REPUBLIC OF OFFICE OF THE AUDITOR GENERAL

Document no: 21x;22x.9-2010/2015-08

THE SYSTEM FOR ENERGY EFFICIENCY NEEDS TO BE STRENGTHENED

Non statutory Audit

Prishtina, September 2015

The Office of the Auditor General (OAG) undertakes both Regularity and Performance Audits. The Deputy Auditor General Artan Venhari is acting head of the OAG which employs around 145 staff.

Our Mission is to “Contribute to sound financial management in public administration”. We shall perform quality audits in line with internationally recognized public sector auditing standards and good European practices. We shall build confidence in the spending of public funds. We shall play an active role in securing taxpayers’ and other stakeholders’ interests in enhancing public accountability’.

The reports produced by the OAG directly promote accountability as they provide a base for holding managers’ of individual budget organizations to account.

Performance audits are carried out to assess whether Government programs are managed appropriately, are cost-effective and efficient, and whether the systems for measuring and reporting their efficiency are functional.

The Deputy Auditor General Artan Venhari has decided on this Performance Audit Report “The System for Energy Efficiency needs to be strengthened”.

The issued report is a result of the audit carried out under the management of the Audit Director, Mirlinda Ahmeti, supported by Drilon Shala (Team Leader), Ardiana Miftari (auditor) and Alban Shatri (auditor).

OFFICE OF THE AUDITOR GENERAL - Address: Musine Kokollari, Nr. 16, Prishtina 10000, Kosovo Tel.: +381(0) 38 25 35 /121/262-FAX: +381(0) 38 2535 122 /219 http://oag-rks.org/

ZYRA E AUDITORIT TË PËRGJITHSHËM – KANCELARIJA GENERALNOG REVIZORA OFFICE OF THE AUDITOR GENERAL

TABLE OF CONTENT

Executive Summary ...... i 1 Introduction ...... 1 1.1 Background ...... 1 1.2 Audit problem ...... 3 1.3 Audit objective and questions ...... 4 1.4 Audit criteria ...... 4 1.5 Audit scope and methodology...... 6 2 The system for Energy Efficiency ...... 7 3 Findings ...... 9 3.1 Have MED created needed preconditions for supporting responsible actors to improve EE? 9 3.1.1 The set up of a Regulatory Framework to assist public authorities in improving EE ...... 9 3.1.2 The Action Plan Process...... 10 3.2 Have the responsible actors taken the foreseen actions to improve EE? ...... 11 3.2.1 The establishment of the EEA as a key and functioning EE institution ...... 12 3.2.2 The establishment of the EE Fund ...... 12 3.2.3 Sources of financing needed to implement planned EE measures ...... 12 3.2.4 Concrete EE measures aimed at ensuring energy savings ...... 13 3.2.5 The establishment of a Monitoring and Evaluation and Reporting system ...... 16 3.2.6 Information and awareness practices ...... 17 3.3 Have Municipalities taken appropriate actions? ...... 18 3.3.1 Development of EEMPs ...... 18 3.3.2 Concrete EE measures at the municipal level and the financial support received ...... 19 4 Conclusions ...... 22 5 Recommendations ...... 25

ZYRA E AUDITORIT TË PËRGJITHSHËM – KANCELARIJA GENERALNOG REVIZORA OFFICE OF THE AUDITOR GENERAL

List of abbreviation

AI Administrative Instruction

CCEMA Commission for Certification of Energy Managers and Auditors

EA Energy Auditors

EE Energy Efficiency

EEA Energy Efficiency Agency

EEAP Energy Efficiency Action Plans

EEMP Energy Efficiency Municipal Plan

EM Energy Managers

EPB Energy Performance of Buildings

EU European Union

GI Government Institutions

IIG Inter-Institutional Group

KEEA Kosovo Energy efficiency Agency

KEEAP Kosovo Energy Efficiency Action Plan

LEE Law on Energy Efficiency

MED Ministry of Economic Development

MEO Municipal Energy Offices

MERS Monitoring, Evaluation and Reporting System

MESP Ministry of Environment and Spatial Planning

MLGA Ministry of Local Governance Administration

MPA Ministry of Public Administration

UNDP United Nations Development Program

WG Working Group

ZYRA E AUDITORIT TË PËRGJITHSHËM – KANCELARIJA GENERALNOG REVIZORA OFFICE OF THE AUDITOR GENERAL

Executive Summary

What have we audited? Energy Efficiency (EE) is a ratio between an output of the energy production and performance towards the quantity of consumed energy for this purpose. In other words it means using less energy to provide the same service. There is a general consensus that a good potential to improve EE is generated from the public sector. Public sector EE is equivalent with good public management: when energy is saved, public funds are also saved. In this audit, we have examined whether the actions and measures of the Government Institutions to improve EE are carried out in an efficient way. This audit report identifies several shortcomings in the process of carrying out the EE measures and provides recommendations for improving the situation. Entities covered in this audit are: MED, KEEA, MPA, MLGA, MESP and Municipalities of Drenas, and .

What we have found? Government Institutions, as it is shown in this report, have undertaken several important steps towards improving EE in the public sector. However, there are certain factors that would contribute to successfully accomplishing the EE process. Proper planning of the measures to be carried out, financial resources to support their implementation and meanwhile monitoring mechanisms to report on the measures taken, would strongly determine the success of the EE process. Based on the in-depth analysis of the evidence submitted by the entities, the interviews conducted with the responsible officials, we have identified several shortcomings in the process of undertaking EE measures. The Government Institutions have not taken proper actions to improve the EE in the public sector. As a result, we have found the following:

Central level:  The existing regulatory framework not yet finalised – other primary and secondary legislation need to be adopted;  KEEAP is vague and misses the representation of key stakeholders;  KEEA, being the main body responsible for the coordination of EE issues, is currently under-resourced, compared to its large number of obligations and responsibilities;  EE measures continue to rely largely on external financing , also financing have not been coordinated and took place without a prior adequate planning;  A broad scheme of EE measures have been implemented, ranging from energy audits to efficient public lighting as well as information and awareness projects, however these projects were basically selected on ad hoc basis without being based in any pre-assessment criteria;  The current level of monitoring is both insufficient and inadequate. It is difficult to evaluate and verify the impact of the investments, and to use the information for evaluating the effectiveness of upcoming investments.

i ZYRA E AUDITORIT TË PËRGJITHSHËM – KANCELARIJA GENERALNOG REVIZORA OFFICE OF THE AUDITOR GENERAL

Municipal level:  MEOs have not been established due to lack of EE expertise and resources at the municipal level;  The three municipalities audited have drafted their EEMPs, however there were different practices involved in drafting them, and the plans are mainly vague and non-specific;  The existing number of EE measures implemented in the local level is relatively low and the current number of municipal officials dealing with the implementation of the planned EE measures, in the three municipalities audited, is limited.

What do we recommend?

Central level:  Establish a constructive legal and regulatory framework that demonstrates transparency and provides easily reached and readily understood information is developed. Priority should be given to the timely finalization and adoption of the primary and secondary legislation on EPB;  Ensure that the existing IIG composed to draft and evaluate the second midterm plan and also the IIG that will be composed to draft the third midterm plan involves the representatives of other key institutions related to the EE improvement of hospitals, health care centres, public lighting and buildings;  Improve communication between MED and MPA in order to improve energy audits identified in KEEAP and reduce double work;  Strengthen KEEA, by expanding the allocated budget for its activities and increasing the number of its staff so that it can meet its large number of commitments;  Financing mechanisms such as the soft loan from the World Bank should be analysed in detail and the financial impact overtime of taking up loan should be elaborated further;  Consider the establishment of an EE Fund and integrate it within the national budget. A comprehensive analysis must be carried out to evaluate whether an EE fund could be set up within the existing legislation or whether and how the current legislation could be adjusted;  Improve institutional capacities and EE statistics in order to enable a successful MERS.

Municipal level:  Place EE on their priority list and acknowledge that large cost savings are achieved from EE measures;  Consider the establishment of MEO that are equipped both with sufficient and experienced staff;  Resources for the establishment of the MEOs and the trainings for the staff must be planned in agreement with the World Bank and the EU;  Review and analyse the current EEMPs in order to identify areas for improvement.

ii ZYRA E AUDITORIT TË PËRGJITHSHËM – KANCELARIJA GENERALNOG REVIZORA OFFICE OF THE AUDITOR GENERAL

1 Introduction

1.1 Background

Energy Efficiency (EE) is a ratio between an output of the energy production and performance towards the quantity of consumed energy for this purpose. In other words it means using less energy to provide the same service.

How governments are spending their money is a topic in the smallest municipality and in the largest nations. However, there is a universal consensus that public funds should be spent wisely. At its core, public sector EE is synonymous with good public management: when energy is saved, public funds are also saved. In nearly every instance there is good potential to improve EE.

The reduction of energy consumption is usually associated with technological changes. But, it can also result from better organization, managing or behavioural changes, known as “non-technical factors”.1

Different countries and international organizations through different agreements have made significant steps towards reducing global consumption of energy. In this respect, the Kyoto Protocol (1998)2 also determines that every country should undertake several measures for higher EE at the national level. Meanwhile, European Union (EU) requires the implementation of the target 20-20-20 in the sector of energy, which applies to member states and involves the period up to 20203, including an improvement of energy efficiency by 20%. In this context, Kosovo is aiming to integrate in the EU and therefore also is amongst the countries that have embraced the implementation of the above mentioned requirements in order to fulfil the EU criteria.

The Kosovo Energy Strategy identifies EE as one of the strategic objectives for the period 2009- 2018, envisaging the development of a comprehensive institutional and legal framework in compliance with European EE Directives4.

In order to be promoting EE as a concept among the institutions of public sector, and in order for the actual system of the EE to function properly, there are several undertakings and commitments.

In fulfilling its mandate, Kosovo Government has made efforts to approximate its local legislation with EU legislation on EE, particularly based on the requirements of several directives5.

1 World Energy Council (2010), “Energy Efficiency: A Recipe for Success”, pg.5 2 United Nations (1998), Kyoto Protocol to the United Nations Framework Convention on Climate Change 3 European Commission (Brussels, 2010), Communication from the Commission Europe 2020 “A strategy for smart, sustainable and inclusive growth “, COM (2010) 2020, pg.9 4 Currently Kosovo has drafted an updated Energy Strategy which includes the period 2013-2022, however this strategy is still a draft and not yet adopted by the Assembly. 5 Directive 2006/32/EC on energy end-use efficiency and energy services Directive 2010/31/EU on the energy performance of buildings Directive 2010/30/EU on the indication by labelling and standard product information of the consumption of energy and other resources by energy-related products

1 ZYRA E AUDITORIT TË PËRGJITHSHËM – KANCELARIJA GENERALNOG REVIZORA OFFICE OF THE AUDITOR GENERAL

Ministry of Energy and Mines, currently the Ministry of Economic Development (MED), in the end of 2008 established a working group to draft national action plan for EE.

Furthermore, the Inter-Institutional Group (IIG) composed of representatives of Municipalities, Office of the Prime Minister, Ministries, Energy Regulatory Office and Association of was established in 2009 as recommended in the Energy Community Secretariat Treaty.

This group drafted the Kosovo Energy Efficiency Action Plan (KEEAP) 2010-2018 which among others addresses the indicative targets of energy savings in the long, medium and short term. It also identifies the responsible actors for implementation of the plan and measures for EE improvement and sectors in which activities will be developed.

The above mentioned plan foresees improvements of EE in five sectors: household, private and public services, industry, transport and agriculture.

KEEAP is divided into three mid-term EE plans, respectively 2010-2012 (first), 2013-2015 (second), 2016-2018 (third).

According to the statistics provided in this document, the general energy consumption is (the average for the period of 2003-2007): household sector around 33%, public services around 13%, industry around 22%, transport 26% and agriculture 5%.6

When it comes to financing the Government activities related to EE, they are mainly financed from the external funds in form of donations or soft loans. Kosovo have co-financed in cases where such sources of financing have not covered the entire financing of the projects.

Lately an agreement is signed between the Government and World Bank in support of EE is worth 31 million Euros. The objectives of the project are to reduce energy consumption and fossil fuel use in public buildings through EE and renewable energy investments, and enhance the policy and regulatory environment for renewable energy and EE7. Still this agreement is not yet ratified in the assembly.

This performance audit addresses EE in the public sector. It focuses on measures taken by the key stakeholders, both on the central and local level.

According to the World Energy Council8, public sector facilities and operations have significant opportunities for EE improvements. The public sector’s energy demand is in most countries of significant size, and public sector actors are also major buyers of energy-using equipment such as office appliance and vehicles. Benefits of improved EE in the public sector are many and include

6 PVKEE, page.21, table 11 7 http://www.worldbank.org/en/news/press-release/2014/06/18/world-bank-supports-energy-efficiency-renewable- energy-kosovo 8 World Energy Council (2010), “Energy Efficiency: A Recipe for Success”, pg.97

2 ZYRA E AUDITORIT TË PËRGJITHSHËM – KANCELARIJA GENERALNOG REVIZORA OFFICE OF THE AUDITOR GENERAL lower energy bills for public actors and reduced demand for investments in energy supply systems. Further benefits result from the public sector’s exemplary role relative to other sectors.9

KEEAP covers five sectors and one of them is the sector of public and private services. This action plan states that public services sector takes an important leading role, by demonstrating an example for the rest of sectors10. This has served as a motive to focus this audit in the public sector.

1.2 Audit problem

Several challenges are identified related to the initiatives and activities aimed at improving EE in Kosovo.

KEEAP mentions several weaknesses related to an unstable energy supply, lack of reliable data on energy consumption and technical loses of energy (about 30%). Another aspect mentioned in this plan is the problem with consumers of electric energy (more than 40%) who avoid paying for the energy spent.11

More specifically Kosovo Progress Report 201412 addresses different fields related to EE where improvement is needed, such as:

 The Law on EE needs to be revised to align with the latest EU acquis;

 Cooperation between the MED and Ministry of Environment and Spatial Planning (MESP) can be improved;

 There are still barriers to financing EE investments, despite the involvement of international financial institutions;

 Lack of EE statistics continues to be an obstacle for reporting on energy savings;

 Local capacities need to be strengthened.

In order for any EE measure to be carried out and to function properly it is necessary to have relevant resources and capacities (in particular financial and human resources/capacities). There is a strong indicator that the key players responsible for managing EE in Kosovo do not possess the necessary resources and capacities. In addition, it is essential that the impacts of EE activities are monitored, verified and evaluated.13

9 Role highly promoted in the EU's Directive 2006/32/EC. 10 Plani i Veprimit i Kosovws pwr EE, f. 44, paragrafi 3 11 KEEAP, page 10, paragraph 1 and 6 12 Kosovo Progress Report, October 2014, page 44, paragrapf 4 13https://www.energycommunity.org/portal/page/portal/ENC_HOME/DOCS/3500148/ANNEX_EEAP_assessment _per_CP_final.pdf, page 25, paragraph 2 and 3

3 ZYRA E AUDITORIT TË PËRGJITHSHËM – KANCELARIJA GENERALNOG REVIZORA OFFICE OF THE AUDITOR GENERAL

Thus, our audit hypothesis is that:

The Government Institutions (GIs) have not taken proper actions to improve the EE in the public sector.

1.3 Audit objective and questions

Through the audit questions we aim to respond to the audit objective that is assessing whether actors involved in EE activities are taking care of fulfilling their responsibilities as they should, by focusing their activities mainly in public sector as a leading example for the other sectors.

Thus, the main audit question of this audit is:

Have the Government put in place the required legal base and organizational system for EE in accordance with EU agreement and is this base implemented as intended?

The following three sub-questions will help answer the above key question.

 Have MED created needed preconditions for supporting responsible actors to improve EE?  Have the responsible actors taken the foreseen actions to improve EE?  Have the Municipalities taken appropriate actions to improve EE?

1.4 Audit criteria

The audit criteria used in this audit derive both from internationally standards, good practices and national legislation.

In order to achieve the Government commitments, MED should:

 Stimulate, initiate, select and prepare well founded and cost effective projects of various kinds (both such that require investment funding and those that mainly is about changing behaviours)14  Ensure that the existing national laws, strategies and regulations on EE are in line with the European Directives on EE and engage in drafting and adopting other primary and secondary legislation15

 Seek and mobilize donor funding and ensure increased national funding possibilities16

14 Energy Community (January, 2011), Energy Community Secretariat Working Document 15 OECD/IEA (2012), Progress Implementing the IEA 25 Energy Efficiency Policy Recommendations (2011 Evaluation), International Energy Agency, Insights Series 2012, pg.8

4 ZYRA E AUDITORIT TË PËRGJITHSHËM – KANCELARIJA GENERALNOG REVIZORA OFFICE OF THE AUDITOR GENERAL

 Make specific, realistic and well founded action plans in central and local level and see to that if they are being implemented, monitored and evaluated 17  Create good administrative conditions for EEA (Energy Efficiency Agency) and the cooperation between the responsible ministries and authorities18  Create incentives in the budget system so the government institutions save energy and become more energy efficient19  Give priority to develop an information system concerning EE (planned and conducted activities, actual energy consumption among institutions etc.), that would be broadly disseminated in a proper form and to relevant target audiences20

In order to achieve the Government commitments, Municipalities should:

 Draft and adopt the energy efficiency municipal plans by identifying the measures that need to be carried out and identify necessary and available sources to finance the implementation of EE measures listed in them21  Establish Municipal Energy Offices (MEOs) whose aim is to deal with energy issues and implement the EEMP22  Make optimal use of existing human resources to implement intended measures related to energy efficiency23

16 Law No.04/L-016 on EE, Article 4 & 11 17 Energy Community (January, 2011), Energy Community Secretariat Working Document “Synthesis of the assessment of Contracting Parties’ Energy Efficiency Action Plans as required by the Energy Community Ministerial Council Decision D/2009/05/MC-EnC of 18 December 2009 on the implementation of certain Directives on Energy Efficiency, with respect to Directive 2006/32/EC on energy end-use efficiency and energy services”, pg.3 18 World Energy Council (2010), Energy Efficiency: A recipe for success, pg. 45-46 19 Eptisa (April, 2013), National Building Energy Efficiency Study for Kosovo, World Bank Institute, pg. 140 20 Directive 2006/32/EC (2006), Directive 2006/32/EC of the European Parliament and of the Council of 5 April 2006 on energy end-use efficiency and energy services and repealing Council Directive 93/76/EEC, Official Journal of the European Union, L 114/66 21 Law No.04/L-016 on Energy Efficiency, Article 6 & 9 22 Law No.04/L-016 on Energy Efficiency, Article 6 & 9 23 OECD/IEA (2012), Progress Implementing the IEA 25 Energy Efficiency Policy Recommendations (2011 Evaluation), International Energy Agency, Insights Series 2012, Sweden case study, pg.99

5 ZYRA E AUDITORIT TË PËRGJITHSHËM – KANCELARIJA GENERALNOG REVIZORA OFFICE OF THE AUDITOR GENERAL

1.5 Audit scope and methodology

In this audit we have covered responsible actors in central and local level.

Entities covered in the central level are as follows:

 MED;

 Ministry of Public Administration (MPA);

 MESP;

 Ministry of Local Governance Administration (MLGA);

 Kosovo Energy Efficiency Agency (KEEA).

Municipalities selected for auditing are:

 Municipality of Drenas;

 Municipality of Prizren; and

 Municipality of Gjakova

This audit covers the time period 2010 until 2015.

In order to conduct the audit we have used different methods with the purpose of answering the audit questions addressed. The audit questions are addressed for the three levels engaged in the EE matter: MED, KEEA and municipalities. In order to answer the audit questions we have followed the following methods:

 Analysed national legislation,administrative instructions (AI), as well as EU Directives;

 Analysed KEEAP (2010-2018);

 Interviews with the responsible officials in all levels engaged;

 Reviewed and analysed different documents related to EE area;

 Reviewed the national and international reports/articles related to this topic.

6 ZYRA E AUDITORIT TË PËRGJITHSHËM – KANCELARIJA GENERALNOG REVIZORA OFFICE OF THE AUDITOR GENERAL

2 The system for Energy Efficiency

The Assembly approved the Law24 on EE in June 2011. The law determines the obligations of the MED, KEEA, and responsibilities of municipalities.

In addition, several different Administrative Instructions25 have been adopted to foster EE in compliance with EU Directives on regard of EE. Together with regulations this is the basis for the functioning of the EE system in Kosovo.

MED is the key public institution in the field of energy sector development, EE policy planning and monitoring of its implementation. MED is responsible for establishing KEEA, create the commission for certifying the energy auditors (EA) and energy managers (EM), develop EE policies and draft the KEEAP. Also MED reviews the KEEAP and reports to the government on the three year basis as well as it reports to the Energy Community Secretariat (ECS) for the achievements in EE field.

In order to fulfil the requirements arising from European Directives, MED has established an IIG consisting of several relevant institutions. Initially, the purpose of establishing this group was to have the KEEAP drafted, as a support to prior working group for EE (earlier established by MED).

Within MED, the “Energy auditors and managers certification commission”, is a body established by the Ministry to manage the system of EAss and EMs. Energy audits should be conducted by certified auditors registered in the EA’s registry. EA is a natural or legal person certified to perform energy audits whereas EM is a natural or legal person certified for energy management. Around 40% of the measures identified for the services sector in the first KEEAP and all measures identified for the services sector in the second KEEAP deal with the issue of energy audits and with the implementation of measures originating from that process. Department of Energy, within MED, is in charge of proposing, drafting and ensuring the implementation of the legislation for energy sector.

In 2012 MED established KEEA that reports directly to the Minister and exclusively deals with issues related to EE.

KEEA proposes policies to the minister, develops and maintains database for EE, develops system for monitoring and implementation of KEEAP, prepares progress reports, gives advices and support to municipalities for preparing EEMPs, promotes EE through awareness campaigns, offers recommendations for improvements needed in central and local level, cooperates with ministry and other relevant institutions.

This agency is organised in three divisions: the planning division, the division for promotion and development of projects and the division for monitoring and reporting.

24 Law No. 04/L-016 25 AI no.14/2012 on the promotion of Energy end use Efficiency and energy services; Regulation no. 01/2012 on Establishment and Functioning of the Commission for Certification of Energy Auditors and Managers; AI no 09/12 on the Labelling of Energy Related Products

7 ZYRA E AUDITORIT TË PËRGJITHSHËM – KANCELARIJA GENERALNOG REVIZORA OFFICE OF THE AUDITOR GENERAL

In the process of developing the periodic plans arising from the KEEAP 2010-2018 as well as in the assessment of implementation level of measures, KEEA is professionally supported by IIG.

MPA is also an important stakeholder in the system of EE given that it deals with the renovation of all building stock belonging to the central level.

In addition, municipalities implements a considerable part of the objectives related to EE. Every municipality drafts its own EEMP, approves it at municipal assembly and sends them to Agency. Municipalities report periodically to the KEEA about the implementation of such plans.

Other players with importance for the system of EE are also consumers and producers in the country and having them properly informed and providing them with the right incentives is significant. The monetary value of energy savings is underestimated often by consumers and that results in them making economically incorrect choices. Also, in cases where consumers are reluctant to pay for their energy consumption, the motivation to carry out EE measures is absent. Alternatively, it is necessary to get producers market more efficient equipments and appliances and consumers to buy them.

8 ZYRA E AUDITORIT TË PËRGJITHSHËM – KANCELARIJA GENERALNOG REVIZORA OFFICE OF THE AUDITOR GENERAL

3 Findings

Placing EE high on the political agenda and ensuring that key national stakeholders are involved and committed is supposed to create better EE and send powerful signals to international donors. These could support in mobilizing additional financial resources necessary for the implementation of initiatives related to EE improvements – such as the implementation of a National EE action plan or strategy.

In this chapter, we present the findings of this audit.

The findings are presented in a structure that is related to the different actors directly involved in the process: Government Institutions (MED), KEEA and Municipalities. Other actors that are of importance and that are indirectly involved in the process and part of our findings are also MESP, MPA and MLGA.

3.1 Have MED created needed preconditions for supporting responsible actors to improve EE?

3.1.1 The set up of a Regulatory Framework to assist public authorities in improving EE

There are five laws that in different ways cover EE in Kosovo: Law on EE (LEE), Law on Energy, Law on Electricity, Law on the Energy Regulator, and Law on Construction. Among these, the key legal document that regulates EE matters is the LEE. This primary legislation is supplemented by secondary legislation on EE in the form of AI’s.26

The LEE regulates EE, preparation, approval and reporting of EE plans, determination of roles, duties and responsibilities of the institutions as well as addressing the obligations deriving from Treaty on Energy Community. Many of the measures, commitments and objectives in the LEE are regulated by secondary legislation which is not fully yet in place. As a result, a WG was established27 and did produce a report suggesting six general recommendations regarding the steps that have to be taken in order to progress the adjustment of the Law. Among these was the issuance of all required secondary legislation for implementation of this Law. The amended LEE is drafted, however not yet adopted28.

26 AI for the Promotion of Energy Efficiency for Final Consumers and Energy Services; AI for Energy Auditing; Regulation on the Establishment of the Certification Commission on Energy Auditors and Managers; AI on the Labelling of Energy Related Products 27 Assembly (November, 2012), Report on Monitoring the Implementation of the Law No.04/L-016 on Energy Efficiency’ 28 Interview with Director of the Energy Department within MED, 15.12.2014

9 ZYRA E AUDITORIT TË PËRGJITHSHËM – KANCELARIJA GENERALNOG REVIZORA OFFICE OF THE AUDITOR GENERAL

In addition, Kosovo is still behind in terms of finalizing and adopting the primary and secondary legislation on Energy Performance of Buildings (EPB) which is significant for the accomplishment of planned measures under KEEAP. As mentioned earlier, the implementation of Directive 2010/31/EU29 on EPB is a challenge given that it is a joint obligation of both the MED and MESP. In this regard, Kosovo is working towards adopting a separate Law on EPB. The transposition of the above mentioned Directive must be accomplished by adopting a Law. By adopting this Law, Kosovo would create a framework for action, mobilize the Government to accomplish the various new tasks that must be fulfilled and provide an understandable signal to the construction sector and to the overall public regarding the new requirements and the new opportunities that exist. The adoption of the Law on EPB would also provide a positive signal to the EU that Kosovo is both, transposing the minimum requirements and meanwhile is fully conscious of the further implementation of the Directive30.

3.1.2 The Action Plan Process

MED has established IIG consisting of several competent institutions31, which drafted KEEAP and performs monitoring and assessment of its implementation on three year bases.

KEEAP represents Kosovo’s first long-term plan on EE. KEEAP is drafted by a Working Group (WG) that consisted of staff from the Division of EE, Renewable Energy Resources and Environment and the Division of Statistics and Energy Balance (both of these divisions operating under MED). In the development of KEEAP, support from TAIEX/EU funded expert mission on EE was given32. KEEAP has taken into account the key requirements set out in 2006/32/EC Directive (lately replaced with the new Directive 2012/27/EU). The KEEAP was approved in April 2011 by the Kosovo Assembly. The KEEAP is divided in three midterm plans, respectively 2010- 2012 (first), 2013-2015 (second) and 2016-2018 (third).

We have found that in particular during the drafting of the second midterm plan, which is a document treating the practical level of EE measures (identification and implementation of measures), the IIG did not involve representatives of key institutions such as from MH, MI and MESP in the drafting. These are considered significant stakeholders given that in the second midterm plan, the majority of EE measures identified belong to their mandate. Municipalities are also significant players due to the large number of measures under second midterm plan expected to be implemented by them.33

29 Directive 2010/31/EU sets minimum requirements for the energy performance of buildings and building elements. Newly constructed buildings and buildings which have undergone major renovation must have energy certificates, as must buildings which are being rented or sold. 30 2nd National Energy Efficiency Action Plan (NEEAP) of Kosovo, June 2013, pg. 87 31 The IG was led by the Ministry of Economic Development and consisted of representatives from: The Parliament, The Office of the Prime Minister, Energy Regulatory Office, Ministry of Finance, Ministry of Spatial Planning and Environment, Ministry of Public Administration, Ministry of Trade and Industry, Ministry of Infrastructure, Ministry of Agriculture, Forestry and Rural development and Kosovo Municipalities Association 32 TAIEX, Expert mission on EE (09.02.2009-13.02.2009), , Kosova, Reference code: KOS IND/EXP 32476 33 Decision (14.02.2013) on establishment of a working group for the drafting of the second midterm plan on EE, Ministry of Economic Development, Nr. 283

10 ZYRA E AUDITORIT TË PËRGJITHSHËM – KANCELARIJA GENERALNOG REVIZORA OFFICE OF THE AUDITOR GENERAL

It was anticipated that this inter-institutional collaboration platform will carry on its operations after the approval of the second KEEAP (2013-2015) and assess the implementation of the long- term KEEAP (2010 – 2018) on regular basis, as well as taking measures for amendments if considered necessary.

The first midterm KEEAP (2010-2012) presented an assessment of energy consumption in all sectors. Analysis of energy consumption was carried out for the following sectors: household, services, industry, transport and agriculture.

The statistics presented for the Service sector do not distinguish between public and private consumption. In addition, these data are combined and as a result the exemplary role of the public sector is difficult to evaluate against the target.

Furthermore it included a list of EE measures and divided them per sector. This is done in accordance to the Energy Services Directive. A comprehensive package of EE measures for the public sector was launched in chapter VI dealing with energy auditing, public procurement, energy labelling, EE lighting, public campaign and education and additional measures to be implemented in municipalities, etc. The service sector included 18 measures of different nature such as: regulative, normative, informative/awareness rising, education/training and financial. The costs of the majority of measures have been estimated, however the financial analysis of the implementation of the measures and available financing sources are absent.

By comparing the second midterm KEEAP (2013-2015) with first midterm KEEAP (2010-2012) progress is visible when it comes to estimations related to the required costs for measures. In addition it has identified the sources of financing required to execute the intended EE measures in every sector. Second midterm KEEAP focuses primarily in the public sector, including applied and intended investment actions in buildings of the central and local level.

Both first and the second plan are linked to EU directives and are aimed at providing general guidelines. But, since the second Midterm Plan (2013-2015) has not been fully put in practice yet, it has not been possible for us to assess whether it has succeeded in creating proper conditions.

3.2 Have the responsible actors taken the foreseen actions to improve EE?

The above mentioned regulatory framework (especially the LEE) clearly foresees the establishment of EEA and the EE Fund. This should contribute not only to the implementation of the KEEAP but also to a well-functioning EE. Apart from the establishment of an EE Fund it is significant that the responsible public authorities to ensure funding possibilities from the budget and seek financial assistance from international financial and development organizations.

11 ZYRA E AUDITORIT TË PËRGJITHSHËM – KANCELARIJA GENERALNOG REVIZORA OFFICE OF THE AUDITOR GENERAL

3.2.1 The establishment of the EEA as a key and functioning EE institution

KEEA is an executive and independent institution within MED. Given all the obligations and responsibilities of KEEA it has to be equipped with appropriate human and financial resources in order to function properly. We have observed that previously there were four officials working in KEEA and currently there are only three officials and this situation shows a decrease in human capacities. However, based on our analysis we have seen that KEEA has considered the best use of existing human capacities by also asking and receiving support from the Department of Energy. In addition, MED has established an inter-institutional working group who has advised and supported KEEA in development of the second midterm KEEAP. Yet, there are several other activities to be carried out by KEEA and its obligation is not only the drafting of EE plan.

KEEA’s independency is shown only when it comes to carrying out its daily activities but not when it comes to deciding on its financial and human resources. It continues to rely on external financing to implement the EE measures.

3.2.2 The establishment of the EE Fund

EE funds are entities that manage and distribute financial support to EE programmes and have proved to be a popular mechanism for supporting EE initiatives in Central and East European countries34.

The issue of establishing an EE Fund has been raised frequently in the EU progress report on Kosovo. However, it is evident that an EE Fund has not yet been established, even though the LEE foresees its establishment.

3.2.3 Sources of financing needed to implement planned EE measures

Sources of financing are all financial instruments such as budget funds, donor assistance, third- party financing and loans.

The measures implemented within the first and second KEEAP until now have been financed by external sources: support of International Financial Institutions and on donor assistance. In cases where such sources of financing have not covered the entire financing of the projects, Kosovo have co-financed.

Kosovo has managed to implement (as it will be elaborated below) several EE measures. However, the implementation was not done efficiently. Most of the activities were scattered and uncoordinated due to the KEEA’s inability to coordinate initiatives concerning sources of financing and the lack of an inter institutional cooperation to support KEEA. Sources of finances have been mainly chosen on ad hoc basis.

Based on the documents analysed and data provided to us by the entities, we have estimated that from 2006 until 2011 the majority of measures have been financed by EU funds to a great extent or other donors such as United Nations Development Program (UNDP), GIZ, German Development

34 Eptisa (April, 2013), National Building Energy Efficiency Study for Kosovo, World Bank institute, pg. 140

12 ZYRA E AUDITORIT TË PËRGJITHSHËM – KANCELARIJA GENERALNOG REVIZORA OFFICE OF THE AUDITOR GENERAL

Bank etc. (investments amounting around 85%). The remaining 15% of sources of financing have been provided by the national budget. From 2012 onwards the reliance on external sources has increased with the projects implemented or planned to be implemented having as sources of finances the EU funds, WB loans, GIZ or other donors (amounting around 95%) and only around 5% contribution from national budget35.

3.2.4 Concrete EE measures aimed at ensuring energy savings

40% of the final energy consumption is spent in the building sector. Improving the building stock36 is among the initial targets in KEEAP. There is a broad scheme of measures carried out with the aim of energy savings.

The scheme of measures included:

 Energy audits (the measure to which is given the main focus);

 Efficient public lighting and introduction of alternative/efficient sources of energy such as solar panels; and

 Information and awareness projects.

Energy Audits

The Commission for Certification of Energy Managers and Auditors (CCEMA) was established37 in 2012 by being considered as an essential tool for accomplishing EE targets. By operating under MED its main objective is to establish an operational scheme for EM 38 and EA39by providing well- trained and qualified experts, as well as certifying them.

There were 52 trained40 and certified EAs in Kosovo. The certification of the existing 52 auditors was valid only for one year, and these certifications expired in 2012.

Regarding this the CCEMA has drafted a work plan whose main aim is the increase of existing EAs and EMs capacities and certification of new auditors and managers. By analysing this working plan it is visible that it is descriptive when it comes to activities to be carried out. We have noticed that the activities described in the work plans have not settled any timeframes regarding the accomplishment of activities.

Energy audit is a measure that is frequently used to get a better understanding of energy use and to identify potential measures for energy savings.

35 Report on the implementation of the first national energy efficiency action plan 2010-2012 Kosovo (01.06.2012); 2nd National Energy Efficiency Action Plan (NEEAP) of Kosovo (June 2013), Measures in the tertiary sector, pg. 55-61 36 Only the public building stock in Kosovo “Schools, universities, hospitals, health centres, government buildings, etc.” includes some 1,800 buildings 37 Regulation No 01/2012 38 Defined in AI 01/2012 on Energy Audits, as a natural or legal person certified for energy management 39 Defined in AI 01/2012 on Energy Audits, as a natural or legal person certified to perform energy audits 40 These were trained under the framework of the “Training for Energy Auditors project funded by European Commission Liaison Office (ECLO)40 and managed by the Danish Energy Management. The training was organized between September 2009 – December 2010

13 ZYRA E AUDITORIT TË PËRGJITHSHËM – KANCELARIJA GENERALNOG REVIZORA OFFICE OF THE AUDITOR GENERAL

By analysing the first and second KEEAP it is visible that in the first KEEAP around 40% of the measures identified for the services sector were directly or indirectly related to energy audits and the EE measures that derive from that process41. In the second KEEAP all measures identified for the services sector deal with energy audits and with the implementation of measures originating from that process42.

Based on data received, 229 energy audits have been carried out from the period 2009/10 till 2013. These audits were mainly focused in public sector buildings, funded by international donors/organizations and by the national budget.

On this regard 65 energy audits43 took place in 2009/10 commissioned by European Commission Liaison Office. This project was followed by EE measures in 63 schools and in hospitals at the local level (around 33 municipalities benefited from this grant). The energy saving measures in these buildings included: insulation of walls, replacement of windows, insulation of roofs and basements and installation of EE lighting.

In addition, 48 energy audits44 took place in 2012 and 116 energy audits45 were carried out in 2013, all of which included an amount of €114, 000 and were all commissioned by KEEA and financed by the national budget. All energy audits were carried out in buildings belonging to the public sector (both central and local level).

There is a list of around 201 proposed buildings46 to be audited within the timeframe 2013-2019. As mentioned above, the source of funding for these proposed audits is planned to be a World Bank loan. This will also involve implementation of EE measures in all central/local governmental buildings that will be audited.

Communication between responsible bodies for undertaking concrete EE measures

The Law on EE determines MED and KEEA as responsible bodies for initiating and coordinating energy audits. Recommendations that occur from the energy audits serve for focusing the investments, both in central and local level.

On the other side, the MPA is responsible for the renovation of a major part of the buildings that belong to the central level and it examines them before renovations take place. Alternatively, before initiating an energy audit of any public building, MED should have cooperated closely with MPA in order to receive information from them regarding what the renovations have included, and this would have excluded any possible double work from occurring. However, during our audit we have found that despite the duties and responsibilities of these two ministries in regard to EE and public building management, have not shown a clear communication and cooperation amongst each other.

41 KEEAP 2010-2018, pg. 26-48; KEEAP second midterm plan 2013-2015 (June 2013), pg. 58-63 42 KEEAP second midterm plan 2013-2015 (June 2013), pg. 58-63 43 Excel list of EE measures conducted in schools provided to us by MLGA 44 Excel list of audits carried out provided to us by KEEA 45 Excel list of audits carried out provided to us by KEEA 46 List of proposed objects provided to us by KEEA

14 ZYRA E AUDITORIT TË PËRGJITHSHËM – KANCELARIJA GENERALNOG REVIZORA OFFICE OF THE AUDITOR GENERAL

Concrete measures in central public buildings

An amount of 2.4 million Euro funded by the national budget, municipalities and GIZ was committed from 2006 until 2011. The measures carried out by this project were of financial, educational and informative nature. In terms of financial aspect, the project invested in implementing actions such as thermal insulation in older buildings, replacement of windows, doors and renovation of roofs, all of these for public entities in the local level. In addition, the project involved educational and informative activities through public campaigns, public discussions, informative corners, promotional EE videos broadcasted nationally, brochures distributed nationwide, etc.

Due to the lack of reliable data, and also due to the available data being scattered, during our audit we have been provided with the data of the EE projects that occurred in 2013 and 2014.

In 2013, around 166 projects took place both in the buildings of the central and local level and all together amounted to around 26 million Euro. Out of these projects, 69 were conducted in the buildings at central level such as ministries, agencies, etc.

In addition, in 2014, 126 projects were carried out in buildings at central and local level. The amount of these projects was lower than in the previous year around 6 million Euro. 49 out of the 126 projects were carried out in buildings at the central level. However, due to the lack of staff within KEEA, and a database that would pool all the data together, it has not been possible for us to conclude about the criteria for the selection of the above mentioned projects. The list of projects for 2013 and 2014 that were provided to us and also the information received during the interviews carried out with the responsible officials showed us that these projects were basically selected on ad hoc basis without being based in any pre-assessment or evaluation criteria.

Other EE actions include the following:

 Public campaign on energy savings and improved EE through efficient lighting (this measure will result in a 10% energy saving from the consumption of electricity in the services sector); and  Stimulation of use of solar systems and panels for sanitary water heating and public lighting.

Based on measures described above, concrete measures were undertaken in schools, hospitals, municipality buildings and central government buildings. It is said that the measures undertaken have also created better working conditions and could have raised the awareness of the citizens47 but during our audit with the data in our disposal it was impossible to prove this statement, given that no assessment was carried out.

47 Interviews conducted with the KEEA officials and also responsible EE officials in the three municipalities (Gjakova, Prizren, Drenas)

15 ZYRA E AUDITORIT TË PËRGJITHSHËM – KANCELARIJA GENERALNOG REVIZORA OFFICE OF THE AUDITOR GENERAL

3.2.5 The establishment of a Monitoring and Evaluation and Reporting system

A proper Monitoring, Evaluation and Reporting System (MERS) would assist in taking due account of existing practices and meanwhile provide information of the progress towards achieving the national indicative energy savings targets. The responsible institution for the development of MERS is KEEA.

A formal monitoring scheme is not yet established. The savings reported for 2012 in the table below represent estimates of the KEEA experts.

2012 (ktoe) 2018 (ktoe)

Sector Estimated Savings from savings from Target* Target* measures** measures** ResidenRrezikutial Rreziku12.80 Rreziku9.94 Rreziku30.64 37.46 Rreziku ServicesRreziku Rreziku9.60 Rreziku10.11 Rreziku12.26 30.54 Rreziku IndustryRreziku Rreziku8.15 Rrezikun / a Rreziku24.84 n/a Rreziku TranspoRrezikurt Rreziku1.40 Rrezikun / a Rreziku24.15 n/a Rreziku Total Rreziku Rreziku31.95 Rreziku20.05 Rreziku91.89 68.0

Rreziku Savings as % of base consumption 3% 2.2% 9% 7.3% Table 1: National Indicative Targets and their accomplishment (ktoe)

Source: *1st KEEAP; ** Report on the implementation of the 1st NEEAP, 2010-2012, Kosovo

A detailed analysis of actual energy savings achieved was provided in chapter 3 of the first KEEAP by showing that more than 80% of the target was accomplished in the residential sector. However, due to lack of data, savings accomplished in the service sector have not been entirely evaluated and reported even though the service sector was foreseen to be the leading example for the other sectors. In addition, the EE database is not yet established which results in lack of data on measures taken. Also, there is a lack of reporting from the implementing entities on measures carried out. Due to this, the monitoring process has not been carried out as expected.

The first KEEAP did not provide information on evaluation and methodologies to measure and monitor energy savings. A bottom-up method was introduced to calculate energy savings achieved. The majority of measures identified in the first KEEAP were soft measures (of regulatory/legal nature). It has been difficult to monitor them and report on achieved savings no matter the methodology introduced.

The second KEEAP shows improvements in this regard. Particularly regarding the measures deriving as a result of energy audits, KEEA has developed a project post-implementation monitoring system that foresees that final beneficiaries should submit information on actual energy consumption after the implementation of the projects. Estimates of expected energy savings are based on average energy savings evaluated by energy audits. However, even though

16 ZYRA E AUDITORIT TË PËRGJITHSHËM – KANCELARIJA GENERALNOG REVIZORA OFFICE OF THE AUDITOR GENERAL there are monitoring tools introduced in the second KEEAP, the savings achieved as a result of measures undertaken cannot be presented yet due to the measures not being finalized48.

In general, the sources used until now for gathering necessary data on EE undertakings were data prepared by KEEA, surveys conducted within municipalities and central government ministries, customs office, studies conducted by international organizations, etc.

Kosovo is lagging behind and the current monitoring, evaluation and reporting practices are of insufficient quality. An outcome of this is the fact that the majority of savings achieved in the public sector are not fully monitored and reported. The current initiatives of introducing project post-implementation monitoring system seem like a needed initiative to report on the savings achieved as a result of measures planned in the second KEEAP.

3.2.6 Information and awareness practices

Information and advice to final customers, is elaborated in the KEEAP49. This includes activities for effective and successful promotion of EE, awareness raising and development of EE market. The concrete activities to be undertaken include the development of a strategy for marketing and communication, EE web-site, EE info-line and corners and centres of information, educational activities, regular awareness surveys, several EE publications, cooperation with the media and journalists, etc.

The MED is responsible for annually promoting EE in media. The Department of Energy within MED every year implements a project that aims at informing public institutions and citizens on EE matters. This project is carried out through promotional campaigns in the media such as: advertisements, short animated movies, billboards, and also the organization of EE promotional meetings in municipalities with the public services directorates and private companies who operate within the energy field. Nevertheless, something is lacking when it comes to awareness practices and that is the fact that the projects carried out until now have basically not set clear targets as to whom the campaign was being addressed. In this respect, very little has been done to employ awareness practices within the public institutions themselves to inform and guide the employees on different ways of saving energy. The number of employees within the public administration amounts to around 91 thousand. Almost 48 thousand employees belong to the central government institutions and therefore the impact of having awareness practices implemented among them would be huge and would result in energy savings within their institutions, without huge costs involved50.

KEEA has continuously proposed to the Minister policies that can promote EE and in general their requests have been supported by the Minister. However, it is noticed that the awareness of pupils within schools is on a low level51. Nevertheless, the KEEA was responsible for a project promoting EE at the local level and which targeted the municipal officials and school pupils. This project was

48 2nd National Energy Efficiency Action Plan (NEEAP) of Kosovo (June 2013), Measures in the tertiary sector, pg. 55-61 49 It is elaborated under chapter 4.9 50 GAP Institute (July, 2015), Reforming Public Administration in Kosovo: A proposal to decrease the number of employees in the public administration 51 Interview (11.12.2014), Interview with Director of KEEA within MED

17 ZYRA E AUDITORIT TË PËRGJITHSHËM – KANCELARIJA GENERALNOG REVIZORA OFFICE OF THE AUDITOR GENERAL funded by UNDP in Kosovo and was implemented during 2013/14. In addition, MED has during 2010/11 implemented a project promoting EE through efficient lighting. This project was co- financed between certain municipalities and GIZ.

3.3 Have Municipalities taken appropriate actions?

3.3.1 Development of EEMPs

The Law on EE envisaged the establishment of Municipal Energy Offices (MEO) that would be responsible for drafting the EEMPs. However, the establishment of MEOs is not understood as mandatory. This is because LEE does not strictly oblige municipalities for establishing MEOs. Due to this and because of financial and human resources, none of the municipalities have established a MEO. In the absence of MEOs, the mayors of each municipality have decided to appoint one responsible official to deal with EE matters and in particular with the development of the EEMP. The practices in assigning EE responsible officials and the practices of developing an EEMP differ from one municipality to another. This will be illustrated below.

Actions of developing an EEMP, for the years 2014-2020, took place in all three municipalities audited. The practices employed to develop the EEMPs differ.

In the case of Drenas and Gjakova, the mayors have appointed a responsible official to deal with EE issues, which by profession are engineers. They have also appointed a WG consisting of representatives of different directorates to assist the responsible official in drafting the EEMP. In Drenas the WG consists of seven members and in Gjakova of three members. In both cases the group is composed of members representing different directorates within the Municipality.

The EEMP of Drenas and Gjakova has been based on support of KEEA and international experts. The data and analysis presented in these plans present EE measures that need to be implemented, by identifying the fields where such measures are to be undertaken such as: administration, education, health, culture and sports and public lighting. Gjakova presents in its EEMP a detailed list of measures to be undertaken in the fields of education, health and culture, by identifying 18 schools, 7 health centres and the palace of culture. In the meantime, Drenas in its EEMP has identified the sectors in which the EE measures will be carried out, however, the detailed description of the projects and activities for each building are expected to be done after the completion of energy audits. For the year 2015, we have been provided with a list of activities that are planned to be accomplished, but such list has not been provided for the period that is covered within the EEMP of Drenas.

Both above mentioned plans identify the sources and costs of financing.

The drafting of the EEMP in Prizren follows a different practice which in fact has placed an expenditure of around 10,000 Euro to the municipality. Due to time constraints and lack of a working group to assist the appointed official on EE, a private company was contracted to draft

18 ZYRA E AUDITORIT TË PËRGJITHSHËM – KANCELARIJA GENERALNOG REVIZORA OFFICE OF THE AUDITOR GENERAL the EEMP. The plan presents EE measures that need to be implemented, and this has been done by identifying the fields where such measures are to be undertaken. No detailed list of concrete EE measures is presented.

The three EEMPs of Drenas, Gjakova and Prizren have been adopted by the respective municipal assemblies.

3.3.2 Concrete EE measures at the municipal level and the financial support received

There have been several EE projects that have been carried in the municipalities throughout Kosovo from 2010 under the KEEAP. The data on our disposal have been presented to us by the entities in a scattered way therefore after having analysed all of them, we have tried to classify the projects based on the years when they took place and therefore a wider picture is presented below.

Initially, a pilot project of the digitalization of public lighting was implemented between 2010 and 2011 and was co-financed by MED (national budget), GIZ and the budget of targeted municipalities. The project had an amount of € 572,494.00 and was implemented in six municipalities52.

In addition, in 2011 and 2012 there were thirteen more municipalities that replaced their street lighting systems and did so by using their own budgets. The concrete actions carried out as a result of this measure included the replacement of inefficient light bulbs with efficient ones.

Moreover, there have been several projects that took place in 2013 and 2014 in different municipalities and that mainly involved measures that derived from energy audits and that included renovation of buildings. In this respect, in 2013, 97 out of 166 EE projects carried out in buildings belonging to the local level. On the other hand, in 2014, 77 out 126 projects were implemented at the municipal level.

The three municipalities have carried out several EE measures, mainly in schools, healthcare centres, hospitals, and public kindergartens. The measures identified to be implemented in the majority of the above mentioned buildings were identified as a result of energy audits. The sources of financing have differed, ranging from the own budget of municipalities, national budget, or international organizations such as GIZ, UNDP, USAID, EU Office, etc.

The majority of EE measures carried out in the three municipalities involved the renovation of buildings through insulation of walls, replacement of windows, insulation of roofs and basements and installation of EE lighting.

52 The eight municipalities were: Pristina, , Prizren, , Mitrovice and Podujeve. The measures has an ID of S17 and is listed among the measures of the servives sector of the first KEEAP

19 ZYRA E AUDITORIT TË PËRGJITHSHËM – KANCELARIJA GENERALNOG REVIZORA OFFICE OF THE AUDITOR GENERAL

Moreover, almost every measure identified in the EEMPs is planned to be implemented within the timeframe 2014-2020, and involves the same above mentioned EE measures53.

However, an appropriate EE measure that is expected to be implemented in a public municipal building, that offers services to citizens, are to be carried out in the renovation of the Gjakova Municipality building (and the construction of a new annex)54. This project is already approved and will be financed by the EU Office. In Gjakova this project will be taking into account EE standards and practices in order to yield energy savings. It is also expected to contribute in providing normal and effective working conditions for all departments located in the current municipal administration premises and those departments that are currently operating in facilities outside of the municipal offices.

Another EE project that is foreseen to be implemented is the construction of a new municipality building in Drenas55. The project to be implemented in Drenas will consider EE measures that might contribute to energy savings and might also provide a better and efficient working environment for the municipal officers.

Additionally, a measure carried out in Prizren ensuring energy savings and a more efficient and comfortable environment, is the replacement of the existing heating system in the Directorate of Finance which operates in facilities outside of the municipal offices56. This measure reduced the expenditure for the used fuel by around 40%.

A project that is implemented partly in 2014 and that is expected to continue its work in 2015 is the replacement of the existing public lighting with solar panels in the square “Fehmi Lladrovci” of Drenas. This project has been co-financed in 2014 by the municipality, UNDP, Feronikel and Norwegian Embassy in Kosovo57. The replacement of existing public bulbs with efficient ones in Prizren has been supported partially by an investment from the Ministry of Infrastructure58.

It is worth mentioning that municipalities have received support from MLGA to finance their planned measures. The Grant for co-financing with Instrument for Pre-accession (IPA) since 2007 is included in the budget structure as an obligation for the Government to take part in co- financing with the EU funds for the program Municipal Socio-Economic Infrastructure. The Grant has as its purpose the improvement of municipal infrastructure in order to create an attractive environment for the economy and for investments. The amount of this grant since 2007 has been €2.5 million. The program is managed by the MLGA. Municipalities had to fulfil several criteria to receive this grant. Among the criteria that needed to be fulfilled was also the compliance with the Law on Construction and with the application of EE measures.

Overall, one of the key reasons why the projects carried out in the municipalities were presented in a scattered way was because they were simply carried out on Ad hoc basis and no prior

53 EEMP (Gjakova, Prizren, Drenas), Detailed description of measured, Under Activity 5 of the EEMPs 54 Interview (03.02.2015), Interview with Director of the Administration within the Municipality of Gjakova 55 Project Proposal of the Construction of a New Municipality Building for Drenas 56 Contract (December, 2014), Supply and installation of the heating system for the Directorate of Finance in the Municipality of Prizren, Contract No. 622-14-200-136 57 Interview (26.01.2015), Interview with Responsible official for EE within the Municipality of Drenas 58 Interview (28.01.2015), Interview with responsible official for EE withing the Municipality of Prizren

20 ZYRA E AUDITORIT TË PËRGJITHSHËM – KANCELARIJA GENERALNOG REVIZORA OFFICE OF THE AUDITOR GENERAL planning took place to better identify and analyse energy saving potentials. Thus, there were no priorities set in the buildings where more energy could have been saved.

It is also essential that the implementation of all the above mentioned measures and those that will be implemented in the future is properly and regularly monitored, especially those that can result with energy savings. Until now this has not been done due to the limited number of staff of KEEA, limited number of municipal officials engaged with this issue and due to the lack of cooperation of the Municipalities to provide KEEA with data on regular basis about the implemented projects59. Since the human and financial capacities are lacking, it is important for all players engaged to set clear priorities when carrying out planned activities.

59 Interview (11.12.2014), Interview with Director of KEEA within MED

21 ZYRA E AUDITORIT TË PËRGJITHSHËM – KANCELARIJA GENERALNOG REVIZORA OFFICE OF THE AUDITOR GENERAL

4 Conclusions

MED

We conclude that the approximation of the regulatory framework was a significant initiative. All of the primary and secondary legislation adopted until now is approximated to the EU directives and represent good practices and standards. Meanwhile, there are other primary and secondary legislation that should either be amended or introduced. The amended LEE need to be adopted by the Assembly. There are comments by the Assembly that require changes on the amended version of the Law. Moreover, it is crucial that the cooperation between MED and MESP improves, in order to implement the Directive 2010/31/EU and adopt the necessary primary and secondary legislation on EPB. A separate Law on EPB in Kosovo is drafted and only needs to be adopted by the Assembly. This law is of great significance given that it is the most important legislative instrument for improving the EE of Kosovo’s building stock. Additionally, this law will set out minimum energy performance requirements for renovation of buildings and for components when they need to be changed.

The establishment of IIG and the development of a national action plan on EE was an important initiative given that it established a base for carrying out necessary EE measures however it is characterised with several shortcomings. Initially, the overall KEEAP as a plan was vague. The composed IIG to draft the second midterm plan which basically had the intention to treat the identification and implementation of concrete EE measures missed the representation of key institutions such as the ones from MH, MI and MESP. Moreover, the action plan aimed at ensuring considerable energy savings through different EE measures. However, due to lack of monitoring mechanisms there is no real certainty of results deriving from the actions taken. Furthermore, the data for the public sector need to be improved in order to facilitate the process of evaluating and reporting on the savings achieved. The efforts of the inter-institutional cooperation in developing these monitoring mechanisms are insufficient. A better communication and cooperation between the institutions need to take place to change the situation.

MED have taken several actions aiming at improving EE. This includes establishing the KEEA, identifying the sources of financing, carrying out concrete EE measures, reporting on measures undertaken, and also informing and raising awareness among the public sector institutions and the public in general.

However, one of the key challenges is that the main body responsible for the coordination of EE issues, KEEA, is currently under-resourced, compared to its large number of obligations and responsibilities. This challenge have up till now been met by support from different departments of the MED. Despite this, KEEA have not succeeded in meeting its obligations under the LEE and those of the ECT. A properly resourced KEEA could meet the responsibilities and obligations assigned by the Government and ECT, coordinate and manage the different EE activities, develop and sustain a comprehensive database and meanwhile play an essential role in coordinating the work of donor agencies.

22 ZYRA E AUDITORIT TË PËRGJITHSHËM – KANCELARIJA GENERALNOG REVIZORA OFFICE OF THE AUDITOR GENERAL

In addition, we conclude that EE measures carried out until now are relied to a large extent on external financing. The financing have not been coordinated and took place without a prior adequate planning. Thus, a more precise and planned assessment of necessary sources of financing and priorities should be further elaborated in the programs and plans for the implementation of specific EE measures.

A broad scheme of EE measures have been implemented, ranging from energy audits to efficient public lighting as well as information and awareness projects. The measures carried out as a result of energy audits took place in several buildings at municipal level (such as schools, hospitals, healthcare centres, etc) and in central government buildings. For buildings belonging to the public sector, the two institutions MPA and MED have not developed a proper communication and cooperation with each other.

Numerous measures are planned to be undertaken and the sources of financing for their implementation are identified (200 proposed energy audits planned to be financed by the World Bank loan). However, it is also essential that the number of measures dealing with promotional public campaigns increases so that the public EE awareness improves further. In this respect, the awareness practices within employees of central government buildings should be introduced in order to set clear set of internal rules and procedures to be followed in order to attain energy savings. Moreover, it is important to make efficient use of projects such as the one that will be funded by an amount of 100 million Euros by the EU funds and that has as its main purpose the increase of EE and usage of renewable sources of energy as vital elements of the energy sector in Kosovo.

The lack of data is still an issue hindering to a great extent monitoring, evaluation and reporting. The institutions are not sufficiently cooperating with one another in terms of providing relevant data on measures carried out. The current level of monitoring is both insufficient and inadequate. It is difficult to evaluate and verify the impact of the investments, and to use the information for evaluating the effectiveness of upcoming investments.

Municipalities

One of the central issues for the local level is the establishment of the MEOs which would enable municipal EE planning and implementation. MEOs has not been established due to lack of EE expertise and resources at the municipal level. Instead, one individual per municipality has been appointed to deal with the drafting and adoption of the EEMPs. In certain cases, the appointed municipal official has received support of an appointed working group (consisted of representatives of different municipal directorates).

As shown above, not all municipalities are making efficient use of their existing human resources to draft proper EEMPs and identifying concrete list of measures to be carried out. Instead, the current practices are characterized by vague and non-specific plans and plans with huge financial implications.

23 ZYRA E AUDITORIT TË PËRGJITHSHËM – KANCELARIJA GENERALNOG REVIZORA OFFICE OF THE AUDITOR GENERAL

The current number of municipal officials dealing with the implementation of the planned EE measures, in the three municipalities audited, is limited. In addition, their work load is high. The number needs to be increased in order to cope both with the implementation of the EE measures and monitor and evaluate their implementation.

EE should have more priority for the Mayors of every municipality as a big consumer of energy in the public sector and responsible for municipal buildings, schools, health centres, cultural centres and kindergartens. The existing number of EE measures implemented in the local level is relatively low. This indicates that EE is not seen by municipalities as high priority.

24 ZYRA E AUDITORIT TË PËRGJITHSHËM – KANCELARIJA GENERALNOG REVIZORA OFFICE OF THE AUDITOR GENERAL

5 Recommendations

We recommend the responsible authorities of central level the following:

Finalisation of the regulatory framework  Responsible government authorities should establish a constructive legal and regulatory framework that demonstrates transparency and provides easily reached and readily understood information is developed. Priority should be given to the timely finalization and approval of the primary and secondary legislation on EPB. In addition, the LEE should be adopted at the Assembly as soon as possible given that the amended version is already finalised.

Functionalize and improve the existing KEEAP  MED should ensure that the existing IIG composed to draft and evaluate the second midterm plan and also the IIG that will be composed to draft the third midterm plan involves the representatives of other key institutions related to the EE improvement of hospitals, health care centres, public lighting and buildings (Ministry of Health, Ministry of Infrastructure and Ministry of Environment and Spatial Planning);  MED need to regularly receive information from MPA as to what their renovations of buildings have included. A better communication between MED and MPA will improve energy audits identified in KEEAP and reduce double work.

Strengthen key players dealing with EE  MED should consider increasing the KEEA’s staff number. In particular the support staff responsible for data processing should be increased;  MED should consider the expansion of the allocated budget for KEEA, something that will not only facilitate the increase of staff but will also ease the implementation of several objectives and responsibilities that are imposed to KEEA officials;  It is essential that MED strengthens KEEA so it can take a leading role;  KEEA should consider establishing a regular EE forum where all interested parties from central and local level can participate and share their concerns.

25 ZYRA E AUDITORIT TË PËRGJITHSHËM – KANCELARIJA GENERALNOG REVIZORA OFFICE OF THE AUDITOR GENERAL

Identify the necessary sources of financing  Financing mechanisms such as the soft loan from the World Bank should be analysed in detail and the financial impact overtime of taking up loan should be elaborated further. Also, identify and analyse the EE measures that will best contribute to energy savings in the public sector, the ones that are expected to be implemented by the 100 million Euro project financed by EU funds for the period 2014-2020 for the energy sector in Kosovo;  The Government should consider the establishment of an EE Fund and integrate it within the national budget. A comprehensive analysis must be carried out to evaluate whether an EE fund could be set up within the existing legislation or whether and how the current legislation could be adjusted;  The soft loan of the World Bank should be adopted as soon as possible at the Assembly so that the institutions can initiate their implementation;  MED should seek for credible donors to initiate a major long-standing project to build up a database as required. In this case we recommend that MED considers the cooperation with Kosovo’s Statistical Agency.

Set up the necessary mechanisms to monitor and report on the results achieved  Government Institutions should improve institutional capacities and EE statistics in order to enable a successful MERS;  Apply a proper methodological approach in order to report and evaluate the energy savings obtained as a result of the implementation of a specific EE measure in accordance with the suggestions in the EU Directive 2006/32/EC under Annex IV.

Increase the number of information and awareness practices  Government Institutions, particularly those of the central level, should introduce internal guidelines of EE awareness for their employees. The set up of these internal guidelines does not involve significant costs and it will most probably trigger more action by the employees of the central government institutions which as described earlier is a very large number;  MED should spread EE awareness campaigns in remote areas of Kosovo that are less aware of this issue and that have difficulties in accessing such information;  MED should consider setting up an educational, informative and interactive EE website where information is accessible for the public in general.

26 ZYRA E AUDITORIT TË PËRGJITHSHËM – KANCELARIJA GENERALNOG REVIZORA OFFICE OF THE AUDITOR GENERAL

We recommend Municipalities to:  Place EE on their priority list and acknowledge that large cost savings are achieved from EE measures;  Consider the establishment of MEO that are equipped both with sufficient and experienced staff. MEOs can either work independent of the municipalities or within them; however we consider that the second option is more favourable. The municipal staff who will be working for the MEO should be properly trained. Resources for the establishment of the MEOs and the trainings for the staff must be planned in agreement with the World Bank and the EU;  Conduct a proper assessment of the budget needed for the establishment and functioning of the MEO and to setup a dedicated funding facilities which can be used only for EE related investments;  Review and analyse the current EEMPs in order to identify areas for improvement. In general, it is important that municipalities in their EEMPs identify a list of concrete EE measures to be carried out – including the target, timeframe of implementation, the type of measure, sources of financing and monitoring mechanisms, by using its existing human resources in an efficient way.

27