Summary
This paper describes the Krakow Energy Efficiency Project whose project proponent were the World Bank and the Government of Poland. The project’s implementation area was in the Krakow region in Poland. The project is a model of a private-public sector partnership, with the World Bank providing funding to a government development scheme. The project was approved in June 2001 and decommissioning date was in December 2007 at a cost of up to US$7.5 million. The Krakow City population prior to the project implementation was about 750million. A significant portion of the population relied on the district heating for commercial and residential purposes.
Krakow’s history in the 1990s decade indicated a shift in the type of energy used from coal or coke stack burning towards gas-fueled or connection to the municipal heating systems. This had a significant positive implication towards achieving energy efficiency that had two main benefits: consumers would cut spending on energy costs as well as enhance environment care through reduction of energy used and the corresponding pollutants emitted while combusting. There is growing need to conserve the available environment resources. It is the reality that some of the naturally occurring resources were abundant in the past but now need special humankind protection to sustain their supply. This means that natural resources have a limit in terms of supply. The concept of energy efficiency embraces this fact.
This project was to achieve the energy efficiency goal by improving the heating systems that are in use within the Krakow region. The first objective envisaged to maintain an ongoing modernization program for the district heating systems. The second objective was to enhance energy efficiency at the consumption stage by providing end-user solutions to lessen heat energy used by the consumers. The third objective was to build a knowledge base of mechanisms intended to inform prospective financiers for the energy efficiency projects in the Krakow region.
Introduction
According to the United Nations Environment Programme (2006), the energy efficiency concept will constitute adjustment made in an effort to reduce the amount of energy used to achieve the expected service (p.1). This means in spite of an energy requirement remaining constant or increasing, proactive measures towards energy efficiency taken will reduce the energy used.
The Krakow Energy Efficiency Project implementation area was in Malopolskie Voivodship (the Krakow region) in Poland, with the World Bank financing via a loan totaling up to US$7.5 million. The project’s approval was in June 2001 while the decommissioning date was December 2007. This was a private-public sector initiative between the World Bank and the Government of Poland. This project was to provide investment support for the energy users in Krakow as a development mechanism, achieve environment care through financing energy efficiency, and enhance institutional capacities.
The main criteria that World Bank applied to approve and offer assistance anchored on the need for advancing strategic infrastructural development that would contribute to the overall national goal while incorporating private players and enhancing environment care. Energy efficiency solutions targeted the district heating and the final consumer. The project financed the local Energy service company so that it could financially strengthen its energy business operations.
The benefits of the project after completion were weighed based on several parameters. The first parameter was the satisfaction of the end-user consumer with regard to the standards of the energy services rendered. On yearly bases, data from representative samples was collected randomly from those owning building to establish the satisfaction parameter. Second parameter was on the amount energy saved which was closely tied to the cutting pollutant emissions. Data would be generated to this end and periodically analysed to establish whether energy consumption per capita had reduced as well as the corresponding emission units. The Annual performance of the Energy Service Company would be the third parameter. Audits would be done to establish sales turnover of the company.
Background
Population surveys just before the energy efficiency project indicated about three-quarter million populace inhabited the City of Krakow (The World Bank, 2009, p.1). Further data showed that just above two-thirds of the household and half of business buildings had connection to the municipal heating system (The World Bank, 2009, p.1). The history of the Krakow region showed a gradual shift from energy technologies that had worse impacts on the environment to those that had relative lower impacts. That is, with time the Krakow region was moving towards achieving energy efficiency (Anonymous2, n.d., p.1). According to the World Bank (2009), most people in the Krakow switched to gas-fueled and connection to the municipal heating system from coal and coke stack burning in the 1990s decade (p.1). This paradigm shift won the confidence of the World Bank who were willing to finance the heating and environmental care projects in Krakow. Global Environmental Facility (GEF) has also been a keen prospective financier of environmentally related projects in Krakow region. Prior to the project, efforts to improve energy efficiency had faced financial constraints.
The concept of energy efficiency has long-term benefits attached. The two main benefits are environmental protection and cost-benefit implication. The long-term impacts of energy efficiency make it an imperative underpinning of the sustainable development concept. Environmentalists repeatedly are sounding alarm on the threats posed by the unpredictable nature of the environment and the weather patterns. This has close links to the climate change phenomenal. It is not clear-cut on the amount of blame to apportion human induced causes on the looming environment crisis. However, the magnitude of concern on the climate change has seen revolution in almost all sectors of the economy. In the contemporary world, no economy activity can prosper without energy consumption.
Its arguable the concept of energy efficiency is gaining popularity because of its contribution to the environment conservation. It is a fact that global population growth is continuously stretching environment resources to their limits, thus compromising the need to reduce resource waste and pollution spells doom. Whether to be skeptic about the climate change scare is arguable but the list is growing for once abundant naturally occurring resources that need special humankind protection or else they will get exhausted, that is a reality. For instance fossil fuel (UPC, 2010, p.1). Actually, energy efficiency encompasses processes that use less energy while continuously meeting the same needs. Clean energy concept is a stricter version of energy efficiency that calls for not reducing emissions but preventing emissions through the zero emission approach. This involves rigorous screening of energy systems and active anticipation of problems thus it predicts and provides solutions prior to their occurrence. Other energy efficiency allied concepts include factor four and factor ten, but this are widely pronounced in the industrial world. However, these concepts do not have attachment to any specific technology, but rather are a way of thinking and improving existing technologies. Actually, technologies and equipments are aligning themselves with the concepts (UII-CO2 – CIRCE, 2006, p.1).
“The Stated Objective Vs the Real Implications of the Project”
According to The World Bank (2009), the Krakow Energy Efficiency Project was aimed at enhancing the energy efficiency through a set of three development objectives (p.1). This project was to achieve the energy efficiency goal by improving the heating systems that are in use within the Krakow region (CAI-ECA, n.d, p.1). The first objective envisaged to maintain an ongoing modernization program for the district heating systems. The second objective was to enhance energy efficiency at the consumption stage by providing end-user solutions to lessen heat energy used by the consumers. The third objective was to build a knowledge base of mechanisms intended to inform prospective financiers for the energy efficiency projects in the Krakow region.
In the modernizing the heating system, targets were to put in place improvements on the heat exchanger stations (anonymous1, n.d, p.1). The planned improvements include reconstituting the existing heating network with already insulated pipes and install at the exchanger substations with plate heating exchangers. Arguably, the implementers forecasted the need for strong institutional capacities to oversee and sustain the project gains for posterity soon after the decommissioning phase. Plans within the project frameworks to address institutional constraints were to include computerizing system operations, undertaking capacity building training on personnel to enhance their productivity, making adjustment on the automation of heating system and some of the heat meters and the proper handling of working gadgets (anonymous1, n.d, p.1).
The change of technology would influence future allied projects to prioritize energy conservation. Ground assessments done prior to the project implementation indicated that Poland had significant number of people with technical knowledge in applying energy efficiency but fewer buildings had embraced this concept (The World Bank, 2009, p.2). In addition, the Energy Service Company was to be allocated funds in order to stabilize its business operations. This was to counter the mindset among some construction stakeholders and banking firms entering into monetary agreements with the Energy Service Company for energy conservation initiatives had a risk implication. Actually, the Energy Service Company was to undergo capitalization. This would build confidence and cultivate willingness among the lending institutions to fund the Company’s energy management programs (The World Bank, 2009, p.1). And further dispel doubts among building owners of immature termination of installing energy efficiency systems. Immature termination would further cause inconveniences to residents using energy systems.
The study done prior to the project showed that implementing energy efficiency projects was perceived as expensive, regardless of the size of the initiative (The World Bank, 2009, p.1). The financial cost further rose when technology being implemented was not familiar to the populace. This implies that short run interest surpassed long term benefits. The short run interests were on limited to reducing the immediate cost of installation overlooking the long-term environmental and cumulative waste of energy due to inefficient technologies.
Further plans were to fund for gradual phasing out of the coal-stove heat-only-boiler technology by diverting the consumers to the municipal heating system. The heat-only-boiler infrastructure would be reused for other purpose of gas, or oil-firing (anonymous1, n.d, p.1). Phasing out of coal stoves would lessen the energy consumption at end-user level. Thus the switch from heat-only-boiler technology would have an environment care implication. Energy efficiency translates to scaling down the energy going to waste as well as reduce pollutant emissions associated with operations of the energy system (United Nations, 2009, p.1). Emissions from energy operation have been associated with the looming environment crisis. Excessive energy combustion contributes massive volumes of greenhouse gas emissions that are driving the global warming phenomenal. Other energy combustion related environmental degradation phenomenal is the urban smog caused formation of ozone at the lower troposphere. Actually, the Global Environment Facility (GEF) was willing to partner with the World Bank in funding the initiative (anonymous1, n.d, p.1). The World Bank as a financial project proponent would oversee the pipeline system supplied with injection pump to boost distribution capacity. With this potential the district hot water system would supply cheaply to the consumers. Other benefits to building owners were on money spend in footing energy bills as well as build confidence on the heat distribution system in the southeast region (anonymous1, n.d, p.1). Energy efficiency systems would provide cost effective alternative to existing energy technology in use. Actually, assessment studies indicated that most of the building owners were unaware of the positive implication of adopting energy efficiency technologies towards the cost of heat supply (The World Bank, June 24, 2009, p.1).
The World Bank rates the achievements made by the Krakow Energy Efficiency Project to be quite reasonable. Both project proponents were rated as proactive. Several lessons were learnt from the project (The World Bank, 2009, p.18). The first lesson for the World Bank was to pay attention to the loaned institution flexibility and market penetration especially when the institution is initially rolling out its services to the public. The World Bank should be keen to vet the personnel behind borrowing institution and their ability to propel the institution successfully. The second lesson for the World Bank was that before lending to a market debut institution proper planning should focus on likely risks and their mitigations as well as a precautionary contingency. Finally, the need for an intellectual shift by other sector in the way they perceive a new Energy Service Company. This should be prior to the entry into a market.
This project led to conservation and recognition by UNESCO of a pre-historic site (The University of Texas at Austin, 2009, p.7).
References
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The World Bank. (2009). Krakow Energy Efficiency Project. Retrieved 18 June 2010 from Web.
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