, such as municipal or regional budgets and central government funds (partly through the Community Development and Investment Agency of the Kyrgyz Republic, ARIS). At the request of local authorities, schools can apply for “stimulating” grants provided by the Ministry of Finance. 87 These funds are provided by the national budget on a competitive basis that requires co-funding from local budgets. Funds can also be allocated from the District Development Funds, which are formed as a 2% share of the total tax paid by the country’s mining companies.88 Usually, funds are allocated for urgent repairs of buildings, but mainly the funds are allocated to the needs of social facilities through village or district administrations. The Kyrgyz government also has a program called "Safe Schools and Pre-School Educational Organizations,” which aims to build to build or rebuild more than 2,000 schools and kindergartens in 2015-2024 89 at an overall cost of almost 50 billion KGS. With help from donor agencies, the government has also piloted EE projects using purely grant or budget financing. These projects have generally demonstrated high levels of energy savings and reasonable payback periods. In addition, such projects provide substantial co-benefits including building modernization, improved comfort, and increased awareness. Notable examples are as follows: • EBRD’s Kyrgyz Sustainable Energy Financing Facility ($55 million) to finance the implementation of equipment to save energy and water and to dispose of waste from homes and enterprises in the Kyrgyz Republic (since April 2013, more than 1,415 energy-saving projects have been supported, resulting in annual energy savings of 128 GWh); • A World Bank “Urban Development” project 90 for the rehabilitation of four schools and two kindergartens to improve their energy efficiency and seismic resilience, strengthen the building structure, and renew the heating system and building insulation; • A UNDP project, “Improving the Energy Efficiency of Buildings" (2010-2014), to build an energy- efficient school in Osh and design an energy-efficient school in Bishkek; and • A World Bank “Enhancing Resilience in Kyrgyzstan” (ERIK) project, which aims to improve the safety and functional conditions of schools (including energy efficiency improvements) in the areas of highest seismic hazard. However, the main lesson learned from these projects indicate that there can be very limited replication of donor pilot programs and grant financing without substantial investments; a sustainable, scalable financing mechanism; and the participation of the private sector. At the same time, energy efficiency investment in Roadmap for the Implementation of Energy Efficiency in Public Buildings of the Kyrgyz Republic 48 large public buildings or bundles of investment projects could generate cash flows from cost savings that can be used to repay the initial investment costs. Various countries have implemented a range of sustainable financing and implementation options, to enhance the financial leverage of public funds and/or to better transition to commercial funding for public sector EE projects by involving the private sector. In the Kyrgyz Republic, however, there are currently no financial products offered by commercial banks targeted at EE rehabilitation in the public buildings sector. A number of impediments limit the feasibility of commercial financing in the sector, including the following: • Public buildings do not generate income; • Public buildings are state property and cannot be used as a real estate collateral; • For any work or service involving a public building, building managers must obtain permits from the relevant line ministry representatives (Ministry of Education, Ministry of Health, etc.); • The budgeting code does not allow a public agency to retain energy cost savings; and • Alternative obligations to increase a public borrower’s performance 91 under a loan agreement (such as bail, guarantees, or penalties for late payments) are considered complex procedures by local commercial banks and usually not applied. Roadmap for the Implementation of Energy Efficiency in Public Buildings of the Kyrgyz Republic 49 3 Energy Efficiency Supply and Service Market The private sector is an important actor for developing a market for energy efficiency products and services and to eventually scale up energy efficiency in the public buildings sector. The energy efficiency market in the Kyrgyz Republic is still in its infancy and currently focused on providing services and equipment for project preparation and implementation, such as for energy auditing and construction services or energy efficiency equipment providers. Due to a lack of norms and quality performance criteria, there is a high variability of quality and cost across the different technologies and services offered. Also, while demand exists throughout the Kyrgyz Republic, most of the companies are located in Bishkek and Osh, which restricts access for rural communities to those technologies and services. As illustrated in Figure 3.1, the energy services value chain encompasses a wide range of activities. Figure 3.1. Energy Services Value Chain Energy Design and Equipment Installation Operation & Facility Energy as Financing Auditing Engineering Procurement Commissioning Maintenance Management a Service There are many different types of energy service providers that may provide some or all of the elements of the value chain; these are commonly referred to as energy service companies (ESCOs). An ESCO generally performs these services using a performance-based approach known as energy performance contracting, or EPC. The main characteristics of EPC as offered by ESCOs are as follows: • An ESCO provides or arranges a wide-ranging package of services comprising many or all of the elements of the energy services value chain. • The services are offered using business and financing models under which customers effectively pay for the energy services from the energy cost savings achieved. • Payments to the ESCO are contingent upon achieving guaranteed performance. • Most of the project risks are assumed by the ESCO. 3.1 Energy Services, Buildings Design and Construction Services Starting in 2013 and according to the Law of the Kyrgyz Republic on "Licensing", 92 the design and auditing of public buildings, as well as construction and installation works, are subject to mandatory licensing of the service provider. This means that building designers, seismologists, engineers, and so on must all obtain a qualification certificate issued by the Kyrgyz government. However, although there are approximately 70 experts in energy efficiency and HVAC (heating, ventilation, and air conditioning) technologies in the Kyrgyz construction sector, there are no specialists in building energy efficiency. While regulatory requirements exist for energy performance certification of buildings and monitoring of equipment, the lack of an approved qualification certification by Gosstroy means that specialists have officially not yet been trained. Energy auditing is not regulated, and no obligatory licensing is required for this service. One of the origins of this problem is the lack of an institution in charge of standardization. The construction sector is better represented and organized. More than 700 construction companies are registered in the Kyrgyz Republic, with the largest concentration of developers in Bishkek. While many construction companies participate in the energy efficiency market, only a few have a well-educated labor force capable of installing thermal insulation such as rock wool and EE windows. Building companies are graded according to their ability to perform work of a certain degree of complexity. 93 Roadmap for the Implementation of Energy Efficiency in Public Buildings of the Kyrgyz Republic 50 In order to obtain a license, the company must present the following information: • Information about the enterprise’s state registration, tax payments, and insurance premiums; • General information about the organization, such as the qualifications of its managers, specialists, and workers and information about its technical base; and • Procedures for ensuring quality control and production safety. A legal entity must have at least one specialist with the appropriate certification for each type of requested activity and work. Licenses are issued without limitation of the term and territory of action. In 2015, the State Construction Committee of the Kyrgyz Republic initiated an initiative on electronic licensing 94 to reduce the costs for applicants and budget expenses for the purchase of forms and delivery. It is important to note that the leading construction organizations that carry out the construction of complex buildings are usually not interested in the construction of public buildings. Instead, they focus on the construction of facilities with short payback periods. Companies that compete for public-buildings works are often founded for the express purpose of participating in public tenders, and work quality is often insufficient due to lower levels of experience. The following table provides a summary overview of market actors, including their respective capacity levels. Table 3.1. Overview of Available Service Suppliers and Capacities Capacity level of Type Existing service providers companies/ institutes Consulting companies/ <10 public and commercial Medium individual experts <30 commercial Energy audit companies <5 commercial Medium to high Design institutes 4 big institutes: Medium to high • Giprostroy and Promproekt – joint stock companies • Garantproekt and Gorproekt – Ltd. > 50 small and medium-scale companies Kyrgyz National Research Institute of Seismic Construction Construction companies >150 in Bishkek Low to medium <10 in regions Project supervisors for State Agency for Architecture, Construction, and Housing Low to medium design and construction State Inspectorate for Environmental and Technical Safety works (excludes state 1 specialized company on technical supervision only departments) + all construction and design companies 3.2 EE Equipment Suppliers The market for energy-efficient materials and equipment in the Kyrgyz Republic is relatively well developed. However, most energy-efficient materials and equipment must be imported (Figure 3.2). There are only a few domestic producers of energy-efficient materials; they include NewTEk LLC 95 (solar collectors), Interglass LLC 96 (energy-saving windows with glazing), Fakel LLC 97 (mineral-wool basalt slabs and coils), and Tansu Ltd 98 (coal boilers). Roadmap for the Implementation of Energy Efficiency in Public Buildings of the Kyrgyz Republic 51 Figure 3.2. Suppliers of Energy-Efficient Materials and Equipment Source: Chart based on data provided (2018) by Kyrseff from their list of recommended suppliers at http://www.kyrseff.kg/list-of-suppliers/?lang=en. In accordance with the requirements of the Eurasian Economic Union and the Law on Technical Regulations for the Safety of Construction Materials, Products, and Structures, energy-efficient equipment is exempted from mandatory conformity assessment. This means there are no performance requirements for the energy efficiency of imported equipment that could prevent the import of low-energy-efficiency performance technologies. Similarly, equipment classified as a "renewable energy source" (RES) is exempted from custom duties in accordance with the Law on Renewable Energy Sources (since 2008). However, the definition of RE technology is weak. A survey of technology suppliers showed that the interpretation of equipment differs. More advanced heating technologies, such as heat pumps, are not explicitly exempted from import duties. Most of the companies are located in Bishkek, in the City of Osh, as well as in regional centers. Companies located in regional cities usually purchase equipment through dealers in Bishkek. Some advanced technologies (heat pumps, solar systems) are available for sale in Bishkek only. The market for plastic windows is the most developed of all the energy-saving technologies: approximately 1,000 companies supply, produce, or install windows in the Kyrgyz Republic. An important challenge with respect to window manufacturing (and to boilers and thermal insulation material) is the absence of a domestic laboratory to certify the heat coefficient (U-value) of windows. Domestic manufacturer thus need to rely on laboratories abroad – but because this is expensive and often not feasible for small manufacturers, it ultimately means that few producers can obtain energy efficiency certificates for their products. Table 3.2 summarizes the capacity levels of the various types of energy service supplier in the country. Roadmap for the Implementation of Energy Efficiency in Public Buildings of the Kyrgyz Republic 52 Table 3.2. Energy Service Suppliers: Capacity Levels Consulting Energy audit Design Construction Project Service companies companies institutes companies supervisors Energy auditing know-how Medium High Low Low Low Economic assessment know- Medium Medium Low High Low how Renewable and advanced Medium Low Low Low Low energy technology knowledge Technical know-how Low Medium High High Medium (construction) Regulatory knowledge High Medium High High High Design know-how Low Low High Medium Medium Implementation know-how Low Low Medium High Medium Supervision know-how Low Low Medium High High References available High Low Medium Medium Low Roadmap for the Implementation of Energy Efficiency in Public Buildings of the Kyrgyz Republic 53 4 Summary of Key Barriers to Public Sector EE Implementation The previous chapters provided insights from the relevant sectors and areas affecting the potential scale-up of energy efficiency in the Kyrgyz Republic, showing how the specific barriers to increasing energy efficiency in the public buildings sector are numerous and span multiple sectors. This chapter summarizes these barriers. International experience shows that the main barriers to public EE implementation can be classified as follows: • Legislative and regulatory barriers (RB) • Institutional barriers (IB) • Budgetary barriers (BB) • Capacity barriers (CB) • Financing barriers (FB) • Market barriers (MB) With reference to this classification, Table 4.1 summarizes the major barriers to public sector EE implementation in the Kyrgyz Republic. Table 4.1. Barriers to EE Implementation in Public Buildings in the Kyrgyz Republic Type of barrier Specific barriers Acronym Legislative and • Outdated energy savings law, outdated Program of Energy Efficiency Policy for RB-1 regulatory 2015-2017, and lack of quantified and committed energy-saving targets in the barriers (RB) long-term national strategic documents (e.g. the National Strategy for Sustainable Development 2040 or the Concept of Green Economy of Kyrgyzstan) • Limited implementation of the Law on Energy Performance of Buildings due to RB-2 incomplete secondary legislation (e.g. energy performance monitoring and certification) and missing administrative acts to enforce primary legislation • Lack of instruments for monitoring the implementation of and enforcing the RB-3 current energy savings legislation and programs (qualified inspection, program evaluation, etc.) • Restrictive procurement rules are biased towards lowest-price procurement and RB-4 do not reflect the full cost of ownership (i.e. lifecycle cost) • Public procurement regulations do not specify energy performance criteria for equipment and materials • Lack of a methodological basis for performing energy audits RB-5 • Lack of an official methodology for building certification under Gosstroy RB-6 • Lack of a central register and inventory of public buildings to benchmark energy RB-7 performance • Outdated construction design standards (SNiPs) RB-8 • Lack of a regulatory framework for energy performance contracting (EPC) or RB-9 private-public partnerships (PPPs) to encourage private sector investment Institutional • General lack of institutional focus and commitment to save energy IB-1 barriers (IB) • Fragmented responsibility for public buildings across agencies, and partly IB-2 diverging interests for the technical management of the same building • Poor institutional memory due to high staff fluctuation and general lack of staff, IB-3 as well as insufficient follow-up of failure to comply with commitments and acts • Weak inter-ministerial cooperation and coordination on energy efficiency IB-4 targets, initiatives, projects and instruments Roadmap for the Implementation of Energy Efficiency in Public Buildings of the Kyrgyz Republic 54 Type of barrier Specific barriers Acronym • Limited communication and exchange between governmental agencies, NGOs and market players with regard to equipment and financing • Weak donor coordination on public energy efficiency IB-5 Budgetary • Strained public-sector budgets BB-1 barriers (BB) • Lack of financial resources for programmatic EE investment projects • Lack of dedicated investment budget lines for building rehabilitation • Limited public funds for detailed project development • Restrictive regulation that limits retainable energy cost savings, e.g. to use BB-2 energy cost savings for energy efficiency investments • Public-building owners are not able to commit to long-term financial obligations BB-3 Capacity • Limited awareness and understanding of energy efficiency opportunities, CB-1 barriers (CB) solutions, and benefits among public sector decision makers leading to lack of incentives to promote energy efficiency • Insufficient utilization and promotion of results of past and ongoing EE demonstration projects • Buildings energy consumption limits are not properly enforced and lack support CB-2 mechanisms to reduce energy consumption • Insufficient capacities at all levels to identify, develop and propose concrete and CB-3 feasible EE project investment projects • Weak enforcement of EE regulation (municipalities, buildings, material) due to CB-4 missing control mechanisms, inspectors, etc. • Weak domestic market capacity and experience (e.g. energy auditors, design CB-5 institutes, construction companies) • Missing guidelines, instruments and specific capacities for conducting energy audits and energy performance certification by trained and qualified experts • Lack of standardized energy audit procedures and certification for public CB-6 buildings energy passports and certification • Lack of a domestic laboratory for certification of materials and equipment to CB-7 confirm their EE performance Financing • Low financial profitability of EE investments (high payback time) at current FB-1 barriers (FB) energy prices and by neglecting economic costs • Missing macro-economic assessment for energy efficiency investments • Lack of customized financial products for public sector EE FB-2 • Lack of demonstration for energy performance contracting and ESCO services • Poor access of public agencies to commercial financing FB-3 • Restrictions on borrowing from commercial banks • Limited availability of equity funding and lack of collateral • Lenders unwilling to provide debt financing to public agencies FB-4 • Limited capacity of lenders to lend for energy efficiency in public sector • Lenders’ perception of high risk Market barriers • Weak and fragmented market capacities for energy service MB-1 (MB) • Absence of an energy efficiency lobby from the market player side, e.g. a dedicated association of suppliers • High variability of quality and costs of equipment and service market due to MB-2 missing norms for quality and performance • Limited presence of equipment and service providers in rural areas/regions MB-3 • Low quality of installation services due to missing requirements for procurement MB-4 and supervision by contractors • High cost for advanced (imported) equipment due to import duties MB-5 Roadmap for the Implementation of Energy Efficiency in Public Buildings of the Kyrgyz Republic 55 5 Vision 2040 for an Energy-Efficient Public Building Stock The government of the Kyrgyz Republic has committed to achieving the UN Sustainable Development Goals (SDGs). SDG 7 is to “ensure access to affordable, reliable, sustainable and modern energy” by 2030 – specifically by increasing substantially the share of renewable energy, doubling the rate of energy efficiency improvements, enhancing international cooperation to facilitate access to clean energy research and technology, promoting clean energy technology and energy efficiency investment, and expanding infrastructure and upgrading technology for supplying modern and sustainable energy services. 99 In December 2015 the Kyrgyz Republic submitted its Nationally Determined Contribution (NDC) to the UN Framework Convention on Climate Change (UNFCCC), which foresees a reduction in “business-as-usual” (BAU) levels of greenhouse gas (GHG) emissions in the range of 11.5 -13.75% by 2030 and 12.7 -15.7% by 2050. The general economic and energy sector development targets of the Kyrgyz Republic, like those for energy efficiency and renewable energy, are not well-formulated. It is thus important to develop a vision for an energy-efficient public buildings sector and define specific targets for its implementation. The following key energy policy objectives are set by the Kyrgyz government according to the draft “Concept for the Development of the Fuel and Energy Sector of the Kyrgyz Republic until 2040” document: • Sustainable energy and economic development; • Safe and reliable energy supply throughout the country, including in remote regions; • Reduced energy intensity and increased energy savings in all economic sectors; • A decrease in harmful environmental impacts; and • The establishment of a supportive institutional, regulatory, financial and market framework. While these energy policy priorities offer an entry point for increased energy efficiency action, the main challenge is to make public buildings energy efficiency a priority among the relevant institutions of the Kyrgyz government. This report thus suggests the following “Vision 2040” list of medium- and long-term targets for a sustainable, climate-resilient, safe and low-carbon public buildings stock in the Kyrgyz Republic by 2040. The medium-term targets (through 2030) are designed establish a supportive policy and regulatory framework and develop and strengthen institutional capacities – so as to provide the basis for scaled-up investments in the sector. Medium-Term Targets (by 2030) • Establish and implement a target to reduce annual energy consumption in the public buildings sector by at least 25-30% (or 250 GWh) compared to the baseline year of 2017. • Amend laws, budget codes, procurement rules, and energy efficiency performance requirements and norms to stimulate EE scale-up of retrofits and new construction. • Develop, budget and launch a dedicated public buildings investment program to address retrofit needs in at least 5,000 public buildings, including upgrading of all public buildings to performance Class B from a current performance class of D or lower. • Establish and operationalize a dedicated public entity (unit/institution/agency/department) to manage the public buildings stock and the investment program and to play a lead role in coordinating and building capacity in market stakeholders and sectoral institutions. • Develop and operationalize a financing mechanism to encourage energy efficiency investments in the public buildings sector (e.g. by combining existing budget lines for building operation and retrofit with external financing). Roadmap for the Implementation of Energy Efficiency in Public Buildings of the Kyrgyz Republic 56 Long-Term Target (by 2040) • Upgrade at least one-third of the public building stock to Class “A” (net-zero-energy buildings, or NZEBs), with the remainder upgraded to at least Class “B”. Roadmap for the Implementation of Energy Efficiency in Public Buildings of the Kyrgyz Republic 57 6 Roadmap for an Energy-Efficient Public Building Stock In order to address the identified barriers and operationalize the Vision for an energy-efficient public buildings sector by 2040, it is important to develop a roadmap that sets out the steps and timeframe necessary to: • Improve the political and regulatory framework for EE – by (a) developing and ratifying the “Concept for the Development of the Fuel and Energy Sector of the Kyrgyz Republic until 2040” document, and then by (b) emphasizing the use of EE in public buildings through the improved coordination of involved agencies, which will serve to enhance the political and regulatory framework. • Strengthen delivery capacities by building institutions and enhancing the capacities of all sectoral stakeholders; and • Scale up EE investments by developing and implementing instruments – such as a large, staged investment program for EE building retrofit; financing mechanisms such as energy performance contracting; and other instruments to provide access to finance and remove market barriers. The following roadmap – along with the accompanying catalogue of recommended measures – recommends a time-bound sequence of measures that are grouped according to the three areas – policy, legislation and regulation (in orange); institutional and technical delivery capacities (in green); and implementation mechanisms and investments (in blue) – and structured as short-term (1-3 years), medium-term (4-8 years) and long-term (10-15 years) measures. Although the State Committee for Industry, Energy and Subsoil Use (the “State Energy Committee”) plays a crucial role in setting the cross-sectoral framework for EE, local authorities can stimulate EE investments and accelerate implementation through their own sound strategies and policies. Roadmap for the Implementation of Energy Efficiency in Public Buildings of the Kyrgyz Republic 58 Figure 6.1. Roadmap for Improving the Energy Efficiency of the Public Buildings Sector Year 1 Short-term (years 2-3) Medium-term (years 4-8) Long-term (years 9-15) • Adoption of roadmap and Integration of EE into the Energy Concept 2040 • Establishment of an inter-ministerial working group as coordinating body for the management of public buildings • Training programs for governmental staff, local administrations, private sector • Media campaign and information events for public-building managers • Amending the law "On Energy Saving" to strengthen focus on public buildings • Regulatory act to set up a Public Buildings Management Agency (PBMA) • Establishment of a Public Buildings Management Agency (PBMA) • Amendment of the Law on Public Procurement to consider EE performance and lifecycle costing • Secondary legislation for energy audits as amendment to the regulation on public buildings certification; update of construction norms (SNiPs) • Regulatory act to set up an EE investment program for public buildings • Development and operationalization of a delivery and financing mechanism for the public buildings investment program (EE fund, EPC, Guarantee Fund) • Mobilization of climate finance to operationalize the investment program • Establishment of a training center; courses for energy service suppliers • Training and procedures for certification of energy auditor specialists • Establishment of a state register and benchmarking system for energy efficiency performance of public buildings • Secondary legislation for energy performance contracting (EPC) • Development of secondary legislation for "net-zero energy buildings" (NZEB) • Stimulating dissemination of EE and RE technologies by improving import conditions and domestic production of equipment and materials • Development and offering of energy management courses in higher education • Upgrade at least one-third of the public building stock to net-zero-energy buildings (NZEBs) or Class ‘A’, with the remainder upgraded to at least class ‘B’. Legend: Policy, Legislation and Institutional and Technical Implementation Mechanisms & Regulation Delivery Capacities Investments Roadmap for the Implementation of Energy Efficiency in Public Buildings of the Kyrgyz Republic 59 6.1 Catalogue of Recommended Measures The following catalogue of measures – which refers to the specific barriers identified earlier in Table 4.1 – is designed to support the operationalization of the roadmap. Further operational details are set forth in section 6.2. Table 6.1. Catalogue of Recommended Measures Policy, Legislative & Regulatory Framework Barriers Responsible Title addressed Measures/outputs institution Required resources Timeframe Development of the RB-1 • Approved “Concept for the Development of State Energy • Inter-ministerial consultations Short term “Concept for the the Fuel and Energy Sector of the Kyrgyz Committee and • Input by sector experts and (next 1 Development of the Fuel Republic until 2040” with emphasis on energy inter-ministerial public consultations (ongoing year) and Energy Sector of the efficiency to achieve national energy savings working group since December 2018) Kyrgyz Republic until 2040” targets and integration of roadmap key issues document and adoption of • Sectoral EE targets defined and the EE public buildings roadmap implementation plan with specific measures developed Amendment of the law RB-2 • Incorporation of (i) Public Buildings Research Center • Technical and legal needs Short term "On Energy Saving" to IB-2 Management Agency (PBMA), (ii) obligation for Energy and assessment (next 1-2 strengthen focus on public FB-2 for energy monitoring, energy audits and Economics / • Utilization of international years) buildings BB-1 performance certification for each public State Energy best practice building, (iii) investment program for EE public Committee • Layout of respective buildings, (iv) development of energy secondary legislation performance contracting, (v) "net-zero energy • Governmental stakeholder building" (NZEB) consultation and agreement • Secondary legislation (on above five items), technical regulation (such as review of SNiP) and analysis on implications for other primary and secondary laws, such as procurement law and budget law • Ratification of amended law in parliament Roadmap for the Implementation of Energy Efficiency in Public Buildings of the Kyrgyz Republic 60 Policy, Legislative & Regulatory Framework Barriers Responsible Title addressed Measures/outputs institution Required resources Timeframe Regulatory act to set up a IB-2 • Governmental decree on “Establishment of State Energy • Stakeholder consultation and Short term Public Buildings Public Buildings Management Agency Committee and agreement (next 1 Management Agency (PBMA)”, its mandate, power and tasks Fund on State • Development of statute, year) (PBMA) • Drafting of decree by relevant authorities and Property business and budget plan, release Management staff needs, organization chart, supervision board, allocation of annual budget for PBMA Secondary legislation for RB-3 • Incorporation of provisions for obligatory Research Center • Guidelines and standards for Short term energy audits as RB-5 energy audits in combination with for Energy and performing energy audits (next 2-3 amendment of regulation RB-7 performance certification for each public Economics / • Detailed methodology and years) for public building building State Energy calculation tools for energy certification • Specific provisions: required qualification and Committee audits and performance certification of the auditors; methodology, certificates quality levels, and results of energy audits (e.g. • Information campaigns for analysis of baseline and retrofit needs, public agencies / building identification of EE potential, and assessment owners of EE measures, as initial steps in investment • Capacity building for energy project preparation) auditors and introduction of • Provisions for a registry of certified energy quality-check mechanisms for auditors energy audits at PBMA • Specific provisions for building certificates: • Development of a support methodology, performance classes program to enable public • Methodology for engagement/hiring of energy building owners to hire auditors professional auditors • Inter-ministerial consultations and agreement Roadmap for the Implementation of Energy Efficiency in Public Buildings of the Kyrgyz Republic 61 Policy, Legislative & Regulatory Framework Barriers Responsible Title addressed Measures/outputs institution Required resources Timeframe Regulatory act for setting BB-1 • Development of program targets, definition of State Energy • Detailed planning of Short term up of an investment FB-2 focus for investment, responsible Committee, investment program: scope (next 1-2 program for EE public FB-3 implementation agency, budget and funding PBMA and priority areas, program years) buildings mechanisms phases, standard and • Development draft budget advanced EE technology • Definition of Program Implementation Unit interventions, project (PIU) (recommended PBMA) preparation steps (investment • Development of draft act and parliamentary plan and design), ratification procurement principles for services and supplies, project management unit • Budget allocation and respective fund raising (e.g. from IFI) • Building PIU capacities Amendment of the Law on RB-4 • Review of public procurement law to State Energy • Technical and legal Medium Public Procurement to BB-2 incorporate: (i) consideration of lifecycle cost Committee, assessment, development of term (next consider EE performance BB-3 assessment replacing selection by lowest Ministry of standardized assessment 3-4 years) and lifecycle costing FB-1 price, (ii) specification of high-energy- Finance methodology performance equipment and materials, and • Inter-ministerial consultation (iii) enabling public-building owners to commit and agreement to long-term contracting of services (five years at a minimum) • Amended law and ratification in parliament Roadmap for the Implementation of Energy Efficiency in Public Buildings of the Kyrgyz Republic 62 Policy, Legislative & Regulatory Framework Barriers Responsible Title addressed Measures/outputs institution Required resources Timeframe Update of technical RB-8 • Review and amendment of SNiPs: Research Center • Update of SNiP with best Medium construction norms (SNiPs) • To enable best-practice design of technical for Energy and available techniques (BAT) in term (next systems used for building retrofits and Economics/ State compliance with reference 4-5 years) consideration of high-energy-performance Energy international climate materials (especially heating devices and use Committee and technologies documentation Gosstroy, PBMA of renewable energies) (i.e. the EU BREFs) • To eliminate overlaps and contradictions • Promotion of updated SNiP among technical norms for mandatory application in • To harmonize standards/regulations for the the design of building retrofits EE technologies market • Adoption of EE regulation • To increase transparency on existing and among the countries of the expired regulations and acts Eurasian Economic Community Secondary legislation for RB-9 • Amendments of budget code, public State Energy • Detailed development of EPC Long term energy performance FB-2 procurement regulations, and procedures for Committee, funding mechanism, draft (years 5-8) contracting (EPC) as an public agencies and municipalities to work Ministry of regulation and related amendment to the Private- with private or public ESCOs Finance standard documents Public Partnership (PPP) (contract, etc.) Law (of February 22, 2012) • Inter-ministerial consultation or separate regulation and agreements • In case of establishments of a public ESCO, development of a business plan Roadmap for the Implementation of Energy Efficiency in Public Buildings of the Kyrgyz Republic 63 Policy, Legislative & Regulatory Framework Barriers Responsible Title addressed Measures/outputs institution Required resources Timeframe Development of secondary RB-2 • Development of technical standard solutions Gosstroy, State • Development of performance Medium- legislation for net-zero MB-2 for NZEBs in the Kyrgyz Republic and Energy standards (following EU term (years energy buildings (NZEBs) provisions for NZEBs, including building- Committee directives) and secondary 5-7) integrated renewable energies legislation • Long-term setting of performance standards • Inter-ministerial consultation for all and new building construction and agreement • Review of regulations for granting of • Consultation with equipment construction permits for NZEBs suppliers and design institutes • Development of the regulation and ratification to develop capacities and in parliament make technologies available Institutional and Technical Delivery Capacities Barriers Responsible Title addressed Measures/outputs institution Required resources Timeframe Establishment of an inter- IB-4 • Decree or administrative act to formally State Energy • Regular inter-ministerial Short term ministerial working group establish an inter-ministerial working group Committee consultations and (next year) as coordinating body to for public buildings involving relevant coordination facilitate management of • Adoption of roadmap objectives and ministries, and • Consensus-building across public buildings measures other institutions, stakeholders, concerted e.g. Gosstroy, activities to promote and Research Center for Energy and support roadmap measures, Economics, PBMA and collaboration across stakeholder institutions Roadmap for the Implementation of Energy Efficiency in Public Buildings of the Kyrgyz Republic 64 Institutional and Technical Delivery Capacities Barriers Responsible Title addressed Measures/outputs institution Required resources Timeframe Establishment of a Public IB-2 • Set-up of a ‘one-stop-shop’ to pool public State Energy • Business plan and staffing Short term Buildings Management CB-3 buildings responsibility for: procurement of Committee and within existing structures of (next 1-2 Agency (PBMA) for IB-3 energy, building maintenance and retrofit Fund on State the State Property years) managing and investments Property Management Fund implementing EE retrofit • Increasing awareness on EE opportunities, Management • Budget allocation for programs funding and financing sources operation of the PBMA • Strengthening coordination between building • Guidelines for public building operators and decision-makers (LGAs, MOF, operators for sources to MoES, MOH, etc.) support technical assistance • Establishing procedures for monitoring of (TA) and funding energy efficiency program. Training programs for CB-1 • Implementation of training programs for Research Center • Training needs assessment, Short- term governmental staff in the IB-1 public sector decision-makers and for Energy and curricula, manuals and (next year) Ministry of Energy, The implementers to (i) improve understanding Economics / State training of trainers State Energy Committee, and commitment for EE, (ii) improve EE costs Energy • Budgeting of training across Research Center for Energy – benefits assessment, (iii) improve EE project Committee, regions and Economics and line PBMA, identification and planning. ministries Universities Capacity-building program CB-1 • Dedicated training program for PIUs, such as The State Energy • Development of training Short to to enhance project CB-2 ARIS, GKP The State Energy Committee EN, Committee curricula and manuals, medium management and Public Buildings Management Agency / State guidelines for monitoring and term (years implementation Property Fund, Ministry of Education, etc., to verification, procurement and 1-3) monitoring for Project ensure and improve effective implementation supervision, etc. Implementation Units of building construction and renovation projects and fiduciary responsibilities. Roadmap for the Implementation of Energy Efficiency in Public Buildings of the Kyrgyz Republic 65 Institutional and Technical Delivery Capacities Barriers Responsible Title addressed Measures/outputs institution Required resources Timeframe Improving capacities and RB-2 • Increase capacities for inspections (number Gosstroy and • Development of training Short- term procedures for quality RB-5 and qualification of inspectors) Research Center curricula and manuals, (next 2 certification of energy RB-6 • Improve enforcement of the provisions and for Energy and guidelines and training-on- years) auditors and building CB-4 secondary regulations of the law "On EE of Economics / State the-job for: methodology and energy specialists CB-6 Buildings" and certification regulation Energy results (e.g. baseline analysis, Committee • Increase the qualification and certification of retrofit needs, identification energy auditors to conduct high quality of EE potentials and energy audits assessment of EE measures), follow-up energy audit procedures Media campaign and CB-1 • Increase awareness of EE opportunities Research Center • TV spots, newspaper articles, Medium information events for CB-4 among directors, groundskeepers, facility for Energy and information flyers, and term (next public-building managers managers Economics / State newsletter service, combined 2-4 years) on energy efficiency • Increase number of project proposals for Energy with regular educational building retrofits Committee activities in the regions Municipal training events CB-1 • Support municipalities to perform energy Research Center • Establishment of a program Medium to support development of CB-3 assessments and develop investment for Energy and template and list of indicators term (next municipal EE programs and CB-4 pipelines and action plans Economics / State to reflect the city's EE 2-4 years) public building retrofits FB-3 • Compliance with regulation on municipal EE Energy program planning and enabling of at least 50% of the Committee • Development of case studies, large municipalities (above 50,000 training programs population) to prepare municipal EE plans • Dissemination of tools for municipal energy management Roadmap for the Implementation of Energy Efficiency in Public Buildings of the Kyrgyz Republic 66 Institutional and Technical Delivery Capacities Barriers Responsible Title addressed Measures/outputs institution Required resources Timeframe Improving capacities for MB-3 • Set up of a trainings center to increase Research Center • Handbook on best practice for Medium building retrofits in the MB-4 awareness, information and capacities of for Energy and building repairs, checklists, term (years private sector commercial and public institutes, design and Economics / State catalogue of technologies incl. 2-3) construction companies on best-practice EE Energy mandatory minimum building retrofits Committee performance criteria and Gosstroy • Delivery of a series of dedicated Training (equipment/window, courses 2-3 days (each year 6 courses) for service/energy audits) as well energy service suppliers in economic and as reference cases regional centers to increase regional • Establishment of a training capacities for energy audits, project design in center as a PBMA department combination with seismic/ construction safety • Development of curricula, • Stimulation of EE retrofits and equipment course manuals, training of installations funded by private/ commercial trainers donors (e.g. LED lighting or windows) to • Setup of roundtable with the comply with minimum technical performance private sector to discuss requirements and sanitary norms dissemination and co-funding opportunities Improving capacity and CB-1 • Develop a postgraduate course on buildings Research Center • Development of curricula and Long term quality of higher education CB-3 energy management for Energy and course manual for teachers, (years 5-10) with respect to building MB-4 Economics / State training of trainers energy management Energy • Cooperation with the private Committee and sector Ministry of Education Roadmap for the Implementation of Energy Efficiency in Public Buildings of the Kyrgyz Republic 67 Implementation Mechanisms and Investments Barriers Responsible Resources and activities Title addressed Measure/output institution required Timeframe Establishment of a state RB-3 • Adoption of Gosstroy provisions regarding Research Center • Development of key Short to registry and benchmarking RB-7 energy consumption and performance for Energy and performance indicators medium system for public buildings IB-3 monitoring for all public buildings Economics / State (KPIs), defining of data term (next CB-6 • Introduction of energy monitoring in all public Energy collection responsibilities, 2-5 years) buildings (municipal, regional and central Committee and guidelines for data Gosstroy as well level) and benchmarking of key performance management, benchmarking as oblast and indicators municipal methodology • Development and roll-out of a central administrations • Development of the registry buildings inventory database (area, energy structure consumption and energy costs, level of • Development of a monitoring performance/certificate, energy audits, needs methodology and for EE retrofit) instruments, guidelines, and standards for certification and reporting Development of an FB-2 • Identification of responsible institution for State Energy • Detailed analysis of retrofit Short term investment program for FB-3 delivery of investment program Committee, needs across all public (next 2-3 the retrofit of 5,000 public • Development of program targets, delivery and Ministry of building sectors and sub- years) buildings to performance funding mechanisms Finance, PBMA sectors, and subsequent class “B” • Preparation of draft law and amendment of development of detailed related laws and regulations investment plan, cost- • Allocation of an investment budget by the benefits analysis, mobilization Ministry of Finance of US$500-700 million form • Upgrade at least one-third of the public public budget, donors and IFIs building stock to net-zero energy building (NZEB) or Class ‘A’, with the remainder upgraded to at least class ‘B’.” Mobilization of climate IB-5 • Request for funding proposal to GCF or other State Energy • Preparation of funding Medium- finance (from GCF or other FB-2 institution that outlines investment demand, Committee, applications to-long sources) to operationalize mitigation potential, financing mechanism Ministry of term (years the investment program Finance 5-20) Roadmap for the Implementation of Energy Efficiency in Public Buildings of the Kyrgyz Republic 68 Implementation Mechanisms and Investments Barriers Responsible Resources and activities Title addressed Measure/output institution required Timeframe Development of a RB-9 • Analysis of different financing options and State Energy • Market analysis Medium financing mechanism that FB-2 consultation with relevant stakeholders, Committee and • Development of financing term (years allows sustained FB-3 • Identification of the appropriate mechanism Public Buildings mechanism design 3-5) investments for EE FB-4 (e.g. EE fund or a public or Super ESCO), Management • Development of legal rehabilitation of the public BB-1 • Amendments of relevant laws to Agency, Ministry provisions/amendments to building stock BB-2 of Finance operationalize and institutionalize a financing relevant laws and budget mechanism as outlined in the EE law code • Analysis of opportunities to extend existing • Mobilization of equity to financial support mechanisms such as operationalize the financing Guarantee Fund OJSC or dedicated credit lines mechanism to extend the access to financing for public borrowers Stimulating dissemination MB-2 • Development of support programs for Ministry of • Setup of a catalogue of Medium- of advanced EE and RE MB-3 stimulation of domestic equipment Economy, relevant equipment and high- to-long technologies and domestic MB-5 production and distribution (such as windows, Ministry of performance specifications, term (years production CB-7 insulation and LED lighting) through tax Finance e.g. coefficient of 5-10) rebates, marketing support, etc. GOST Institute, performance (CoP) for heat Research Center • Waiving of import duties on foreign EE pumps for Energy and equipment Economics / State • Design, funding and • Establishment (or contracting) of a domestic Energy implementation of small, laboratory for certification of EE performance Committee dedicated support programs of materials and equipment • Establishment of test databases and laboratories for product certification Roadmap for the Implementation of Energy Efficiency in Public Buildings of the Kyrgyz Republic 69 6.2 Operationalizing the Roadmap The public buildings sector is plagued by highly fragmented institutional responsibilities, regulatory gaps and lack of coordination. In order to operationalize the preceding roadmap (Figure 6.1) and implement the numerous measures laid out in the roadmap catalogue (Table 6.1), it is important to first address the most rampant deficiencies and establish an enabling environment. The following four immediate actions are recommended to empower the government of the Kyrgyz Republic to implement the roadmap: 1. Strengthening the coordination of relevant agencies 2. Strengthening the regulatory framework 3. Establishing a public enterprise for public buildings management 4. Developing financing mechanisms The remainder of this chapter will discuss each of these actions in turn. 1. Strengthening the Coordination of Relevant Agencies The government should establish a Coordinating Council for Energy-Efficient Public Buildings as an inter- ministerial working group under the State Energy Committee. As a model, it could use the existing World Bank HSIP Project Selection Commission (which comprises representatives from the Ministry of Emergency, the Ministry of Health, the Ministry of Economic Development, the Ministry of Finance, the State Property Management Fund (SPMF), the State Committee on Penalty Control, etc.). The Council should have the following functions: • Sector-wide coordination of, and consensus-building toward, the development of energy efficiency retrofit investments in the public buildings sector; • Facilitation of the measures and regulatory acts necessary to address identified barriers; • Coordination of support, assistance and funding instruments and projects by international donors in the EE sector; and • Supporting legislation related to a national energy efficiency investment program for public buildings (see next section) and a regulation governing the establishment of a dedicated implementation body. 2. Strengthening the Regulatory Framework The current draft “Concept for the Development of the Fuel and Energy Sector of the Kyrgyz Republic until 2040” offers an opportunity to integrate the findings of this roadmap to showcase the enormous energy- saving potential in the Kyrgyz public building stock. The following legislative and regulatory changes are urgently needed to establish the right legislative framework for energy efficiency: • An amendment to the "Resolution of the Government of the Kyrgyz Republic on the Preparation of the Economic Sectors and the Population for the Autumn-Winter Period (May 24, 2018, No. 249) to introduce the obligation to verify the energy efficiency performance of public buildings; • A new regulatory act or law establishing a comprehensive energy-efficiency investment program for public buildings; and • Amendments to the Law "On Energy Saving" with a strengthened focus on public buildings and secondary legislation for energy services and energy performance contracting, including amendments to relevant public procurement laws 3. Establishing a Public Enterprise for Public Buildings Management In order to institutionalize and streamline the responsibility for public buildings, it will be important to set up an agency that has the political mandate and appropriate budget to work across stakeholder institutions. Roadmap for the Implementation of Energy Efficiency in Public Buildings of the Kyrgyz Republic 70 Setting up the agency as new, unified state enterprise on a cost-accounting basis and as a ‘one-stop-shop’ for management of all buildings can pool the authority: • for purchasing and payment for utilities (energy); • for management of building maintenance; • for preparation of building retrofit investments (with a focus on energy efficiency), including energy audits; • for implementation of building retrofit investments (acting as a Program Implementation Unit; • to implement accompanying information and capacity-building measures, such as guidelines and training for subordinated project institutions and suppliers; • to accumulate revenues from energy savings and allocate them to project reinvestment; and • to monitor, evaluate and report on financial flows, results and achievement of targets. Once the government decides to establish a dedicated implementation agency, it will need to: • prepare a regulatory act establishing an agency responsible for the management of public buildings and task it with the necessary responsibilities, supervisory board and functional operations budget; • conduct business planning, including: developing tasks and targets for program preparation and implementation; analyzing the market and determining the extent of the investment program; and establishing rules, procedures, instruments and financing mechanisms; and • engage key staff by (i) nominating the supervisory board members and (ii) identifying and hiring key experts of the agency, 100 starting with the director and key engineers and economists. Given the current institutional structure of public building management in the country, it is recommended to focus initially on educational and health facilities (schools, hospitals/policlinics), with later expansion to social and municipal public buildings (kindergartens, etc.). There are different options for the organizational structure of an implementation agency: 1. A dedicated administrative unit within the Ministry of Energy or State Energy Committee; 2. A dedicated administrative unit within the Fund on State Property Management; or 3. An independent entity of governmental state enterprises in the form of an Energy Agency. Figure 6.2. Key Requirements and Elements of a Public Buildings Agency POWERS Mandate and statute Stakeholder commitment and collaboration agreements Access to data Rights and legitimacy TASKS CAPACITIES PRE-CONDITIONS - Program Implementation Unit - Qualified staff - Business plan - Coordination and facilitation - Instruments and tools - Management chart - Project preparation - Local network - Funding - Information and promotion - Twinning arrangements - Technical assistance - Monitoring and evaluation with similar foreign agencies 4. Development Financing Mechanisms Judging from the audits conducted in 14 buildings under the World Bank’s Heating Supply Improvement Project (HSIP) and Urban Development Project (UDP) in the Kyrgyz Republic, EE investments have to date Roadmap for the Implementation of Energy Efficiency in Public Buildings of the Kyrgyz Republic 71 demonstrated solid energy savings of 60-70%. This means the techniques implemented will significantly reduce the energy cost for respective central and local governmental agencies. However, despite the positive results of these pilot projects, there is limited replication potential because grant financing is scarce. It is generally recognized that such grant and budget financing is not sustainable in the long term, and that EE projects generating cost savings can be used for repayment of the investment costs. Various countries have implemented a range of different sustainable financing and implementation options to enhance the financial leverage of public funds and/or to better transition to commercial funding for public sector EE projects. A review of international experience with public sector financing reveals various options for providing financing for public buildings. Perhaps the best such option is energy performance contracting (EPC), under which an energy service company (ESCO) finances energy efficiency investments and, subsequently, is repaid through the full or partial annual energy savings achieved throughout the contract period. Under an EPC, the revenues obtained from energy savings should be used both to refinance obligations and to fund other EE interventions. Hence, the EPC could establish a corridor through which EE savings can flow from one project to another. EE investments under the EPC scheme would first need to take initial steps to lay the groundwork for project implementation, including development of the EPC framework, setting up guarantees, and outlining expected results following execution of EE measures. Thereafter, private ESCOs can help overcome barriers in scaling-up implementation of EE projects in the public sector by: • Offering a range of services throughout the energy services value chain; and • Providing the technical skills and resources required to identify and implement EE opportunities, execute services using performance-based contracts (reducing the risks to the municipal utilities and public agencies), facilitate access to commercial banks, and enable energy users to pay for services out of the cost savings. Table 6.2 further details the potential benefits of energy performance contracting. Table 6.2. How EPCs Can Help to Overcome the Key Barriers in Public Sector Energy Efficiency Lack of commercial incentives to • EPCs cannot by themselves address the fundamental lack of incentives, reduce operating costs but they can help to reduce both transaction costs and perceived risks by offering a full package of services and assuming project performance risk. No incentive to save energy (no • EPCs cannot address the principal-agent issue, but they can better define retention of savings) the costs and benefits upfront, so agencies can negotiate and apportion them appropriately. High perceived risks from new • EPCs include performance guarantees to assign many project risks away technologies and mechanisms from the public agency and financier to the EPC. Inflexible procurement procedures • EPCs can allow for high returns by fast-tracking the implementation of the best-value projects, bypassing procurement of service providers and equipment for each measure. Constrained annual budgets for • EPCs often offer project financing, either through an ESP or a third party, capital upgrades with repayment derived from project savings. Small projects with high project • EPCs allow for multiple smaller public projects to be bundled, since development and transaction costs there is common ownership, often with notional audit/baseline information, thus helping to reduce development and transaction costs. Inadequate information and • EPCs invite technically competent private sector firms to compete based technical know-how on their qualifications, experience, and best project ideas Roadmap for the Implementation of Energy Efficiency in Public Buildings of the Kyrgyz Republic 72 Figure 6.3 illustrates the different financing options in the form of a “financing ladder” for public sector projects. The ladder includes the various options identified in Annex B plus the two non-sustainable options (grant financing and budget financing). At the bottom of the ladder are options that rely almost entirely on public financing (such as budget and grant financing), while the top of the ladder represents mostly private financing using commercial lenders. Moving up the ladder leads to increasing levels of private financing and requires increasing levels of market maturity. A brief description of each of the nine options is provided in Annex B. Figure 6.3. Illustrative Financing Ladder for Public Sector EE Projects Note: See Annex B for a full description of options for financing mechanisms. Roadmap for the Implementation of Energy Efficiency in Public Buildings of the Kyrgyz Republic 73 Annexes Roadmap for the Implementation of Energy Efficiency in Public Buildings of the Kyrgyz Republic 74 Annex A: List of Reference Documents and Interviewees Documents 1. Constitution of the Kyrgyz Republic, from June 27, 2010 2. Tax Code, from October 17, 2018, № 230 3. Administrative Code, from August 4, 1998, № 114 (and new version of the Code on Violations, approved by Parliament on March 2, 2017, which will enter to force in January 2019) 4. National Strategy for Sustainable Development of the Kyrgyz Republic for 2013-2017, from January 21, 2013, № 11 5. (draft) National Strategy for the Development of the Green Economy in the Kyrgyz Republic for 2019- 2023, by the Ministry of Economy, September 2018 6. Governmental Program "On the Transition of the Kyrgyz Republic to Sustainable Development for the period 2013-2017", from April 30, 2013, № 218 7. Governmental Program “Forty steps of the new dispensation”, from September 22, 2017, № 602 8. Governmental Program "Affordable Housing 2015-2020" from August 5, 2015, № 560 9. Long-term Strategy for Heat Supply of the Kyrgyz Republic, from April 27, 2004, № 300 10. Program of Development of Small and Medium Energy in the Kyrgyz Republic until 2012, from October 14, 2008, № 365 11. Program "Safe Schools and Pre-School Educational Organizations” for the period 2015-2024, from July 31, 2015, № 551 12. (outdated) National Energy Program 2008-2010 and Strategy of Development of Fuel Energy Complex and Energy Sector until 2025, from February 13, 2008, № 47 13. (outdated) National Program of Housing Construction in the Kyrgyz Republic for 2008-2010, from November 26, 2007 No. 562 14. (outdated) Program of the Government of the Kyrgyz Republic on Energy Saving and Energy Efficiency Policy Planning in the Kyrgyz Republic for 2015-2017, approved by Governmental Decree on August 25, 2015, № 601 15. (outdated) Program of the Government of the Kyrgyz Republic " Trust and unity for 2017 year", from January 30, 2017 № 53 16. (draft) Concept for the Development of the Fuel and Energy Sector of the Kyrgyz Republic until 2040 17. (draft) Program of the Development of Renewable Energy Sources in the Kyrgyz Republic, June 2018 18. (draft) Climate Investment Program "Operational Framework for Management and Access to Climate Finance in the Kyrgyz Republic”, May 2018 19. (draft) Program “Energy saving and energy efficiency in the area of construction for 2015-2019”, from September 2015 20. Plan of measures ("Roadmap") for Creating Conditions for Practical Implementation of Legislation in the Sphere of Energy Efficiency of Buildings of the Kyrgyz Republic, from October 26, 2016, № 1 21. Law of the Kyrgyz Republic “On Regulatory Legal Acts”, from July 20, 2009, № 241 22. Law of the Kyrgyz Republic “On Energy” from October 30, 1996, № 56 23. Law of the Kyrgyz Republic “On the Energy Efficiency of Buildings”, from July 26, 2011, № 137 24. Law of the Kyrgyz Republic “On Energy Saving”, from July 7, 1998, № 88 25. Law of the Kyrgyz Republic "On Renewable Energy Sources", from December 31, 2008, № 283 26. Law of the Kyrgyz Republic “On Public Procurement”, from April 3, 2015, № 72 27. Law of the Kyrgyz Republic "On Licensing” from October 19, 2013, № 195 28. Law of the Kyrgyz Republic “On public-private partnership in the Kyrgyz Republic” from February 22, 2012, № 7; 29. Law of the Kyrgyz Republic "On Local Self-Government”, from July 15, 2011, № 101 Roadmap for the Implementation of Energy Efficiency in Public Buildings of the Kyrgyz Republic 75 30. Law of the Kyrgyz Republic "On the State Budget for 2018 and the Forecast for 2019-2020", from December 28, 2017, № 218(23) 31. Law of the Kyrgyz Republic “On the State Budget for 2017 and the forecast for 2018-2019”, from December 22, 2016, № 215 32. Law of the Kyrgyz Republic "On the National Bank of the Kyrgyz Republic, Banks and Banking Activities”, from December 16, 2016, № 206 33. Law of the Kyrgyz Republic "On the Financial and Economic Foundations of Local Authorities" from September 25, 2003, № 215 34. The Kyrgyz Republic Intended Nationally Determined Contribution (INDC), 2017 35. Priorities for Adaptation to Climate Change in the Kyrgyz Republic until 2017, from October 2, 2013, № 549 36. (outdated) Law of the Kyrgyz Republic "Technical Regulations for the Safety of Buildings and Structures" from June 27, 2011, № 57 37. (outdated) Law "Technical Regulations for Fire Safety" from July 26, 2011, № 142 38. (draft) Law “Amendments to the Law on Energy Efficiency of Buildings”, by the State Agency on Architecture, Construction, and Housing” from October 2018 39. (draft) Law “Amendment to the Law on Energy Saving” from the State Committee on Energy, Industry and Subsoil Use, from July 2018 40. Medium-Term Tariff Policy of the Kyrgyz Republic for Electric Energy for 2014-2017, from November 20, 2014, № 660 41. Medium-Term Tariff Policy of the Kyrgyz Republic for Thermal Energy for 2014-2017, from November 20, 2014, № 660 42. Regulation “On the Rules and Procedures of the Energy Certification of Buildings” from August 2, 2012, № 531 43. Regulation on the Procedure for Periodic Monitoring of Energy Efficiency of Boilers, Heating and Hot Water Supply Systems; Government Decree, from August 2, 2012, № 531 44. Sample of Contract on Purchasing Electricity”, from April 28, 2017, № 1/1 45. Regulation “On Tender for the Right to Build Small Hydropower Stations in the Kyrgyz Republic”, from March 24, 2017 № 175 46. Regulation “On the State Committee on Energy, Industry and Subsoil Use”, from July 15, 2016, № 401 47. Regulation “On the State Agency for Architecture, Construction and Housing”, from June 24, 2013, № 372 48. (suspended) Regulation “On the Licensing of Certain Types of Activities”, from May 31, 2001, № 260 49. Regulation “On Measures for Stabilizing the Situation on Energy and Gas Supply to the Population” from December 25, 2012, № 857, December 6, 2015, № 1 50. (draft) Regulation “On the Rules and Procedures for the Qualification Certification of Specialists in the Energy Certification of Buildings and the Periodic Monitoring of the Energy Efficiency of Boilers, Heating Systems and Hot Water Supply of Buildings” (June 2018) 51. (draft) Regulation “On the State Register of Energy Certificates of Buildings, Reports on Periodic Monitoring of Energy Efficiency of Boilers, Heating and Hot Water Supply Systems of Buildings and Certified Specialists in Energy Efficiency of Buildings and on Periodic Monitoring of Energy Efficiency of Boilers, Heating Systems and Hot Water Supply of Buildings” (June 2018) 52. Decree of the Government of the Kyrgyz Republic "On Approval of the Limits for the Consumption of Heat, Electric Energy, Natural Gas, Water and the Intake of Wastewater for 2005-2006 for Public Organizations and on Measures for Rational Use of Funds Allocated to Budget Organizations for Utilities", from June 2, 2005, № 255 Roadmap for the Implementation of Energy Efficiency in Public Buildings of the Kyrgyz Republic 76 53. Decree of the Government of the Kyrgyz Republic "On the Results of the Preparation of Economy and Population in the Kyrgyz Republic for the Heating Season 2008/2009", from October 29, 2008, № 602 54. Decree of the Government of the Kyrgyz Republic "On the Preparation of Economic Sectors and the Population of the Kyrgyz Republic for the Autumn-Winter Period 2016/2017", from April 26, 2016, № 215 55. Decree of the Government of the Kyrgyz Republic “The Financial Agreement between the Government of the Kyrgyz Republic and the European Union on the Program for Sustainable Energy for Central Asia: Renewable Energy - Energy Efficiency (RES-EE)”, from February 2014, № 40-r 56. Decree of the Government of the Kyrgyz Republic "On Temporary Measures to Ensure the Implementation of Supervisory Functions in the Field of Energy and Construction", from December 4, 2014 № 690 57. Decree of the President of the Kyrgyz Republic "On the Transparency Initiative of the Fuel and Energy Sector of the Kyrgyz Republic", from July 20, 2010, № 49 58. Decree of the State Committee on Energy, Industry and Subsoil Use “On Coordination Council for Energy Efficiency”, from December 4, 2017 59. Decree of the Government of the Kyrgyz Republic “About the Report of the Prime Minister of the Kyrgyz Republic on the Work of the Government of the Kyrgyz Republic for 2013”, from April 8, 2014 № 202 60. Decree of the State Committee on Energy, Industry and Subsoil Use “On the National Research Center on Energy and Economy”, from November, 2015 61. (draft) Decree on Electronic Licensing, by the State Agency for Architecture, Construction and Housing, from May 2015 62. Budget classification of the Kyrgyz Republic, from December 21, 2017, № 161 63. Rules for Assigning a Level of Responsibility for the Licensing of Work in the Construction Industry, from May 31, 2001, № 260 64. Methodology of Calculation for Electricity Tariffs Supplied by Stations Generating Energy from Renewable Energy Sources, from August 6, 2015, № 1 65. Methodology for Calculating the Energy Efficiency of Buildings and Determining Energy Efficiency Class for Energy Certification of Buildings, from May 26, 2013, № 1 66. Methodical Guide for Conducting Periodic Inspection of Energy Efficiency of Boilers, Heating Systems of Buildings and Hot Water Supply of Buildings, from May 26, 2013, № 1 67. SNiP 23-01:2013 “Building Heat Engineering (Thermal Protection of Buildings)”, from May 26, 2013, №1 68. SP 23-101-2013 “Design of Thermal Protection of Buildings”, from May 26, 2013, № 1 69. SNiP KR 31-04-2001 “Public Buildings and Structures”, from April 16, 2001, № 62 70. SNiP KR 31-08: 2013 “School Buildings”, from July 12, 2013, № 149 71. SNiP 2.04.05-91(*) “Heating, Ventilation and Air Conditioning” 72. SNiP 2.01.02-85 (*) “Fire Regulations” 73. SNiP 2.04.01 - 85* “Internal Water Supply and Sewerage of Buildings” 74. МСН 2.04-05-95 “Natural and Artificial Lighting” 75. IBC 59-88 “Electrical Equipment for Residential and Public Buildings” 76. SNiP 2-02-01-83 “Foundations of Buildings and Structures” 77. List of legislative documents on building materials, products and structures, which leads to compliance with the requirements of the Technical Regulation “Safety of Building Materials, Products and Structures” of March 22, 2011 78. Guide to the Settlement Application for Energy Certification of Buildings, May 26, 2013, № 1 79. National Statistics Committee of the Kyrgyz Republic, “Industry of Kyrgyzstan”, Bishkek, 2017 Roadmap for the Implementation of Energy Efficiency in Public Buildings of the Kyrgyz Republic 77 80. Analytical report "Financing of the Education Sector in the Kyrgyz Republic", Bishkek (2016), https://eeas.europa.eu/delegations/kyrgyz- republic_el/50040/Support%20to%20the%20Reform%20of%20the%20Education%20Sector%20in% 20the%20Kyrgyz%20Republic 81. “Reference Document on Best Available Techniques for Energy Efficiency in Buildings” (February 2009), http://eippcb.jrc.ec.europa.eu/reference/BREF/ENE_Adopted_02-2009.pdf. 82. Unison, “Coal for school’s space heating: guideline for users” brochure (Bishkek: Unison, 2016). 83. "On Strategic Directions for the Development of the Education System in the Kyrgyz Republic", decision of the GKR from March 23, 2012, № 20 84. Open data of the National Statistic Committee of the Kyrgyz Republic http://www.stat.kg/ 85. Web portal “Open Budget” of the Ministry of Finance of the Kyrgyz Republic, https://budget.okmot.kg/ 86. Web portal of financial data “Akchabar”, https://www.akchabar.kg/ 87. Web portal for government procurement, https://zakupki.gov.kg/ 88. “National Sustainable Development Strategy for 2018-2040,” adopted in October 2018 89. “Roadmap for Improving Legislation on Energy Performance of Buildings 2017-2019” (approved by Gosstroy in 2016) 90. “Medium-Term Tariff Policies of the Kyrgyz Republic for Electrical Energy and Heat for 2014-2017” (approved in 2014) 91. “Program on Energy Savings and Energy Efficiency Policy Planning 2015-2017” (approved by the government in August 2015) 92. “Action Plan for Implementation of the Program on Energy Saving and Energy Efficiency Policy Planning” 93. “Program of the Development of Heat Supply Systems in Small and Medium Towns of the Kyrgyz Republic for 2017-2025” (draft) Interviewees 1. Azamat Omorov, Head of Department of the Fuel Energy Complex and Subsoil Use of the Government Office of the Kyrgyz Republic 2. Joomart Kubanychbekov, Expert in the Department of Economics and Investments of the Government Office of the Kyrgyz Republic 3. Marat Cholponkulov, Advisor of the State Committee on Energy, Industry and Subsoil Use 4. Aitmamat Kadyrbaev, Deputy Chairman of the State Committee for Energy, Industry and Subsoil Use; 5. Maksat Amiraev, Head of Housing Department of the State Agency for Architecture, Construction and Housing 6. Valentina Kasymova, Professor of the Kyrgyz State University named after Razzakov I (author of the draft “Concept for the Development of the Fuel and Energy Sector of the Kyrgyz Republic until 2040”) 7. Eshimbek Karasartov, the Deputy Head of the Committee on Fuel, Energy and Construction of the Parliament of the Kyrgyz Republic 8. Rustam Sydykov, Senior Specialist of the National Energy Holding Company 9. Bakyt Askarbekov, Financial Manager of the Kyrgyzstan Sustainable Energy Financing Facility (KyrSEFF) 10. Rajap Biyaliev, Heat Supply expert 11. Zuhra Hurova, Senior Loan Officer of the Optima Bank 12. Gulnara Abdyldaeva, Senior Specialist of Housing Department, Bishkek Mayor’s office 13. Taalai Kurmanbekov, Head of Financial Department of Sokuluk region 14. Aibek Askarbekov, Member of City Council in Naryn Municipality Roadmap for the Implementation of Energy Efficiency in Public Buildings of the Kyrgyz Republic 78 15. Aibek Kasymov, CEO of ES Technology, Ltd. 16. Azamat Akeleev, CEO of Smart Energy Solutions, Ltd. 17. Kairat Janbaev, CEO of NurSun, Ltd. 18. Talgat Chinetov, Director of BiFORCE, Ltd. 19. Aidar Mendeev, Technical Director of SMU (construction company) 20. Rahatbek Asanov, CEO of Evrotechstroy (construction company) 21. Timur Vildanov, General Design Director of Ailunstroy (design company) Roadmap for the Implementation of Energy Efficiency in Public Buildings of the Kyrgyz Republic 79 Annex B: Description of EE Financing Mechanisms in the Public Sector 101 Budget Financing with Capital Recovery This approach, also referred to as “budget capture,” anticipates that financing is provided by a government agency, such as the Ministry of Finance (MOF), using a combination of government budget allocations and funds from donors and international financial institutions (IFIs). This funding covers the investment costs of the EE projects in both central and municipal buildings and facilities. The recipient of the funding “repays” the funds using the savings generated by the investment project in the form of reduced budgetary outlays (“budget capture”) for energy bills of the public agency in future years. The size of the reduced outlay is usually based on the amount of energy cost savings. The flow of funds to pay for EE improvements follows the same procedures as for any other funds received from the MOF. The repayment to MOF could be full or partial; the partial approach encourages municipal utilities and public agencies to participate in the program because they retain a share of the savings achieved. The captured energy cost savings would then be made available to finance additional EE investments and establish a basis for sustainable EE financing by allowing funds to revolve. Utility On-Bill Financing Utility on-bill financing is a mechanism under which an energy utility finances the implementation of EE projects at the premises of their public customers. The funds are provided as a loan to the customer (which could be a public sector agency) for equipment purchase and installation, and loan repayments are recovered by the utility through the energy bill. The cost of the EE measures is borne by the individual customers in whose facilities the EE measures have been installed. These customers are the direct beneficiaries of the energy savings and related cost reductions. The utility on-bill financing approach is designed to overcome the first cost barrier (lack of availability of internal funds) for investment in EE. Under this approach, the utility provides or arranges for the financing needed for the project investment. The customer signs a loan agreement with the utility and the utility collects the loan repayments from the customer through the customer’s utility bill by adding a line item on the bill. In most cases, the loan repayments are arranged so that the amount of the repayment is smaller than the customer’s cost reduction from the energy savings created by the energy-efficient equipment. This allows the customer to be “cash flow positive” throughout the life of the EE project. Energy Efficiency Revolving Fund An energy efficiency revolving fund (EERF) has been proven to be a viable option for scaling up EE financing in the public sector. Under a typical EERF, created using public funds and IFI loans, financing is provided to public agencies to cover the initial investment costs of EE projects; some of the resulting savings are then used to repay the EERF until the original investment is recovered, plus interest and service charges. The repayments can then be used to finance additional projects, thereby allowing the capital to revolve and creating a sustainable financing mechanism. Since both the borrower and lender are publicly owned, such funds may often offer lower-cost financing with longer repayment periods and less-stringent security requirements than typical commercial loans. Because EE projects have positive financial rates of return, capturing these cost savings and reusing them for new investments creates a more-efficient use of public funds than typical budget- or grant-funded approaches. Roadmap for the Implementation of Energy Efficiency in Public Buildings of the Kyrgyz Republic 80 This can help demonstrate the commercial viability of EE investments and provide credit histories for public agencies, paving the way for future commercial financing. Public or Super ESCO Several countries have taken a more active role in promoting EE projects using the performance contracting approach by creating either public or “super” ESCOs that are wholly or partly owned by the state. Often this was done to promote ESCOs in general, examples being China (pilot EMCs created by the World Bank in Beijing, Shandong, and Liaoning), Poland (MPEC) and Croatia (HEP ESCO). Another example is the establishment of UkrESCO in Ukraine. Such public ESCOs were typically formed when the local ESCO markets were nascent and some public effort was deemed necessary to catalyze them. An additional advantage of a public ESCO is that project development procedures and costs can be streamlined since a public agency is simply contracting with another public agency, and can do so using a memorandum of understanding (MOU) or a simple framework agreement. The super ESCO is a special type of public ESCO. Established by the government, it has two very important functions: (i) implementing EE projects for the public sector (hospitals, schools, municipal utilities, government buildings, and other public facilities) using the performance contracting approach; and (ii) supporting the capacity development and project development activities of existing private sector ESCOs by engaging them as subcontractors to undertake various project implementation functions. The government (possibly with help from IFIs) capitalizes the super ESCO with sufficient funds to undertake public-sector energy savings performance contract (ESPC) projects and to leverage commercial financing. Another function of the super ESCO is to facilitate access to project financing by developing relationships with local or international financial institutions. The super ESCO may also provide credit or risk guarantees for ESCO projects, or act as a leasing or financing company to provide ESCOs and/or customers with EE equipment on lease or on benefit-sharing terms. Public Sector Energy Efficiency Credit Line (operated by a Development Bank or Commercial Banks) A public-sector EE credit line is a financing mechanism that makes funds available to local banks and financial institutions (FIs) to provide debt financing of EE projects in utilities and public buildings and facilities. The major purpose of such a credit line is to increase the funding available from these lenders for debt financing of municipal EE project investments. These can be managed by a development bank, municipal bank, commercial bank(s), or other financial institutions. Dedicated EE credit lines may be established by governments, multilateral or bilateral financial institutions, or governments in cooperation with international donor agencies. The funds provided by the donors or governments to lenders are often leveraged by additional funds provided by the participating banks and/or financial institutions to increase the total amounts available for debt financing. Risk-Sharing Facility A major barrier to commercial financing of public EE projects is commercial lenders’ perception that EE projects are inherently riskier than their traditional investments. A risk-sharing facility is designed to address this by providing partial coverage of the risk involved in extending loans for EE projects. The facility – essentially a bilateral loss-sharing agreement – generally includes a subordinated recovery guarantee and Roadmap for the Implementation of Energy Efficiency in Public Buildings of the Kyrgyz Republic 81 might also have a “first-loss reserve” 102 to be used to absorb up to a specified amount of losses before the risk sharing occurs. A partial risk-guarantee facility, provided by a government, donor agency, or other public agency, can assist municipal utilities and public agencies by: (a) providing them access to finance, (b) reducing the cost of capital, and (c) expanding the loan tenor or grace periods to match project cash flows (Mostert 2010). Such a facility would also build commercial lenders’ capacity to finance EE projects on a commercially sustainable basis. Commercial Financing and Bond Issuance Under this option, municipalities either take commercial bank loans (if they are creditworthy and have borrowing capacity) or issue bonds to finance EE investments. This option can mobilize commercial financing which can deliver scale and be sustainable. The elements of competition can help lower financing costs, address overcollateralization/short tenor issues, and allow public agencies to undertake own procurement/ implementation. This option can work if there are well-developed municipal credit and rating systems, financial institutions that are willing and able to lend to the public sector for EE projects, and large municipalities with strong technical capacity willing and able to bundle many EE projects together. Vendor Credit and Leasing A lease is a contractual arrangement in which a leasing company (lessor) gives a customer (lessee) the right to use its equipment for a specified length of time (lease term) and specified payment (usually monthly). Depending on the lease structure, at the end of the lease term the customer can purchase, return, or continue to lease the equipment. Many different types of organizations – including proprietorships, partnerships, corporations, government agencies, and religious and non-profit organizations – use leasing throughout the world. Suppliers of energy-efficient equipment can provide such equipment under a leasing arrangement, usually with lease payments based on estimated energy savings. Equipment leases are broadly classified into two types: the operating lease and the finance or capital lease. In an operating lease, the lessor (or owner) transfers only the right to use the property to the lessee. At the end of the lease period, the lessee returns the property to the lessor. Since the lessee does not assume the risk of ownership, the lease expense is treated as an operating expense in the income statement and the lease does not affect the balance sheet. Leveraging Commercial Financing with Private ESCOs At the top of the “financing ladder” for public sector projects described earlier is the development of private sector energy service providers, such as ESCOs that specialize in EE project development and implementation. Private ESCOs can help overcome important barriers to scaling up implementation of public sector EE projects. They can (a) offer a range of services spanning the energy services value chain and (b) provide the technical skills and resources needed to identify and implement EE opportunities, perform services using performance based contracts (thereby reducing the risks to the municipal utilities and public agencies), facilitate access to financing from commercial lenders, and enable energy users to pay for services out of the cost savings achieved. Roadmap for the Implementation of Energy Efficiency in Public Buildings of the Kyrgyz Republic 82 Performance contracting refers to EE implementation services offered by private ESCOs under ESPCs. These have the following key attributes: • ESCOs offer a complete range of implementation services, including (a) design, engineering, construction, commissioning, and maintenance of EE measures and (b) monitoring and verification of the resulting energy and cost savings. • ESCOs provide or arrange financing (often up to 100%) and undertake “shared savings” or “guaranteed savings” contracts, such that the payments to the ESCO are less than the cost savings resulting from the project implementation. • Under the performance contract, ESCOs offer specific performance guarantees for the entire project (as opposed to individual equipment guarantees offered by equipment manufacturers or suppliers) and generally guarantee a level of energy and/or cost savings. • Payments to the ESCO are contingent upon demonstrated satisfaction of the performance guarantees. • Most of the technical, financial, and maintenance risk is assumed by the ESCO, thereby substantially reducing the risks to the energy user. Summary The following table summarizes these financing options. Roadmap for the Implementation of Energy Efficiency in Public Buildings of the Kyrgyz Republic 83 Table B-1. Summary of Characteristics of Financing Options for Public Sector Energy Efficiency Projects Issues to be Financing Option Conditions Pros Cons addressed Examples 1. Budget financing • Credit barrier is too high, • Easy to implement • Sustainability may be • Who will manage • Hungary with capital underdeveloped banking sector, • Can directly finance questionable, even if and administer the • Lithuania recovery or budget collateralization is difficult municipal entities and repayment is obtained funds? • FYR Macedonia capture • Financing should target new and central government through budget financing • Is there sufficient • Serbia underdeveloped markets, programs agencies implementation must be efficiently administered, initial capacity? subproject results should be intensely disseminated, need viable co-financing • Availability of funding for EE projects 2. Utility on-bill • Requires regulations for utility • Streamlined repayments, • Requires changes in utility • Are utilities • Brazil financing participation lower repayment risk if risk regulations and billing interested and • China • Strong financial position and financial of utility disconnection systems willing? • India management of utilities • Builds off utility • Creates potential for • Do they have • Mexico • Payment discipline among public relationships and services monopolistic behaviors capacity and billing • Sri Lanka clients, adequate energy pricing and • Can be done on a • Financing may compete systems for on-bill • Tunisia billing practices sustainable and scalable with local banks, financing? • U.S. basis • Limited experience with • Is the regulatory heat utilities system conducive and supportive? 3. Energy efficiency • Insufficient liquidity in banking sector, • Can be structured to • May require new • Needs a strong and • Bulgaria revolving fund major aversion to risk among lenders address financing needs legislation capable fund • Romania • Use of grant funds as subordinated and evolving capacity of all • May be difficult to cover manager or • Armenia debt can help mobilize commercial co- public buildings (central administrative costs of management team financing and municipal) the Fund from its • Needs supporting • TA to disseminate information on EE • ESA option can be very revenues legislative subproject performance/financial data useful for municipalities framework for critical to sustainability with poor credit and lack of establishment • Need for professional, well- capacity incentivized Fund Management Team Roadmap for the Implementation of Energy Efficiency in Public Buildings of the Kyrgyz Republic 84 Issues to be Financing Option Conditions Pros Cons addressed Examples 4. Public or super • Immature private sector ESCO • Can address financing • Need to create a new • Where will such a • Ukraine Public ESCO industry, but interest/demand to issues and build ESCO organization public ESCO be ESCO (EBRD) develop ESCO industry capacity • Need to provide funding located? Croatia HEP • Contracting between public ESCO and • Needs to operate • Will donors be ESCO (WB/GEF), public-sector entities may be easier efficiently and avoid interested in Armenia, than with private sector service acting as monopoly funding such an Uruguay, EESL providers agency? (India) 5 a. Dedicated credit • Developed public/ municipal credit • Builds commercial lending • Relies on strong banking • Is there a suitable • Brazil line with market market by demonstrating partner with incentive development bank? • India (municipal development bank • High commercial bank lending rates public agencies can repay and ability to proactively • How many public infrastructure and low tenors • Allows public agencies to develop pipeline and agencies can borrow fund) • Existence of credible development undertake own offer good financial and are • Mexico bank willing to lend for EE and assume procurement and products creditworthy • Turkey repayment risks implementation • Serves only creditworthy (proposed) • Municipalities must have ability and • Allows for lower interest municipalities willingness to borrow rates • Some development banks • Public agencies able to retain energy • Funds can revolve making do not conduct proper cost savings it more sustainable risk assessments and appraisals 5 b. Dedicated EE • Well-developed banking sector, • Leveraging of private funds • Needs municipalities or • Will the • KfW credit line credit line with willingness of banks to accept risks and • Utilization of existing ESCOs that have participating in Serbia commercial financial EE as line of business banking infrastructure for borrowing capacity (credit financial institutions • Hungary institution(s) • Sufficient market activity to develop financing public sector and collateral) provide loans to • China project pipeline • Banks/FIs need to be municipal utilities & • Turkey • Need for parallel TA to develop strong willing to lend to public public agencies? • Ukraine demand, create sustained quality sector • How many public • Uzbekistan pipeline agencies are creditworthy and have borrowing capacity? Roadmap for the Implementation of Energy Efficiency in Public Buildings of the Kyrgyz Republic 85 Issues to be Financing Option Conditions Pros Cons addressed Examples 6. Risk-sharing • Well-developed banking sector, banks • Has worked well in some • Needs a relatively mature • Is the banking sector • USAID DCA in program (such as are liquid and willing to accept some Central and Eastern banking sector and mature enough? FYR Macedonia, partial credit risks but have a perception of high risk European countries eligible borrowers • How many Bulgaria and guarantee) with respect to EE projects • May scale up commercial • Poor experience of WB municipalities are other countries • Sufficient market activity to develop financing and USAID in some creditworthy? • Bulgaria, CEEF project pipeline countries with respect to (Central/Eastern public agencies Europe), China, Croatia, Hungary, Poland 7. Commercial • Requires well-developed public-sector • Mobilizes commercial • Only makes sense for very • Are financiers willing • Bulgaria financing, bonds credit and rating systems financing which can deliver large bundles of projects and able to lend to • Denmark • Financiers willing and able to lend to scale and be sustainable • Only highly creditworthy public sector? • India public sector for EE projects • Elements of competition agencies can use these • How many public • U.S. • Large municipalities with strong can help lower financing schemes agencies are technical capacity willing to bundle costs • Relatively high creditworthy and many EE projects together • Can help address transactions costs have borrowing overcollateralization/short capacity? tenor issues 8. Vendor credit, • Large, credible local and/or • Mobilizes commercial • Relies on local banks and • How many public • China leasing international vendors able and willing financing which can deliver leasing companies agencies are • EU to finance public EE projects scale and be sustainable • Serves only very creditworthy and • U.S. • Local bank financing available for • Can help address creditworthy public have borrowing vendor leasing overcollateralization/short agencies, capacity? • Creditworthy public agencies able to tenor issues • Vendors must assume sign long-term vendor contracts • Financing and procurement substantial debt and offer • Public agencies able to retain energy in one contract long-term financing cost savings, pay based on • Lease may not count • Only some building consumption against public debt equipment suited for leasing (lighting, SWH, boilers) Roadmap for the Implementation of Energy Efficiency in Public Buildings of the Kyrgyz Republic 86 Issues to be Financing Option Conditions Pros Cons addressed Examples 9. Leveraging • Supportive policies and enabling • Mobilizes commercial • Needs local banks and • Are there any • WB China ESCO commercial environment financing which can deliver ESCOs to provide private ESCOs in the program financing using • Introduction of simpler business scale and be sustainable reasonable cost financing market? • Czech Republic private ESCOs/ models first • Helps address and assume credit risk • Are private ESCOs • Germany performance • Appropriate financing schemes overcollateralization/short • Serves only very and/or • Hungary contracts tenor issues creditworthy public municipalities • Early market development through • India public sector projects • ESPC may not count agencies, creditworthy for • Japan • Development of PPP models to kick- against public debt, public • ESCO industry is difficult commercial project financing? • South Korea start market agency shifts technical risks to develop to third party • U.S. • Public procurement issues difficult to address • Canada Source: World Bank. Roadmap for the Implementation of Energy Efficiency in Public Buildings of the Kyrgyz Republic 87 Annex C: Diffusion of EE Technologies in the Kyrgyz Republic Insulation Heating Heating Heating material Efficient Air system system system Solar Water/water Wall / gas and Solar conditioners Heat pumps upgrade, upgrade, upgrade, building- and Roof / solid fuel water (AC) with (HP) dwelling building building integrated ground/water Windows Floor boilers heaters heat pumps (air-to-air) level level level PV heat pumps Basis of sales m² of m² of Number of Number of Number of AC Number of HP Apartment Buildings Buildings Number of Number of heat figures for BAT windows insulation boiler units collector split units of units of units with with heat with PV units pump units of and CMP of average units average average new metering + modern average (common market capacity of capacity of 5 capacity of 17 radiators, control heating sub- capacity of 17 practice) 24 KW kWth output kWth thermostat station KWth equipment balancing valves, system balancing Equipment, Equipment, Boiler, Collector, AC, HP, Equipment, Equipment, Equipment, Equipment, Equipment, installation installation system storage installation installation installation installation installation installation installation connection, tank, installation installation Total sales in KR 135,000 633,333 500 413 1,000 11 3 300 20 20 300 2 of which for 20% 50% 20% 50% 40% 0% - - - 250 - rehabilitation of which for 80% 50% 80% 50% 60% 100% 3 300 20 20 50 2 new buildings Total number of 7,702,500 88,131,250 200,000 50,000 150,000 10,000 145,200 4,400 4,400 886,000 886, 000 units (m² or no.) in KR = overall market for the technology Number of units 280,000 1,200,000 1,250 1,250 2,500 10 3,300 130 800 70 2 already installed Market 20% 30% (in 3% 5% 4% 0% 5% 3% 20% 0% 0% penetration in urban area) 2017 – 5% in total Roadmap for the Implementation of Energy Efficiency in Public Buildings of the Kyrgyz Republic 88 Notes 1 As explained in a 2015 USAID report (Kyrgyzstan Construction Materials Value Chain Stakeholder Analysis, available at www.ibc.kg/en/download/858), “GOST are a set of technical standards that cover energy, oil and gas, environmental protection, construction, transportation, telecommunications, mining, food processing, and other industries. Quality and safety standards fall within the GOST codes. Within the GOST standards are building codes and regulations (SNiP). The certification of construction materials and on-site verification is housed under the Republican Center for Certification of Construction. The construction material certification standard for the industry is the Construction Norms and Regulations (SNiP), which is a holdover from the Soviet Union. The Kyrgyz SNiP practices have not been updated to include contemporary international construction material standards. Also, SNiP are not translated fully in Kyrgyz and are no longer legal acts.” 2 A free resource (in Russian) for these standards is available at http://cbd.minjust.gov.kg/act/view/ru-ru/200296. 3 World Bank (2018), Analysis of Public Buildings Stock and EE Potentials. 4 A policlinic (also polyclinic) is a dispensary or department of a hospital at which outpatients are treated. 5 The overall energy consumption is the result of the extrapolation of (i) reported and verified real energy consumption by the public central and local agencies that pay the energy bills, (ii) sample energy audits, and (iii) the inventory of public building stock. 6 The remaining public buildings either are new, exhibit good energy performance, or are deemed infeasible to rehabilitate due to cost or structural safety considerations. 7 Estimates are based on assessments undertaken for the following World Bank projects: Urban Development Project (6 pre-feasibility studies for 2 kindergartens and 4 schools); Heat Supply Improvement Project (8 energy audits in 2 hospitals, 3 kindergartens and 3 schools); and Enhancing Resilience of Public Buildings in Kyrgyzstan: 25 walk-through energy audits in schools. 8 The average lifetime of standard technologies (in particular of the building envelope) is 25 to 30 years, while the average lifetime of innovative technologies (e.g. heat pumps) is 15 to 20 years. 9 For a rough economic analysis, we have applied a LRAIC for electric power of US$0.14 per kWh. The LRAIC measures the incremental costs of providing the total service. Power tariff assumptions: • Current tariff for public sector institutions (12/2017) = 2.5 KGS/kWh (0.036 US$/kWh). • Average projected electricity tariff of the next 20 years (with annual CPI of 5%, and constant FX of 69 KGS/US$)= 4.3 KGS/kWh (0.063 US$/kWh). • For the economic assessment the LRAIC electricity supply tariff has been applied: LRAIC of 0.14 US$/kWh. • For the RE power generation analysis, a premium of 40% was added to the LRAIC to reflect the additional economic benefit of reduced likelihood for power outages. This factor for PV characterizes the improved economic value for building operation resilience up to about 40% of the generated electricity value. • According to the RE legislation provisions, the FIT for solar PV power of 0.15 $/kWh is only guaranteed for a period of 8 years. 10 The Regulation of the State Energy Committee, approved on July 15, 2016, by Decree No. 401. See http://cbd.minjust.gov.kg/act/view/ru-ru/99446. 11 Gosstroy’s organizational structure is explained at http://cbd.minjust.gov.kg/act/view/ru-ru/94558. 12 See Section 2.2.2.2, Energy Certification and Energy Passports. 13 The expected main tasks of the Coordinating Council are to organize effective and constructive coordination among all stakeholders involved in energy efficiency; to improve the effectiveness of the actions, the efficiency of allocating international support and financial resources, and the sharing of knowledge and best practices; and to prevent inconsistency and duplication of efforts. 14 http://cbd.minjust.gov.kg/act/view/ru-ru/97870. 15 For more on CASEP, see http://www.inogate.org/projects/75?lang=en&order=date_end_desc§ion=activities. 16 This voluntary commitment was announced by the Minister of Foreign Affairs, Mr. E. Abdyldaev, on September 23, 2014, at the New York Climate Summit. (See Chapter 5.) 17 http://cbd.minjust.gov.kg/act/view/ru-ru/97869?cl=ru-ru. Roadmap for the Implementation of Energy Efficiency in Public Buildings of the Kyrgyz Republic 89 18 The Kyrgyz Sustainable Energy Financing Facility (KyrSEFF) is an investment mechanism designed to finance the implementation of modern RE equipment to save energy, water, and dispose waste in homes and enterprises in Kyrgyzstan. The Facility was developed by the European Bank for Reconstruction and Development (EBRD). Its loan portfolio totals $55 million. For the successful implementation of energy saving measures, KyrSEFF clients receive a 10- to-35% grant provided by the EU Investment Facility for Central Asia (EU IFCA). Since April 2013, more than 1,415 energy saving projects have been supported within KyrSEFF. It has led to the annual energy saving of 128,293,890 kWh/year and hazardous emissions reduction of 39,048 tons annually. See http://www.kyrseff.kg or (in English) http://www.kyrseff.kg/?lang=en. 19 Based on estimates prepared by KyrSEFF, December 2017. 20 http://cbd.minjust.gov.kg/act/view/ru-ru/96. 21 http://cbd.minjust.gov.kg/act/view/ru-ru/203377/20?mode=tekst. 22 As stipulated in the regulation “On the Energy Certification of Buildings” (http://cbd.minjust.gov.kg/act/view/ru- ru/93706), there are seven classes (A to G) for five categories of buildings: • Residential family building • Residential multi-apartment buildings • Administrative buildings • Schools • Kindergartens 23 The roadmap for the implementation of legislation in the sphere of energy efficiency of buildings was approved in October 2016, by the order of Gosstroy. 24 http://cbd.minjust.gov.kg/act/view/ru-ru/56374?cl=ru-ru. 25 For example, Decree No. 215 of April 26, 2016, "On the Preparation of Economic Sectors and the Population of the Kyrgyz Republic for the Autumn-Winter Period 2016/2017." 26 These certificates have as their regulatory base the Law “On Energy Performance,” 2011. Energy performance requirements of structures and material must be met for building retrofit in case it comprises 27 more than 25% of the building envelope. 28 http://cbd.minjust.gov.kg/act/view/ru-ru/111496?cl=ru-ru. 29 In accordance with the annual resolution of the Government of the Kyrgyz Republic on the timely preparation for the autumn-winter period, which is issued every year in April-May, for example, the RCC of April 26, 2016 No. 215 "On the preparation of the economy and the population of the Kyrgyz Republic for autumn-winter the period 2016/2017 " http://www.gov.kg/?p=74589&lang=ru 30 31 http://cbd.minjust.gov.kg/act/view/ru-ru/200200. 32 See https://budget.okmot.kg/ru/exp_func/index.html, the Open Budget portal on the Akchabar website. Akchabar is an independent financial web-portal (https://www.akchabar.kg/ru/about). At https://www.akchabar.kg/budget/expenses/56/year/ the data is visualized, but an analysis suggests that calculated estimates are not correct. The Ministry of Finance has a separate portal with other information (https://budget.okmot.kg/ru). 33 http://cbd.minjust.gov.kg/act/view/ru-ru/111125. 34 https://zakupki.gov.kg. 35 https://stimgrant.okmot.kg/stimgrand. In the Law of the Kyrgyz Republic "On the Central Government Budget of the KR for 2018 and the Forecast for 2019-2020," under the article on stimulating (share) grants, the amount of 500,000 KGS is provided. According to the Protocol of the meeting of the Commission for approval of projects due to share (incentive) grants for the implementation in 2018 of 14.03.2017, No. 15-01 / 27, 213 projects were approved. 36 The District Development Funds are administered by te regional or local authorities. See http://cbd.minjust.gov.kg/act/view/ru-ru/97125. 37 http://edu.gov.kg/ru/schools/save-schools. 38 According to the Law of the Kyrgyz Republic “On the National Bank of the Kyrgyz Republic, Banks and Banking Activities”. 39 Dated October 19, 2013, No. 195. Roadmap for the Implementation of Energy Efficiency in Public Buildings of the Kyrgyz Republic 90 40 This is governed by the rules for assigning a level of responsibility with regard to the licensing of work in the construction industry: http://cbd.minjust.gov.kg/act/view/ru-ru/6849?cl=ru-ru#p2 41 http://gosstroy.gov.kg/ru/?p=1015. 42 https://www.un.org/sustainabledevelopment/energy. 43 A qualified and motivated staff is the key to success. However, given the currently low salary levels for public officials, it might be difficult to convince top experts to join the agency. 44 As explained in a 2015 USAID report (Kyrgyzstan Construction Materials Value Chain Stakeholder Analysis, available at www.ibc.kg/en/download/858), “GOST are a set of technical standards that cover energy, oil and gas, environmental protection, construction, transportation, telecommunications, mining, food processing, and other industries. Quality and safety standards fall within the GOST codes. Within the GOST standards are building codes and regulations (SNiP). The certification of construction materials and on-site verification is housed under the Republican Center for Certification of Construction. The construction material certification standard for the industry is the Construction Norms and Regulations (SNiP), which is a holdover from the Soviet Union. The Kyrgyz SNiP practices have not been updated to include contemporary international construction material standards. Also, SNiP are not translated fully in Kyrgyz and are no longer legal acts.” 45 A free resource (in Russian) for these standards is available at http://cbd.minjust.gov.kg/act/view/ru-ru/200296. 46 World Bank (2018), Analysis of Public Buildings Stock and EE Potentials. 47 A policlinic (also polyclinic) is a dispensary or department of a hospital at which outpatients are treated. 48 The overall energy consumption is the result of the extrapolation of (i) reported and verified real energy consumption by the public central and local agencies that pay the energy bills, (ii) sample energy audits, and (iii) the inventory of public building stock. 49 A separate World Bank report, Market assessment for Deployment of Innovative Energy Efficiency and Renewable Energy Technologies in Public Buildings Rehabilitation (2018, not publicly available), features an in-depth review of the Kyrgyz market for EE and RE technologies. 50 The remaining public buildings either are new, exhibit good energy performance, or are deemed infeasible to rehabilitate due to cost or structural safety considerations. 51 Estimates are based on the Urban Development Project (6 pre-feasibility studies for 2 kindergartens and 4 schools); Heat Supply Improvement Project (8 energy audits in 2 hospitals, 3 kindergartens and 3 schools); and Enhancing Resilience of Public Buildings in Kyrgyzstan: 25 walk-through energy audits in schools. 52 The average lifetime of standard technologies (in particular of the building envelope) is 25 to 30 years, while the average lifetime of innovative technologies (e.g. heat pumps) is 15 to 20 years. 53 For a rough economic analysis, we have applied a LRAIC for electric power of US$0.14 per kWh. The LRAIC measures the incremental costs of providing the total service. Power tariff assumptions: • Current tariff for public sector institutions (12/2017) = 2.5 KGS/kWh (0.036 US$/kWh). • Average projected electricity tariff of the next 20 years (with annual CPI of 5%, and constant FX of 69 KGS/US$)= 4.3 KGS/kWh (0.063 US$/kWh). • For the economic assessment the LRAIC electricity supply tariff has been applied: LRAIC of 0.14 US$/kWh. • For the RE power generation analysis, a premium of 40% was added to the LRAIC to reflect the additional economic benefit of reduced likelihood for power outages. This factor for PV characterizes the improved economic value for building operation resilience up to about 40% of the generated electricity value. • According to the RE legislation provisions, the FIT for solar PV power of 0.15 $/kWh is only guaranteed for a period of 8 years. 54 National Report on the Development of EE and RES in KG, UN Economic Commission for Europe, 2015. 55 The Regulation of the State Energy Committee, approved on July 15, 2016, by Decree No. 401. See http://cbd.minjust.gov.kg/act/view/ru-ru/99446. 56 Gosstroy’s organizational structure is explained at http://cbd.minjust.gov.kg/act/view/ru-ru/94558. 57 See Section 2.2.2.2, Energy Certification and Energy Passports. 58 The expected main tasks of the Coordinating Council are to organize effective and constructive coordination among all stakeholders involved in energy efficiency; to improve the effectiveness of the actions, the efficiency of allocating international support and financial resources, and the sharing of knowledge and best practices; and to prevent inconsistency and duplication of efforts. 59 Text available (in Russian) at http://www.president.kg/sys/media/download/52135. See also Roadmap for the Implementation of Energy Efficiency in Public Buildings of the Kyrgyz Republic 91 http://kabar.kg/eng/news/national-development-strategy-of-kyrgyzstan-for-2018-2040-approved. 60 A net-zero-energy building – also known as a zero net energy (ZNE) building, net zero building or zero-carbon building – is a building with zero net energy consumption. This means the total amount of energy it uses roughly equals the amount of renewable energy created either on site or by renewable energy sources elsewhere. 61 http://cbd.minjust.gov.kg/act/view/ru-ru/97870. 62 For more on CASEP, see http://www.inogate.org/projects/75?lang=en&order=date_end_desc§ion=activities. 63 This voluntary commitment was announced by the Minister of Foreign Affairs, Mr. E. Abdyldaev, on September 23, 2014, at the New York Climate Summit. (See Chapter 5.) 64 http://cbd.minjust.gov.kg/act/view/ru-ru/97869?cl=ru-ru. 65 The Kyrgyz Sustainable Energy Financing Facility (KyrSEFF) is an investment mechanism designed to finance the implementation of modern RE equipment to save energy, water, and dispose waste in homes and enterprises in Kyrgyzstan. The Facility was developed by the European Bank for Reconstruction and Development (EBRD). Its loan portfolio totals $55 million. For the successful implementation of energy saving measures, KyrSEFF clients receive a 10- to-35% grant provided by the EU Investment Facility for Central Asia (EU IFCA). Since April 2013, more than 1,415 energy saving projects have been supported within KyrSEFF. It has led to the annual energy saving of 128,293,890 kWh/year and hazardous emissions reduction of 39,048 tons annually. See http://www.kyrseff.kg or (in English) http://www.kyrseff.kg/?lang=en. 66 Based on estimates prepared by KyrSEFF, December 2017. 67 http://cbd.minjust.gov.kg/act/view/ru-ru/96. 68 http://cbd.minjust.gov.kg/act/view/ru-ru/203377/20?mode=tekst. 69 As stipulated in the regulation “On the Energy Certification of Buildings” (http://cbd.minjust.gov.kg/act/view/ru- ru/93706), there are seven classes (A to G) for five categories of buildings: • Residential family building • Residential multi-apartment buildings • Administrative buildings • Schools • Kindergartens 70 The roadmap for the implementation of legislation in the sphere of energy efficiency of buildings was approved in October 2016, by the order of Gosstroy. 71 http://cbd.minjust.gov.kg/act/view/ru-ru/56374?cl=ru-ru. 72 For example, Decree No. 215 of April 26, 2016, "On the Preparation of Economic Sectors and the Population of the Kyrgyz Republic for the Autumn-Winter Period 2016/2017." 73 These certificates have as their regulatory base the Law “On Energy Performance,” 2011. Energy performance requirements of structures and material must be met for building retrofit in case it comprises 74 more than 25% of the building envelope. 75 SNIP “KR” means the standard (or construction norm, CN) has been fully adapted to Kyrgyz Republic conditions and is aligned with the country’s legislation. The standards are available in national databases such http://cbd.minjust.gov.kg/act/view/ru-ru/200296. 76 U-values are used to measure how well elements of a building's fabric act as insulators. The lower the U-value, the better the material performs as an insulator. 77 http://cbd.minjust.gov.kg/act/view/ru-ru/93633. 78 http://cbd.minjust.gov.kg/act/view/ru-ru/111496?cl=ru-ru. 79 Typical standards per student, class-set and group are set by the government, based on the conditions of each institution. For small rural schools, the standard does not depend on the number of students. 80 In accordance with the annual resolution of the Government of the Kyrgyz Republic on the timely preparation for the autumn-winter period, which is issued every year in April-May, for example, the RCC of April 26, 2016 No. 215 "On the preparation of the economy and the population of the Kyrgyz Republic for autumn-winter the period 2016/2017 " http://www.gov.kg/?p=74589&lang=ru 81 82 http://cbd.minjust.gov.kg/act/view/ru-ru/200200. Roadmap for the Implementation of Energy Efficiency in Public Buildings of the Kyrgyz Republic 92 83 See https://budget.okmot.kg/ru/exp_func/index.html, the Open Budget portal on the Akchabar website. Akchabar is an independent financial web-portal (https://www.akchabar.kg/ru/about). At https://www.akchabar.kg/budget/expenses/56/year/ the data is visualized, but an analysis suggests that calculated estimates are not correct. The Ministry of Finance has a separate portal with other information (https://budget.okmot.kg/ru). 84 Law of the Kyrgyz Republic of July 15, 2011, No. 101, "On Local Self-Government" http://cbd.minjust.gov.kg/act/view/ru-ru/203102?cl=en-ru; Law of the Kyrgyz Republic of September 25, 2003, No. 215, "On the financial and economic foundations of local self-government" http://cbd.minjust.gov.kg/act/view/ru- ru/1341. 85 http://cbd.minjust.gov.kg/act/view/ru-ru/111125. 86 https://zakupki.gov.kg. 87 https://stimgrant.okmot.kg/stimgrand. In the Law of the Kyrgyz Republic "On the Central Government Budget of the KR for 2018 and the Forecast for 2019-2020," under the article on stimulating (share) grants, the amount of 500,000 KGS is provided. According to the Protocol of the meeting of the Commission for approval of projects due to share (incentive) grants for the implementation in 2018 of 14.03.2017, No. 15-01 / 27, 213 projects were approved. 88 The District Development Funds are administered by te regional or local authorities. See http://cbd.minjust.gov.kg/act/view/ru-ru/97125. 89 http://edu.gov.kg/ru/schools/save-schools. 90 More information about the project: http://www.aris.kg/ru/proekty_aris/realizuemye_proekty/proekt_gorodskogo_razvitiya 91 According to the Law of the Kyrgyz Republic “On the National Bank of the Kyrgyz Republic, Banks and Banking Activities”. 92 Dated October 19, 2013, No. 195. 93 This is governed by the rules for assigning a level of responsibility with regard to the licensing of work in the construction industry: http://cbd.minjust.gov.kg/act/view/ru-ru/6849?cl=ru-ru#p2 94 http://gosstroy.gov.kg/ru/?p=1015. http://newtek-schmid.com. 95 http://www.interglass.kg. 96 97 http://fakel.kg. http://tansutech.com. 98 99 https://www.un.org/sustainabledevelopment/energy. 100 A qualified and motivated staff is the key to success. However, given the currently low salary levels for public officials, it might be difficult to convince top experts to join the agency. This discussion is extracted from previous World Bank studies of international experience with financing options for 101 energy efficiency. 102 In a subordinated recovery guarantee, the guarantor ranks behind other lenders in the recovery of the guarantee funds it pays out in case the borrower defaults on the loan. This allows lenders to offer better loan terms, such as lower interest rates or longer tenors. A subordination provision may be useful, for example, when interest rates are high due to higher perceived risk, or if a new technology with limited operational experience is being deployed. In the event of a loan default, a first-loss reserve pays for all losses incurred until the maximum first-loss reserve amount is exhausted. The lender incurs losses only if the total loan loss exceeds the first-loss amount. By covering all or a large share of first losses and sizing the definition of first losses to be a reasonable proportion of the loan portfolio (usually higher than the estimated default or loss rate), a first-loss reserve can provide meaningful risk coverage to the lender, but with a low level of total guarantee liability relative to the total size of the portfolio. Roadmap for the Implementation of Energy Efficiency in Public Buildings of the Kyrgyz Republic 93