Public-Private Partnership: Regional expertise for local projects

Ankica Barbulov, Director at GGE ESCO, spoke about the potentials and importance of public-private partnership (PPP) for municipalities in Serbia and PPP projects that GGE Group has successfully implemented in partnership with several municipalities in the region.  Following are excerpts taken from her interview for Improving Energy Efficiency through Public-Private Partnership Model publication.

Total energy saving potential of public building in Serbia is up to 40%, while potential in reducing energy consumption by street lighting installations often exceeds 80%. Public-private partnership is a chance for each and every municipality in Serbia to turn this kind of potential into an advantage and transform it into financial savings, without allocating funds from the budget, Ankica Barbulov says.

From the perspective of an ESCO company operating in many SEE countries, tell us more about the situation in the region and how PPP model has helped improve energy efficiency?

Slovenia is a leader in the region, primarily because of high awareness of the importance of energy efficiency and environmental protection.  The first ESCO firms appeared in this market in the early 2000s.

Thanks to the successful implementation of the ESCO model in combination with PPP, LED lighting is now dominant in the city lighting system, and most of the public buildings are energetically rehabilitated. The GGE team successfully implemented many PPP through the ESCO model in kindergartens, schools, elderly homes, universities, prisons. We have always applied the latest technologies with the maximum use of green energy sources – from small gas cogenerations, through wood chips or pellet boilers, to heat pumps using the sea energy.

How would you explain the importance of PPP to increase energy efficiency in Serbia?

Energy infrastructure in most public buildings in Serbia is mostly 40 years old, even more. According to the World Banka data, the Western Balkans’ countries, including Serbia, spend 3 times more energy than the EU countries. However, this disadvantage of public buildings in Serbia is also our biggest advantage: these buildings create huge possibilities for energy savings, and that will enable public partners to acquire new technologies without allocating funds from the budget.

The lack of funds in the budget is no longer a barrier to new investments in energy efficiency.

The most important message of every realized PPP project in Serbian cities and municipalities so far is that the lack of funds in the budget is no longer a barrier to new investments in energy efficiency. There are private partners who are interested in investing in energy efficiency projects, and there are also technologies that will enable both energy and financial savings that will allow the city to repay a private partner. Money is no longer an excuse. On the contrary, PPP should be an incentive for solving energy efficiency problems through arrangements with private partners: public institutions and local governments are not obliged to have a defined investment budget in order to get new lighting, heating or new facade systems. Often these projects will create savings in the budget. The result of public lighting projects, for example, is 10 – 15% or possibly more than 20% reduction of the existing budget expenses after paying the fee to the private partner.

New technologies ignorance or shortage of personnel can no longer be an excuse neither. The second most important aspect of PPP is that a private partner takes over financial and technical risks as well. Municipalities and cities do not need to worry anymore about choosing right technology, right manufacturer and contractor, investment portion, equipment failures or other quality of work related issues – these are all now obligations and responsibilities of a private partner.

The GGE implemented Serbia’s first PPP for heat energy supply, in Pirot. How did it go and what are the results?

Out cooperation was great from the very beginning.  There was the incredible amount of dedication and desire to succeed, from the mayor, and the energy manager, to the implementation team and the school director. The project of heating system modernization in four schools is positive from several aspects. First of all, renewable energy source – biomass – is going to be used, thus it will reduce CO2 emissions by 420 tons per year. Biomass also has a multiple significant economic effects, both for the city, due to reduced heating costs, and for the local economy. The energy source is locally available, and the process of transportation and preparation of energy products will be carried out by local Pirot companies. This all means new jobs for the city of Pirot.

Total energy saving potential of public building in Serbia is up to 40%, while potential in reducing energy consumption by street lighting installations often exceeds 80%

Since wood chips are currently the cheapest energy source on the market, the total cost for heating of these four schools will be reduced by 25%. In addition, the private partner is going to be responsible in next 15 years for quality and delivery of biomass, for the equipment and its maintenance. In brief, the city showed the initiative and used the potential of PPPs and available equipment: without its own funds, the city has got modern heating system on ecological fuel and with reduced expenses.

How much GGE projects rely on local contractors and associates? How many local people could find work through these projects?

The GGE strategy is that we provide money and knowledge, everything else is done locally. The preparation of the project itself involves the cooperation of our engineers and potential local partners, with whom we jointly assess the situation on the ground, then propose solutions and initiate the PPP project. If the public partner initiates the development of a project, and receives the approval of the PPP Commission and selects us on the tender, then the GGE realizes this project completely relying on local partners. We sign contracts with suppliers and contractors and let them do work on the ground. When it comes to maintaining installed systems we also leave this job to our local partners because they will always respond quickly in case of necessary interventions.

GGE is participating in the largest PPP energy efficiency project in the region, as the private partner of the City of Ljubljana. What makes this project significant and important?

This project includes a complete energy rehabilitation of 48 public buildings in Ljubljana. The investment is huge, 14.3 million euros, of which 51 percent is provided by the private partner, and the rest is on the city and state. The buildings included in the project are administrative buildings, schools, kindergartens, sports centers and other public institutions. This is the first real example of a comprehensive energy recovery on this scale. Due to the scope of work – heating, cooling, insulation, windows, roofs, secondary heating system, thermostatic valves and radiators – the project is being carried out in partnership with the Petrol company.

This project is an excellent example of everything that can be done in terms of energy rehabilitation of buildings in PPP. I hope this project will be a pilot project that will launch a domino effect in other countries of the region. And I think that in Serbia, comprehensive energy recovery will be the future of ESCO projects.

 Improving Energy Efficiency through Public-Private Partnership Model is published by the Chamber of Commerce and Industry of Serbia in cooperation with Balkan Green Energy News and the Standing Conference of Towns and Municipalities.