Serbia: Creative financing solutions for energy efficient buildings and district heating in Šabac

Benefits

  • Estimated average annual energy savings of 10% ie 5.800 MWh per year for DH system
  • Carbon emission reduction of 2.167 t of CO2 per year
  • Less consumption of 800.000 m3 of natural gas
  • An innovative business model of “Public ESCO” makes condominium communities more attractive for the financial sector

Challenge

Besides the problems arising from the use of fossil fuels and climate change impacts, another serious concern that the City of Šabac is facing is energy poverty. This problem was amplified when households switched to consumption based billing in 2010. The average billed heat consumption of 130 kWh/m2 increased up to newly billed 180 kWh/m2 in some buildings, reflecting better the true consumption.

Summary

The “Energy Policy of the City of Šabac” defined the goals for making district heating sustainable. This included a project aiming at implementing energy efficiency measures in up to 40 residential buildings constructed in the 1960s, 1970s and 1980s, including thermal insulation of the building envelopes and introduction of thermostatic valves and heat allocators to support consumption based billing.

The public utility company “Toplana-Šabac” is the sole provider of district heating in the City of Šabac, which operates a 24 km long grid and supplies 8.200 private, public and business consumers. The annual heat production amounts to 60.000 MWh.

The DH company developed an innovative business model, by operating as a public Energy Service Company – “Public ESCO”. This means that the company contracts a loan for the project implementation and implements the investment by itself. On the one hand, the company manages the project and mitigates the risk for the financial sector, and, on at the other hand, it guarantees the calculated thermal performance of buildings and the energy savings to flat owners. To implement the project, the company conducted thorough negotiations with condominium communities.

Financing

In April 2019, a loan agreement was signed with the EBRD who provided EUR 2,5 million to the DH company – Public ESCO for investments. The total amount of the loan will be repaid by consumers throughout the period of 12 years in monthly instalments. At the same time, consumers will have lower bills for energy consumption due to energy savings achieved as a result of energy efficiency measures.

Results

Thermal insulation and self-regulation of energy consumption in all 40 buildings will result in energy savings of up to 10%, ie 5.800 MWh per year for DH system. It means min. 800.000 m3 of natural gas consumption less than before the project. Heat savings including electricity savings will decrease CO2 emission for 2.167 t of CO2 per year.

So far, 7 buildings are fully retrofitted. It is expected that the renovation of 20 more buildings will be completed by the end of 2021 and of 13 remaining buildings in 2022.

Next steps

The project contributes to the “green” transition through environmental benefits arising from the reduction of energy consumption in residential buildings. Implementation of high quality energy efficiency measures in buildings, including demand side energy savings measures, is expected to have a strong demonstration effect, especially considering that the current level of penetration of energy efficiency technologies in the building sector is very low. Moreover, the reduction of energy consumption and increase of energy efficiency in the residential sector can significantly improve the sector’s performance.

It is expected that the project will create a proactive community which will launch more projects to reach the goals defined in the “Energy Policy of the City of Šabac” and will lead to an increased share of renewable energy sources in the local energy sector, such as high capacity heat pumps or several small DH grids that use biomass or other renewable energy.

One of the most important benefits is to support “prosumers”,consumers who will cooperate with the public sector in heat and electricity production.