EU Funds delivering domestic energy efficiency in Latvia - concerted facilitation and promotion is the key

Encouraging developments related to the deployment of EU funds in Latvia for improving household energy efficiency have reached Bankwatch Mail from Latvian Green Movement, our member group based in Riga.

This article is from Issue 51 of our quarterly newsletter Bankwatch Mail

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The following description of how the Latvian “Heat insulation for multi-apartment buildings” programme has been implemented and encouraged can stand as an inspiration for other new member states to better channel EU money into a sector that is still crying out for funds and action.

The “Heat insulation for multi-apartment buildings” programme, financed through the European Regional Development Fund (ERDF), was seen by the Latvian government as a way to tackle the economic crisis by stimulating employment and local economic activity. Thus in April 2009 the Cabinet of Ministers took the decision to increase allocations for this programme from EUR 20 million to roughly EUR 63 million.

Such has been the success of the programme (as we will see below), delivering real economic and quality of life benefits, that in fact just last month Latvia's Cabinet of Ministers took the decision to increase allocations for the scheme from EUR 63.09 million to EUR 67.96 million.

Initially, though, the implementation of the programme was sluggish. It was opened for applications from the beginning of April 2009, however applicant interest was very low. Applying for funding could be done within several rounds of applications. The Ministry of Economics had reserved around EUR 6 million for each round, yet for the first round only 14 applications were received for approximately 30 percent of available funding, an experience repeated in the subsequent round.

The Ministry of Economics (and its agency responsible for housing at the time) decided to act by simplifying the programme and application procedure, reducing bureaucracy and extending the scope of potential beneficiaries. This was done on a few occasions – in August 2009, again in 2010 and in April 2011 – the result being that by 2011 the programme had become very popular.

The key steps taken to boost interest and, ultimately, applicant uptake were:

1. The introduction of a simplified energy audit tailored to standard multi-apartment buildings – those ‘Soviet blocks’ where average annual heat consumption in the previous three years exceeded 180 kWh/m2).
2. Extending the scope of potential beneficiaries, through for instance making older buildings eligible, i.e. those built before the Second World War; also increasing the maximum amount of co-financing to make bigger houses (12 and 16 floor buildings) also eligible for funding.
3. Extending the categories of eligible costs, including making eligible the costs for professional building experts to make the budget for heat insulation work, as well as making VAT eligible.
4. Reducing the minimum number of flat owners within a building required for giving consent to renovation work; previously at least 75 percent consent was necessary, which was then reduced to 50 percent +1, thus making it easier to obtain agreement from people.
5. Reducing the level of required documentation necessary – some papers were no longer needed such as a statement from the State Revenue Service or bank account statements.
6. Reducing the compliance threshold – previously it was difficult for multi-apartment buildings located in economically more developed municipalities with smaller amount of flats (i.e. 8-12) to apply as they would not comply with the criteria of minimum of points in the initial quality assessment, but this requirement was lifted.
7. Cancelling separate calls for applications – initially, as described above, the applications could be submitted in several rounds, but this was proving to be confusing for potential beneficiaries; moreover the demand for money was so much lower than what was actually available, thus starting in the end of 2009, the rounds were cancelled and now applications are submitted as long as the allocated funding is not exhausted.
8. Finally, and perhaps most significantly, the Ministry of Economics and its various agencies engaged in extensive advertising and promotion of the scheme with a campaign called "Live warmer". They refused to give in to the scepticism about the initial slow implementation as they remained confident about the eventual added value for local economies, employment and energy security. The authorities showcased positive examples, produced a range of explanatory materials and brochures, took part in various exhibitions, and organised countless seminars where they invited all stakeholders. Social media has also played a role with a twitter account established where news about heat insulation is posted at www.twitter.com/siltinam

And the numbers have gone up

When the “Heat insulation for multi-apartment buildings” programme began in April 2009, the Latvian authorities estimated that around 1000 multi-apartment buildings in total could benefit from co-financing. The actual number of contracts by the end of 2011, including both projects completed and in progress, was 419. However, the year by year breakdown demonstrates what the concerted governmental efforts have reaped in terms of increased applications:

• Number of applications in 2009 (starting from May): 117
• Number of applications in 2010: 169
• Number of submitted applications in 2011 (as of August 2011): 367

It is worth clarifying the meaning of co-financing within the programme. The costs break down in the main at a rate of 50:50, i.e. 50 percent is covered by ERDF, and flat owners have to cover the other 50 percent (usually via bank loans or where possible via a mix of savings and bank loan ). If at least 10 percent of the residents in a particular multi-apartment building are registered as low-income or poor persons living, then eligible co-financing from the ERDF increases to 60 percent. Moreover, the usual approach applied is that monthly payments for residents would not increase, i.e. the combined lower costs for district heating + the bank loan and interest should equal or be lower than what was paid previously.

This win-win strategy – no increase of monthly payments and a warmer, renovated building – has worked well to convince those who were initially sceptical. The payback period is usually 10-12 years.

What of the climate benefits? Alas, real data is not yet available and may take some years to compile. However, when the average energy savings being achieved are at the level of 40-50 percent (with some buildings even exceeding 60 percent energy savings), an excellent climate success story is clearly well underway in Latvia.

Find out more

You can visit an e-map posted in September 2011 that displays all projects under the programme either implemented or being implemented. All projects are briefly described (in Latvian) here.