I NSTRUMENT FOR P RE - ACCESSION A SSISTANCE (IPA II)

2014-2020

KOSOVO*
Support on Implementing the
3rd Energy Package and EU
acquis on Energy Efficiency
and Renewables

Action summary

The action aims at supporting the key stakeholders (relevant Government

institutions Ministry of Economic Development (MED), including the Agency for
Energy Efficiency (AEE), Ministry of Environment and Spatial Planning (MESP),
Ministry of Trade and Industry (MTI), the Energy Regulatory Office ERO), as
well as the Ministry of Local Government Administration (MLGA) and Kosovo
municipalities) in the energy sector on upgrading the legal and regulatory
framework in compliance with the 3rd energy package and with the EU acquis on
energy efficiency and renewable energy as required by the Energy Community
Treaty (ECT).

The action will support the planning process on improving energy efficiency
including energy efficiency statistics, and on promoting the use of renewables. The
bottom-up planning process on energy efficiency and renewables requires
strengthening local level capacities on data collection and processing, on energy
efficiency planning and implementation as well as on setting up monitoring
mechanisms. Further support to the national planning process will be provided by
improving the quality of data in different sectors.

*
This designation is without prejudice to positions on status, and is in line with UNSCR 1244/1999 and the ICJ Opinion on the Kosovo declaration of
independence.
 Action Identification
Action Programme Title 2014 Annual Action Programme for Kosovo

Action Title Support on implementing the 3rd Energy Package and EU acquis on
Energy Efficiency and Renewables
Action Reference IPA 2014 /032355/ 3rd Energy Package

Sector Information
IPA II Sector(s) Energy
DAC Sector 23010
Budget
Total cost EUR 2.5 million
(VAT excluded)1
EU contribution EUR 2.5 million

Management and Implementation

Method of implementation Direct management
Direct management: European Union Office in Kosovo
EU Delegation in Charge

Implementation European Union Office in Kosovo

responsibilities
Location
Zone benefiting from the Kosovo
action
Specific implementation Kosovo
area(s)
Timeline
Deadline for conclusion of 31 December 2015
the Financing Agreement
Contracting deadline 3 years following the date of conclusion of Financing Agreement

End of operational 6 years following the date of conclusion of Financing Agreement

implementation period

1
The total action cost should be net of VAT and/or of other taxes. Should this not be the case, clearly indicate the amount of VAT and the
reasons why it is considered eligible.
1. RATIONALE
The energy sector in Kosovo is one of the key sectors for a sustainable economic development.
Kosovo is a member of the Energy Community of SEE (ECSEE) and is making progress on
implementing the obligations deriving from the Energy Community Treaty (ECT). Restructuring of
the energy sector is ongoing. After the privatisation of electricity distribution and supply, the
Government of Kosovo aims to focus on the electricity generation, starting with the implementation of
environmental protection measures and construction of new capacities which will generate energy
with a more advanced technology, while preserving the environment. Improved energy efficiency and
maximal use of renewable energy sources have a vital importance in this process, to which Kosovo is
committed.
To continue with this process Kosovo needs technical support to increase and strengthen the necessary
capacities to address these challenges.

PROBLEM AND STAKEHOLDER ANALYSIS

Kosovo, as a signatory party to the Energy Community Treaty (ECT), has assumed the obligation to
transpose the third energy package and acquis on energy efficiency and renewable energy. The targets
are already set for Kosovo, pursuant to 20/20/20 standards of the European Union as follows: 9%
increase of energy efficiency in the final consumption by 2018 and 25% obligatory (29.47% indicatory
target) for the share of renewable energy sources in the final energy consumption by 2020. The
challenge is in the implementation of plans and programs to create the preconditions for achieving
these targets.

The primary legislation of Kosovo for the energy sector is being amended in view of ECT
requirements. The process of transposing has already started and will have to be completed by the end
of 2014. However, the Kosovo Government and the Energy Regulatory Office (ERO) will have to
implement the secondary legislation during 2015. This is a challenge as it will require the
establishment of necessary legal, strategic and programmatic mechanisms for the purpose of
implementing the new legislation. Therefore, the assistance requested in this area will help strengthen
the capacities of the central institutions primarily the Ministry of Economic Development (MED) and
ERO, but also the Ministry of Trade and Industry (MTI), Ministry of Local Government
Administration (MLGA) and municipalities.

The action will build on previous EU funded assistance which supported the Agency for Energy
Efficiency (AEE) in preparing and monitoring the implementation of the energy efficiency midterm
plan and provided training and guidance to 14 municipalities on preparing their first energy efficiency
plans. Improving the bottom-up planning process is critical to successful achievement of the national
targets on increasing the energy efficiency and the share of renewable energy in the energy mix. The
poor data quality on energy efficiency hampers the planning process. Establishing monitoring and
verification mechanisms and innovative financial mechanisms to support the implementation of the
national and municipal plans are a high priority.

There are a number of projects carried out within the EU funded programme Western Balkans
Investment Framework (WBIF) jointly with IFIs (mainly KfW and World Bank) on assessing the
potential for energy efficiency measures in local and central level buildings. KfW is preparing a loan
scheme for five municipalities to implement energy efficiency measures in public buildings; whereas
the World Bank has earmarked a €32million loan for energy efficiency measures in central public
buildings. These projects will contribute to the achievement of the national energy efficiency targets,
however, a clear financing framework and implementing mechanisms have to be established to ensure
midterm and long-term energy efficiency targets.

RELEVANCE WITH THE IPA II INDICATIVE STRATEGY PAPER (OR MULTI-COUNTRY STRATEGY
PAPER) AND OTHER KEY REFERENCES

The energy sector is key for IPA II assistance because of its economic potential and because of the
sizeable amount of EU acquis in the sector. Energy benefits from a comprehensive sector strategy that
should allow the introduction of a sector approach in the near future. The Indicative Strategy Paper for
Kosovo (CSP) states that IPA II will support Kosovo in ensuring a reliable and sustainable energy
supply to citizens and enterprises, in increasing its energy efficiency and the use of renewable energy
sources, and in aligning its legislation with EU energy standards. This action is targeted toward
directly contributing to the achievement of these objectives by enabling Kosovo to assume its
obligations under the third energy package and the Energy Community treaty.

With the aim of building a sustainable energy sector, Kosovo has listed as key priorities the
development of policies that provide the preconditions for sustainable energy supply, diversification of
energy resources and which represent a solid basis for the implementation of programs to increase the
efficient use of energy and protect the environment.

The policies mentioned above are either included or in the process of being included in strategic and
programing documents and in the legislation that is currently being developed. As such they form the
basis for a sustainable energy sector and for Kosovo's participation in the regional energy market.
Furthermore, the priorities outlined in the CSP derive from the process of cooperation with the Energy
Community Secretariat, energy sector reform in Kosovo in line with EU best practices, the EU energy
acquis and targets of the EU 2020 climate and energy package.

The assistance to be provided through IPA is complementary to other donor community activities
which are offered directly through the Energy Community Secretariat or through regional mechanisms
such as WBIF.

SECTOR APPROACH ASSESSMENT

In terms of IPA 2014 Programme and following the logic of the CSP, this action is presented within
the energy sector. A number of sector-specific documents in the energy sector have already been
elaborated. Kosovo has already elaborated the second National Energy Efficiency Midterm Plan for
the period 2013-2015 and the National Plan for Renewable Energy Sources 2011-2020 which contain
measures planned for achieving targets set within the documents. Implementation is expected to
strengthen the capacities required for the coordination, monitoring, assessment and reporting. The
MED, ERO and AEE are responsible for drafting conducive policies and for coordinating the
implementation process. A good long-term planning in the level of development strategies and plans
are necessary for reforms in the energy sector. The environment protection measures are key to ensure
sustainable development.

LESSONS LEARNED AND LINK TO PREVIOUS FINANCIAL ASSISTANCE

Under IPA I the EU funded assistance has supported the main responsible institutions in the energy
sector namely MED and ERO on setting up the legal and regulatory framework in compliance with the
2nd energy package as required by the Energy Community Treaty. The focus was on developing the
electricity market model and market rules in compliance with European single electricity market
principles. However under the umbrella of the Energy Community Treaty the obligation of the
contracting parties including Kosovo expanded in the field of energy statistics, energy efficiency and
renewable energy which brought new challenges for the Kosovo institutions.
Under the previous EU funded assistance (IPA 2009) the process of energy efficiency planning was
initiated at the local (municipal) level and 14 out of 38 municipalities in Kosovo now have plans. The
existing law on energy efficiency requires each municipality to adopt an energy efficiency plan. The
municipalities lack technical capacity to collect and maintain energy efficiency data, further they lack
capacity for planning and for monitoring the implementation. Therefore the bottom-up planning for
energy efficiency will require substantial assistance to local capacity building.
2. INTERVENTION LOGIC

LOGICAL FRAMEWORK MATRIX

OVERALL OBJECTIVE OBJECTIVELY VERIFIABLE SOURCES OF

INDICATORS (*) VERIFICATION
By 2017 the energy intensity has decreased Annual European
Sustainable development of the energy sector in line with the national by 20% (from currently 465.8kgoe to Commission Progress
strategy and ECT obligations. 369.9kgoe) and Energy dependency has Reports for Kosovo.
reduced by 3%. Energy Community annual
implementation reports.
By 2017 the share of renewable energy in
electricity has increased by 8%; the share of Kosovo's implementation
renewable energy in heating and cooling report of the national plan for
has increased by 0.34% and the share of energy efficiency and for
renewable energy in transport has increased renewable energy.
by 3%;

Reduction of Greenhouse Gas (GHG):

• CO2 reduction by approx. 1 million ton
by 2018;
• By approx. 30% by 2018

SPECIFIC OBJECTIVE OBJECTIVELY VERIFIABLE SOURCES OF ASSUMPTIONS

INDICATORS (*) VERIFICATION
Support in the implementation of the third energy package including the The primary and secondary legislation is Energy Community annual the approval process of
acquis on EE and RES. completed and adopted. implementation reports. legislation is not delayed due
Kosovo's official gazette. to political environment;
The national targets for energy efficiency
and for renewables are met.
the Government ensures the
commitment of relevant
Ministries in the
implementation;

The energy efficiency and

renewable energy are given
priority in the national energy
 strategy.

The Government ensures

budget support for
implementation of the
national energy efficiency
plan (NEEAP).

RESULTS OBJECTIVELY VERIFIABLE SOURCES OF ASSUMPTIONS

INDICATORS (*) VERIFICATION
Result : The government ensures the
Secondary legislation on energy efficiency NEEAP implementation independence of ERO on the
Result 1: The legal and regulatory framework (including electricity,
is approved by the Government. reports; measures to promote energy
energy efficiency, renewables, cogeneration) is aligned with the EU
KREAP implementation efficiency and the renewable
acquis as required by the Energy Community Treaty;
Municipalities conduct surveys to improve reports; energy;
the quality of energy efficiency data; Municipal EE
Result 2: Increased capacity of central institutions on EE and RES implementation reports; Municipalities ensure the
planning and implementation; Monitoring system established and ERO's annual reports; human and financial
functional; Annual reports of ECS resources needed for the
Consultant's progress reports. implementation of the
At least 25 municipal officers are trained on Reports from KEEA on municipal energy efficiency
Result 3: Improved energy efficiency planning at local government level; energy management. investments in EE in different plans;
sectors: residential, industry,
At least one ESCO established or in process services, etc. There is political
of establishment; commitments in
Result 4: Improved financing modalities and developed Energy Service Municipalities to support the
Company (ESCO) market; implementation of surveys
for energy data collection;

The Government and the

Kosovo Statistics Agency
support municipalities on
energy efficiency statistics;

ACTIVITIES MEANS OVERALL COST ASSUMPTIONS

Activity 1:
At least one Service Contract: €2.5 million AEE has increased the
1.1. Support the government and ERO on drafting the secondary
number of staff in order to be
legislation and regulatory rules deriving from the primary legislation
able to absorb the assistance.
aligned with the EU acquis as required by the Energy Community
Upgrade of the legal and regulatory
Treaty; framework (transposing the 3rd package).
Municipalities have assigned
Activity 2:
Strengthening capacities for energy sufficient resources required
2.1 Support MED and KEEA on preparing implementation reports for EE
efficiency and renewable energy. for the implementation of the
and RES including development of an interagency database for the
project.
purpose of monitoring the implementation of the National Plan on RES;
2.2. Support the MTI on drafting a plan for deployment of biofuels and The central and local
on implementing it; governments are committed
2.3. Support MED on improving the long-term energy planning process as to enhance their policies on
well as monitoring and reporting; energy efficiency and
2.4. Support MED for identification, monitoring and implementation of renewables.
standards and regulation related to the EE and RES
2.5. support on defining financial mechanisms for investments on EE;
2.6. Further build the institutional capacity for monitoring, evaluation and
reporting in energy efficiency and renewable energy
2.7 Assist AEE on assessing the potential for EE in transport and industry
sectors;
2.8 Assist AEE on setting up the bottom-up planning methodology and
support the process of improving the energy efficiency data quality;
Activity 3:
3.1 Support all municipalities in the energy planning process and in
defining financial plan/means for the implementation of the plans;
3.2 Training for the energy managers at municipalities on energy
efficiency;
3.3 CO2 emissions data gathering, processing and long-term sustainable
energy planning based on the requirement of the National Emission
Reduction Plan
3.4 Investigate possibilities and advice municipalities in joining the
'Covenant of Mayors' initiative and developing the Sustainable Energy
Action Plan (SEAP)
Activity 4:
4.1. Study the potential of private sector participation and related job
creation in the implementation of the energy efficiency national and
municipal plans;
4.2 Support on the drafting and implementation of the legal/regulatory
framework including establishing of ESCO market ;
4.3. Support on dialogue between central/local institutions with the
private sector in the EE and RES;
ADDITIONAL DESCRIPTION
The implementation of this Action will require a strong involvement of different institutions therefore
a close coordination has to be ensured at early stages of the implementation to ensure the achievement
of results.
The main challenge in the implementation is meeting the deadline for adoption of new legislation that
would transpose the 3rd energy package and the acquis on energy efficiency and renewable energy as
set by the Energy Community. In addition, the lack of data and the poor quality of data hinders the
capability of the Governmental institutions on accurate reporting to the Energy Community
Secretariat.

3. IMPLEMENTATION ARRANGEMENTS

ROLES AND RESPONSIBILITIES

Direct responsible authorities in the process are:

• Ministry of Economic Development (MED) is responsible for preparing the national energy
strategy and national policies for energy efficiency and renewables.
• Agency for Energy Efficiency (AEE) under the Ministry of Economic Development is
responsible for implementation of the national plan on energy efficiency as well as for
reporting on the implementation of the national targets.
• Energy Regulatory Office (ERO) is an independent body reporting to the Kosovo Assembly
and is responsible to monitor the energy market development; to encourage energy efficiency
at the market players; to ensure protection of customers including vulnerable costumers.
• Ministry of Local Government Administration (MLGA) and Association of Kosovo
municipalities are responsible for improving the energy data quality and for ensuring energy
efficiency planning at local levels as well as promoting renewable energy projects in their
respective municipalities.
• Ministry of Trade and Industry (MTI) is responsible for ensuring the implementation of the
legislation on biofuels in accordance with the Energy Community requirements;

• Ministry of Environment and Spatial Planning (MESP) is responsible for implementing the
energy performance in buildings directive.

IMPLEMENTATION METHOD(S) AND TYPE(S) OF FINANCING

The Action will be implemented through technical assistance in two service contracts: one service
contract will provide support on transposing the 3rd energy package with focus on energy efficiency
and renewable energy, whereas the other service contract will support on planning and implementation
of energy efficiency and renewable energy. The implementation duration of the action is 30 months.

4. PERFORMANCE MEASUREMENT

METHODOLOGY FOR MONITORING (AND EVALUATION)

INDICATOR MEASUREMENT

Indicator Description Baseline Last available Milestone 2017 Target Source of information
(2014) (2014) 2020
Reduction of Greenhouse Gas Meeting Energy Community CO2 7,1 million CO2 7,1 million 6,1 million Approx. 7,6 2nd National Energy
(GHG) Treaty requirements related to ton/year ton/year ton/year million ton/year Efficiency Action Plan.
• CO2 reduction by approx. 1 environmental acquis (Large
million ton by 2018; Energy Community
Combustion Plants Directive and
implementation report for
Industrial Emission Directive). Other pollutants Other pollutants Approx. 22,000
• Other pollutants reduction by Kosovo.
(SOx, NOx, (SOx, NOx, ton/year
approx. 30% by 2018 Dust) 38000 Dust) 38000 (including new Note: The CO2 emissions
ton/year ton/year power plant) forecast for 2020 is higher
27,000 ton/year than in 2017 because of the
new coal fired power plant
expected to be operational
by 2020 upon
decommissioning of Kosovo
A units, whereas other
pollutants form the new
power plant will be
significantly lower due to
compliance with Industrial
Emissions Directive.
3% increase of energy Achievement of the national n/a 2014 Total energy Not defined yet Energy Community report.
efficiency energy efficiency targets consumption 1409
National reports deriving
toe
from the monitoring,
evaluation and verification
mechanism.
At least one ESCO established Development of the market for n/a none At least one ESCO Not defined Energy Community report.
energy services by establishing at
least one energy services
company
At least 25 municipal officers Training on energy management n/a So far 14 At least 38 officers Not defined Municipal energy efficiency
are trained on energy will be provided for all officers are plans are prepared.
management municipalities that will be trained The AEE report son
involved in the preparation of implementation of the
municipal energy efficiency national energy efficiency
plans. plan.
5. CROSS-CUTTING ISSUES

ENVIRONMENT AND CLIMATE CHANGE (AND IF RELEVANT DISASTER RESILIENCE)

The project will enhance the efficient use of energy at local level which includes environmental impact
and an assessment of greenhouse gas emissions as a result of energy activities. Energy efficiency
planning at local level entails a thorough assessment of environmental impact of each energy efficiency
measure to be implemented in the buildings stock, transport, services sector etc. In addition the project
will support the implementation of the national target of min 25% the share of renewable energy in the
final energy consumption which will add to the energy mix in Kosovo and thus reduce the need for
future coal based power generation.

ENGAGEMENT WITH CIVIL SOCIETY (AND IF RELEVANT OTHER NON-STATE STAKEHOLDERS)

The civil society organisations in Kosovo are very actively promoting the efficient use of energy as well
the renewable energy potential as an alternative in energy generation. The CSOs will be closely involved
during the process of designing policies and action plans for energy efficiency and RES and will also be
involved in the consultation process for all project outputs.

EQUAL OPPORTUNITIES AND GENDER MAINSTREAMING

The project will contribute to enhancement of policies to improve the living comfort for people by
improving the energy efficiency at households, schools, public institutions etc. the implementation of the
3rd energy package will enable better regulation for consumer protection with due consideration to
gender mainstreaming.

MINORITIES AND VULNERABLE GROUPS

The project will contribute to better energy supply and improved living comfort conditions for all
population including minority areas and vulnerable groups. The project will support on design of
policies and financial mechanisms that take into account the affordability of different social categories
including the consumers reliant on social assistance and minority areas.

6. SUSTAINABILITY

The project aims at strengthening the institutional capacities at central and local levels on energy
efficiency and RES planning and implementation. The project activities will be implemented by the
project team of experts in close cooperation with the beneficiary staff to maximise the transfer of
know- how to the beneficiary institutions. Other stakeholders such as other donors and financing
institutions will also be involved in order to ensure complementarity and synergy between different
players in the energy efficiency and RES sector.

7. COMMUNICATION AND VISIBILITY

Communication and visibility will be given high importance during the implementation of the Action.

The implementation of the communication activities shall be the responsibility of the beneficiary, and
shall be funded from the amounts allocated to the Action.
The European Union Office in Kosovo has developed clear visibility guidelines and ensures that all
projects which are implemented in Kosovo are fully in line with these guidelines. Project visibility is
also clearly stipulated in all contractual documents whereby the contractors/implementers are obliged
to adhere to all EU visibility requirements.
A detailed visibility plan will be designed and agreed upon with the European Union at the beginning
of the Action. All the deliverables of the action will be communicated to the public highlighting the
financial support during progress of actions, project development, and communication of results and
best practices developed.
The Action will have its webpage and its technical deliverables will be disseminated through
promotional materials (leaflets, brochures) to all stakeholders including CSOs. The beneficiary
institutions will provide updates on project developments through their websites to all citizens

All necessary measures will be taken to publicise the fact that the Action has received funding from
the EU in line with the guidelines developed by the EU Office in Kosovo, as well as the provisions
outlined in the Communication and Visibility Manual for EU External actions.

Visibility and communication actions shall demonstrate how the intervention contributes to the agreed
programme objectives and the accession process. Actions shall be aimed at strengthening general
public awareness and support of interventions financed and the objectives pursued. The actions shall
aim at highlighting to the relevant target audiences the added value and impact of the EU's
interventions. Visibility actions should also promote transparency and accountability on the use of
funds.

It is the responsibility of the beneficiary and the contractors to keep the EU Office fully informed of
the planning and implementation of the specific visibility and communication activities.

The beneficiary shall report on its visibility and communication actions in the report submitted to the
IPA monitoring committee and the sectoral monitoring committees.