Lasting Solutions: Making Kosovo More Energy Efficient for the Future

Kosovo – the youngest country in Europe – has experienced solid economic growth record since 1999 and remains just one of four countries in Europe to record positive growth rates in every year since the onset of the global financial crisis in 2008. Despite this growth, however, Kosovo remains one of the poorest countries in Europe, with an average annual income of about $3,453 in 2012 and nearly 30% of the population living below the poverty line in 2011. However, with medium-term growth beyond 2013 expected to remain around 4%, Kosovo continues to demonstrate economic resilience as it travels down a path of growth and reform.

Among the key areas underpinning future growth in the country is the energy sector, an area that today represents a drain on public resources, a major constraint to doing business and a source of local and global air pollution. At present, Kosovo is unable to meet current energy demand, forcing the country to import approximately 10% of its energy from abroad - at an estimated cost of nearly $60 million in 2012. An unreliable supply of mostly lignite-based electricity leads to frequent power outages around the country, constraining business operation and expansion and affecting both job creation and investment.

In response to these challenges, policymakers in Kosovo are exploring a range of options to help increase the country’s domestic energy supply, decrease inefficient energy use, and make the energy sector more sustainable. Among the most economically viable and effective options for achieving these goals is increasing energy efficiency through improved energy systems and increased awareness among users.

Given the potential savings in energy consumption from improvements in efficiency, the government of Kosovo, in coordination with the World Bank Group, has identified a series of energy efficiency investments that could save the country as much as $25 million every year. This work is focusing on improving efficiency in public buildings around the country - a key area of engagement with huge potential for savings in both municipal and central government buildings. A 2013 World Bank Institute preliminary market assessment showed that the country’s building sector accounts for more than 47% final energy consumption, with energy efficiency potential of about 44%. In particular, the assessment highlights the ultimate potential of energy efficiency projects in Kosovo’s municipal and central government buildings – showing savings of 38% in schools, 47% in health buildings, and nearly 50% for central government buildings.

In an effort to tap these huge energy saving potentials, officials in Kosovo are now working with the World Bank Group to implement the Kosovo Energy Efficiency and Renewable Energy Project, a $31 million project designed to reduce energy consumption and fossil fuel use in public buildings through energy efficiency and renewable energy investments. Additionally, this project will enhance the policy and regulatory environment, further easing the facilitation of these investments.

“The energy sector is a potential key source for future economic growth in Kosovo,” notes Jas Singh, a Senior Energy Efficiency Specialist at the World Bank and Task Team Leader for this new project, “by investing in energy efficiency, the country can do a lot to boost its energy security—at a fraction of the cost of new supply or imports. Such investments can also help cultivate a local energy efficiency industry, creating jobs while helping to improve energy use in other sectors of the economy.”

In order to achieve these potential savings, the project provides investment finance for energy efficiency and renewable energy projects in eligible government-owned buildings. This will have the dual impact of reducing energy consumption while simultaneously demonstrating the commercial viability of such investments. This work reinforces calls from the Government’s National Energy Efficiency (NEEAP) and Renewable Energy Action Plans (NREAP), which call for cumulative energy savings of 9% over 2010 levels by 2018 and 25% of energy supply from renewable energy by 2020.

In addition to the energy savings, the project also aims to enhance the regulatory environment to help boost economic activity around energy in the country – including job creation and investment. By supporting the development of a robust policy and regulatory framework for sustainable energy-related investments in the country, the project also aims to attract future investment and scale-up investments in clean energy – reinforcing the gains that will be made through initial investments under the project.

This cooperation between The World Bank Group and the government of Kosovo in the sphere of sustainable energy is the latest push by officials in the country to improve energy security, availability, and reliability for citizens in Kosovo through a diverse set of policy and investment options. By also supplementing the initial investments from the Kosovo Energy Efficiency and Renewable Energy Project with the development of policy and regulatory frameworks, policymakers are also demonstrating their commitment to lasting solutions that can ensure that energy is made available today and for a long time to come.