De-Risking and Scaling-Up Investment in Energy Efficient Building Retrofits - Armenia

Project Overview

The "De-Risking and Scaling-Up Investment in Energy Efficient Building Retrofits - Armenia" project will build the market for energy efficient building retrofits in Armenia, leading to sizeable energy savings and Green House Gas emission reductions (up to 5.8 million tons of Carbon Dioxide of direct and indirect emission savings over the 20-year equipment lifetimes). It will also lead to green job creation and energy poverty reduction. It will directly benefit over 200,000 people and will catalyse private and public sector investment of approximately US$100 million.

Through this project GCF will invest a US$14 million loan to make energy efficiency loans for building retrofits more affordable. The Municipality of Yerevan will add US$8 million in co-financing. In addition, GCF will provide US$6 million in technical assistance to remove market and policy barriers to building retrofits, with UNDP providing US$1.4 million and the Ministry of Nature Protection US$0.4 million co-funding. The technical assistance will seek to overcome lack of information and awareness about the benefits of retrofitting through the establishment of measurement, reporting and verification measures, the development of policy frameworks. The cost-effective combination of policy and financial de-risking instruments and targeted financial incentives will address market barriers and achieve a risk-return profile for EE building retrofits that can attract private investments.

Expected Outcomes

Component 1: Establishment of building sector Measurement, Reporting and Verification (MRV): Robust MRV for the building sector established

Component 2: Policy de-risking: National, sub-national and local authorities adopt and implement an enabling policy framework for EE retrofits

Component 3: Financial de-risking: Access to affordable capital for EE retrofits provided

Component 4: Financial incentives: Affordability of EE retrofits for the most vulnerable households ensured through targeted financial incentives to building / apartment owners (directly or via private-sector ESCOs)

Project Details

Levels of Intervention

Municipality

Source of Funds

Green Climate Fund

Key Implementers

Country Office
Local Governments
National Governments
Private Sector Partners
United Nations Development Programme (UNDP)

Funding Amounts

US$20 million (GCF grant according to GCF website)
US$9.8 million (US$8 million from Municipality of Yerevan, US$0.4 million from Ministry of Nature Protection, US$1.4 million from UNDP according to GCF website)

Project Partners

Green Climate Fund
Municipality of Yerevan

Introduction

The "De-Risking and Scaling-Up Investment in Energy Efficient Building Retrofits - Armenia" project will build the market for energy efficient building retrofits in Armenia, leading to sizeable energy savings and Green House Gas emission reductions (up to 5.8 million tons of Carbon Dioxide of direct and indirect emission savings over the 20-year equipment lifetimes). It will also lead to green job creation and energy poverty reduction. It will directly benefit over 200,000 people and will catalyse private and public sector investment of approximately US$100 million.

Through this project GCF will invest a US$14 million loan to make energy efficiency loans for building retrofits more affordable. The Municipality of Yerevan will add US$8 million in co-financing. In addition, GCF will provide US$6 million in technical assistance to remove market and policy barriers to building retrofits, with UNDP providing US$1.4 million and the Ministry of Nature Protection US$0.4 million co-funding. The technical assistance will seek to overcome lack of information and awareness about the benefits of retrofitting through the establishment of measurement, reporting and verification measures, the development of policy frameworks. The cost-effective combination of policy and financial de-risking instruments and targeted financial incentives will address market barriers and achieve a risk-return profile for EE building retrofits that can attract private investments.

Project Details

Armenia is a small, poor, land-locked country in the heart of Eurasia, and is highly vulnerable to the impacts of climate change. Unsustainable energy use in buildings underpins Armenia’s closely intertwined development, security and climate-related challenges. Approximately 30% of Armenian households are energy-poor, where energy poverty (often called ‘fuel poverty’) is defined as households spending more than 10% of their budgets on energy. Some 45% of apartments in multi-family buildings have indoor temperatures in winter below 19°C (i.e. below established international standards for human occupancy). About 50% of energy use in buildings depends on imported fossil fuels, and 4% of CO2 emissions come from energy use in buildings. With this in mind, over 50% of energy can be saved via energy efficient retrofits

Improving energy efficiency (EE) in buildings has been assigned the highest priority in Armenia’s housing, energy and climate strategies, including the country’s Intended Nationally Determined Contribution (INDC), its Third National Communication to the UNFCCC and its UNFCCC Technology Needs Assessment.

UNDP will work with the Government, city administrations, the European Investment Bank, private sector stakeholders, ESCOs and local banks to deploy the most cost-effective combination of policy and financial de-risking instruments and targeted financial incentives to address market barriers and achieve a risk-return profile for energy efficient building retrofits that can attract private investments. The project builds on UNDP’s long experience supporting the Government of Armenia and on UNDP’s de-risking framework for low-carbon investment. It has the full backing of Armenia’s National Designated Authority (NDA) for the GCF, the UNFCCC National Focal Point, and the Municipality of Yerevan (home to one-third of Armenia’s population). The project is fully consistent with Armenia’s INDC.

Level of Intervention: 
Primary Beneficiaries: 
210,000 direct beneficiaries, 1700 jobs will be created, 1.4 million tons of carbon will be offset
Implementing Agencies & Partnering Organizations: 
Green Climate Fund
Municipality of Yerevan
Project Status: 
Source of Funds Approval/Endorsement
Funding Source: 
Financing Amount: 
US$20 million (GCF grant according to GCF website)
Co-Financing Total: 
US$9.8 million (US$8 million from Municipality of Yerevan, US$0.4 million from Ministry of Nature Protection, US$1.4 million from UNDP according to GCF website)

Key Results and Outputs

Component 1 will establish building sector Measurement, Reporting and Verification (MRV) and knowledge management. One of the identified barriers is a lack of information and awareness: energy efficiency is not a major concern for most people in Armenia. There is a low level of awareness among building owners, real estate agencies and occupants about operational costs and potential energy- and money-saving opportunities. There is also a misinformed perception that full compliance with efficient building codes and energy-efficient buildings would be prohibitively expensive in Armenia. The market for EE products and services is immature. Robust MRV will build the investment case for energy efficiency retrofits and, together with the dissemination of information, will support the communication of the financial and development gains to be made from energy efficiency investments, thus improving information availability and awareness of the benefits of buildings with improved energy performance.

Component 2 will support national, sub-national and local authorities to adopt and implement an enabling policy framework for energy efficiency retrofits. This will remove a number of policy, legal and institutional barriers through supporting legal reform, the introduction and implementation of regulation, and the modernisation and enforcement of standards. Component 2 will also remove technical and capacity barriers by providing technical assistance to selected market players, such as building owners / managers / owner associations and local government.

Component 3 will provide access to affordable capital for energy efficiency retrofits. This will help remove financial barriers, such as the fact that home-owners and public sector entities lack the financial resources necessary to undertake EE building retrofits without loans and the reluctance of local commercial banks to provide loans for EE renovation.

Component 4 grants from the GCF will be offered as a temporary targeted incentive. They will be targeted and will address the needs of the most vulnerable households. The financial analysis shows that, for those earning less than the median household income of US$400 per month, building retrofits are not affordable. For middle- and higher-income households, grants are not needed from an affordability point of view, and will only be used at a low level to overcome early-mover barriers. The grants will support poor and vulnerable households to secure access to improved thermal comfort and cost / energy savings. Incentive grants for low-income households are also needed to unlock building-level investments, as these households might otherwise block building-level investment decisions in multi-apartment buildings.

Reports and Publications