Update: December 2006

Contents:

- Evaluation of Structural Funds for Renewable Energy 2004-2006

- Barriers and Recommendation of Structural Funds for Renewable Energy for the period of 2007-2013


Evaluation of Structural Funds for Renewable Energy 2004-2006

Structural funds are by far the biggest means of distributing EU funding - one third of the whole EU budget is allocated for Structural Funds. New EU member states from the CEE countries began receiving and using the first EU funds during the period 2000-2003. These so called pre accession funds (ISPA, SAPARD and PHARE) where followed by the 'normal' structural, cohesion and rural development funds after their accession to the EU in 2004. Approximately 30 billion EUR in the first round is available for the new EU accession countries in 2004-2006. Half of this has been allocated to Poland. The allocation is partly based on population and need. The member states distribute the funding to eligible projects through a government department, ministries or committees at national and local level, usually a mixture of the above. All new EU countries are now preparing for the next funding period, 2007-2013.

The experience so far (the end of 2006) shows no big success from the point of view of funding of sustainable energy projects. Distribution of funds is usually done through the Operating Programs (OP). Due to the fact that national or regional authorities are responsible for the details of programs there is a lot of differences between new EU member states policies in terms of who is eligible and how the funds can be used. For example in Slovakia the support was given preferably to the investment in the industrial sector oriented on energy efficiency. Main beneficiaries were private companies which received the support also from other state support schemes for the sustainable energy, whereas the communities or public institutions are not eligible for this additional support. On the other hand OPs in Czech republic, Poland or Lithuania are oriented on small and medium enterprises, communal and public sector.

Czech Republic
Funds allocated and approved for the renewable energy projects where distributed through:

· OP industry and enterprises where final beneficiaries were small and medium enterprises in processing industry. Projects oriented at energy plantation or alternative fuels for transportation were not eligible. Additionally the larger projects than 1 million EUR were also not supported.
· OP infrastructure was oriented to support combined heat and power production, renewable energy sources and low emissions combustion technologies. End users were mainly in the public sector and NGOs including communities.

According to the list of supported projects ca 6,6 mil. EUR (179 million CZK) were approved for the renewable energy oriented projects. It does not seem to be big share out of 454.333 million EUR allocated for all OP in Czech republic.

Hungary

In 2004-06, the budget for the KIOP/EIOP's "Environmentally Friendly Development of Energy Management" budget line was about 23 Million EUR for the industry and municipalities, and 7.7 Million EUR for private people from the total of 440 Million EUR. (see more under Hungary in the database of INFORSE-Europe.)

The budget line of about 23 Million EUR for the industry and municipalities was shared in two major program line:
· Increase of energy efficiency: 42 % for 23 projects
· Utilization of renewable energy resources: 58% on 20 projects
From which the shares were: biogas: 33 % for 2 projects; wind: 31% for 11 projects; geothermal: 20 % for 4 projects;; hydro: 9 % for 1 project; biomass: 7 % for 2 projects. See list of projects in table.

The support scheme for private people on energy (NEP) was about about 7.7 Million EUR shared in two program line:
· energy conservation (NEP-2006-1)
Budget expected: 1.2 Mrd HUF (about 4.7 million EUR) (originally 800 million HUF to 2800 projects)
· renewable energy (NEP-2006 -2) mainly solar thermal collectors for heating
Budget expected: 800 million HUF (about 3 million EUR) (originally 183 million HUF to 500 projects)
The number of application in 2006 exceeded all expectations. It was announced only in March 2006 and after 2 weeks it has to be closed because of the big interest. There were 7,500 applications, and about 6,600 receives funding. The funds are distributed continuously still at the end of 2006.
This was the result that in 2005 there were no funding announced, and in 2004 the NEP 2004 budget was 200 Million HUF. There is no online information about who got funding in 2004.

The call for private people was very late and it was uncertain for very long time. The online database for information has been made but has been developed very slowly. It is still not filled up with concrete project information, and the planned English version is still not available at the end of 2006.

Lithuania
Sustainable energy (RE and EE) projects were financed through 3 operational programs:
· OP infrastructure,
· OP development of industrial sectors and services and
· OP rural development and fisheries.

Eligible projects included also intelligent utilization of energy in renovated buildings, energy auditing of buildings and infrastructure, regional co-operation, research and development, education, consulting and processing of agricultural products for energy utilization. Among beneficiaries were state institutions, communities, public entities, small and medium enterprises and farmers.

Poland
Main program oriented on sustainable energy was Integrated regional OP – support for the modernization of district heating systems, reconstruction of heating boilers and their substitution with low emission technologies. End users were community authorities and public institutions. Poland was one of those very few countries, which allowed environmental NGO representatives to take part at the two Cohesion Fund steering committees (for transport and environment), whose task was to select projects for funding. It was also important that two representatives consult local NGOs on particular projects reviewed in the committee.

Slovakia
EU funds used for sustainable energy projects were distributed mainly through two operating programs.
· OP industry and services – eligible projects were oriented on energy efficiency in industrial processes and buildings, projects of combined heat and power production, RE, regulation and automatisation of heating systems including heat distribution networks. Beneficiaries were mainly private companies.
· OP basic infrastructure was also oriented mainly at private companies few projects on community level were also supported.

From the database of supported projects it can be seen that huge amount of funds have been used for fossil fuels (co-firing of coal and biomass, natural gas boilers etc.). All these projects have been approved because of reduction of emissions. Interestingly by far the project with the largest support was oriented on co-firing of coal and biomass at Zvolenska teplarenska, a. s. (14 million EUR). Due to the lack of technical data (share of biomass?) it can be hardly seen as the example of sustainable energy project. On the other hand project proposed by twelve municipalities and one environmental NGO oriented on substitution of old coal boilers by biomass heating plants was approved but funding was not provided (postponed behind the year 2007). Here a group of different municipalities in the Banska Bystrica region have old inefficient coal fired district heating systems, plus 2 of these municipalities have sawmills with a large waste product of wood chips and sawdust, sufficient to supply all 12 district heating systems with wood at lower cost than the existing cost of coal, plus keeping more money in the local economy and creating new jobs. The Slovak NGO FOE-CEPA has invested heavily in this project as it is eligible for structural funds, economically viable and an exemplar many other regions can follow.

There have been 31 projects supported from the OP infrastructure. Total amount of funds allocated was 1,366,793,543 SKK (40,199 mil. EUR). They have been distributed in the following way :
Biomass 14 projects 343,250,000 SKK (25,1 %)
Geothermal 1 project 31,932,000 SKK ( 2,3 %)
Emission reduction 7 projects 292,256,000 SKK (21,4%)
Natural gas 7 projects 211,545,000 SKK (15,5%)
Energy efficiency 1 projects 17,555,000 SKK ( 1,2 %)
Co-firing (coal+biomass) 1 project 470,251,000 SKK (34,5 %)

There were another 42 projects supported from OP industry and services. Total amount of funds were 758,525,000 SKK (22,309 million EUR). Here 11 biomass oriented projects received total of 380,271,000 SKK (50%), six hydro power projects received 159 766 000 SKK (21 %), five project on geothermal energy received 57,911,000 SKK (8 %) and the rest was used for energy efficiency (savings) and natural gas projects.

More than 90 % of all funds went to private companies and the rest was used by the municipalities.

Barriers and Recommendation for 2007-2013

Transparency
Transparency in managing SF seems to be the biggest problem in most of the new EU member states. In order to achieve higher transparency in distribution of EU funds some important changes in the legislation and procedures for the whole process of EU funds management (the supervision of tenders and criteria, the selection of projects, the responsibilities of implementing agencies, etc.) are needed. Efficient, transparent and environmentally sustainable use of the funds is of great interest both to people in the recipient countries and to European taxpayers in the donor countries. Many countries occurred that the development of online application procedures and databases of projects supported has been very slow. Description of the projects received funding still missing most of the cases.

Transparency EU-wide
English information is planned in some of the countries but there is no country where you can find the information in English on the national Structural Funds.

Administrative Barrier
It is important that the call for applications to receive support has to be announced in time that gives time to make applications and the application forms should be understandable and manageable for the respective target group.

NGO involvement
According to the EU vision, non-governmental organisations (NGOs) could play an important role in monitoring of the proper use of EU funds. The partnership principle in is mentioned in EU regulation (“the member state shall ensure broad and effective involvement" of regional, local and other public authorities, economic and social partners and "any other relevant competent bodies"). Actually, this is very vague formulation, and it usually leaves NGO participation up to the goodwill of national authorities. Experience so far shows that the role of NGOs was practically negligible in all new EU MS with almost no influence (except of Poland) on selection or criteria setting for projects. Even if NGOs were invited into partnership structures, they often encountered other problems, such as:
• the appointment of NGO representatives by the authorities instead of allowing NGOs to elect their own representatives;
• problems with access to information;
• unclear and changing rules;
• non-transparent project selection process.

It is clear by now that NGO involvement could help in securing of transparent and democratic decision-making process, but it was not the case in new EU member states so far.

Public Awareness
In order to push sustainable energy projects which have mainly decentralised character (small scale biomass, solar, hydro projects) more emphasis should be given to the awareness raising on community level. Subjects (decision-makers at community level) eligible for funding in rural areas are usually not skilled enough to prepare quality projects. As the result of this large private companies are benefiting from this situation and pushing their mostly unsustainable projects. The NGOs with their skills and knowledge can play larger role in the whole process of project preparation and awareness raising.

Recommendations for 2007-2013
European Commission should insists on higher transparency of the whole process of the management of SF. Public opinion on major projects must be included into the process. Since financing of these projects comes from EU taxpayers, the decision about the funding should not be left to just a small group of experts.

Support also must be linked to the commitment of beneficiary to make open the basic data of the project. This has been requested by several NGOs so far including Transparency International. Information about the projects, which were approved, and information about the reasons why other projects were refused is still kept secret.

In the next programming period (2007-2013), the European Commission is planning to somewhat loosen its control of the funds management and shift more responsibility to the member states and regions. Therefore there is a stronger need for partnership with NGOs who can play important role in monitoring of correct use of EU funds by each Member State. It is clear that without opening the EU funds to more public scrutiny and participation, control of them may become too concentrated in the hands of the national managing authorities. Experience shows that beneficiary countries have not always been able to develop transparent mechanisms for the management of the funds and there have even been cases of misuse and corruption.

In order to improve involvement of NGOs in the whole process the European Parliament and Member States in the European Council should put more emphasis on provisions about partnership in the new regulations on the EU funds. EU should define clear minimum standards for participation. According to the draft report of the European Parliament which "rejects any weakening of the principle of partnership as envisaged in the original proposal and calls for the maintenance of the list of appropriate bodies which also should include environmental NGOs and bodies representing the disabled". It would be appropriate if NGOs should be explicitly mentioned in the partnership clause and their involvement in the partnership structures should become compulsory for all Member States. Additionally to this the new regulation should also define a clear minimum framework for participation, e.g. regarding access to timely and sufficient information, rules on commenting process, etc.

Taking into account the benefits of NGO involvement in the EU funds and the planned decentralization of SF management, NGO participation in the EU funds partnerships needs to be supported through training and capacity building. The European Commission should require MS to support NGOs involved in partnerships from the Technical Assistance budget or the Global Grants scheme or by setting up a special Operational Program for civil society. Alternatively, the Commission should consider creating a new European support fund for the capacity building of environmental NGOs under Article 43 of the new regulation for the EU funds.

Concerning to cope with the barriers, the member states should make more efforts to
- announce the applications procedures in time, and make the application forms manageable for the target group
- give clear guidelines about the conditions of funding and refusal
- recognize the big demand for supporting the installation of solar thermal collectors and energy conservation, especially for private people as well as for municipal buildings, and increase substantially the share of support for these.
- make the online application procedures and conditions available in time
- make sure that the online databases of projects funded is filled up with information
- make the online database available in English.

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