1. Primary Energy Efficiency Law

Moldova imports roughly ninety four percent (94%) of the resources necessary to cover its national energy consumption. Improved energy efficiency therefore represents a path towards ending this dependency on imported energy and improving Moldova's energy security profile for the benefit of future generations.

The legal framework regulating energy efficiency in the Republic of Moldova mainly includes Law No. 160/2007 on Renewable Energy which is applicable until 25 March 2017. After this date, new and more progressive legislation will be enforced, specifically Law No. 10/2016 on Promoting Renewable Energy Use, which transposes Directive 2009/28/EC of the European Parliament and of the Council of 23 April 2009 on the promotion of the use of energy from renewable sources and amending and subsequently repealing Directives 2001/77/EC and 2003/30/EC. The latter essentially sets forth the primary regulations concerning renewable energy sector activities and methods of organising production and sale of renewable energy and fuel.

Law No. 142/2010 on Energy Efficiency ("Law") is meant to create an appropriate background for the implementation of EU Directive 2006/32/EC of the European Parliament and the Council, from 5 April 2006 on Energy End-use and Energy services, repealing Council Directive 93/76/EEC. The Law establishes the premises for energy efficiency improvement, implicitly by supporting business structures involved in developing and implementing programmes, plans, energy services, and other energy efficiency measures.

Equally important is Government Decision No. 833/2011 approving the National Programme on Energy Efficiency 2011-2020 and Government Decision No. 102/2013 approving the Energy Strategy of the Republic of Moldova 2030, both outlining pertinent, specific targets regarding energy efficiency, along with other relevant normative documents and regulations.

Moreover, in November 2013, Moldova initialled the EU Association Agreement (AA), whereby energy efficiency is identified as a key area of cooperation, referring to domains such as: (i) energy policies and strategies; (ii) development of competitive, transparent and non-discriminatory markets according to EU standards and the Treaty Establishing the Energy Community; (iii) development of an attractive and stable investment climate by tackling institutional conditions, legal, tax and related aspects; (iv) energy infrastructure and projects of common interests by facilitating investments through loans and grants; and (v) scientific and technical cooperation.

Even though the existing legislation is intended to increase energy efficiency and mitigate the negative impact of the energy sector on the environment, Moldova still remains open to regular dialogue in these areas as it moves to align its legislation with the EU regulations and related international standards.

2. Specific Provisions of the Law

The main solutions envisaged by the relevant legislation are the following:

-Implementation of advanced energy production technologies, such as cogeneration and trigeneration, distribution, transportation and use of energy and fuels is to be accomplished by applying energy efficiency standards for installations, buildings, machinery and equipment, as well as compliance supervision;

-Promoting of private initiative and energy service companies that contribute to optimising the exploitation of energy systems based on energy performance contracts;

-Support of cooperation between producers, transporters, distributors, suppliers and energy consumers in order to correlate the common interests and attain the objectives of State policy on energy efficiency;

-Training at all levels of decision-makers to identify and achieve energy efficiency measures;

-Raising awareness and involving the civil society in the decision processes regarding energy efficiency measures and their implementation;

-Compulsory energy audits in an exhaustive list of cases, under specific procedures and requirements, especially if the audits are financed by the Energy Efficiency Fund, or the State and public local authority’s budget; and

-An institutional framework consisting of the following authorities: the Ministry of Economy, the Agency for Energy Efficiency, the Energy Efficiency Fund, the National Energy Regulatory Agency.

National Energy Efficiency Action Plans

The main objectives of the Energy Conservation Programme for the years 2003-2010 were: restoring electricity supplies, preventing continuous collapse of the heating sector, increased consumption of natural gas by substituting out of coal consumption (a rather rudimentary approach which served as a primary basis for the next strategies, especially for drafting the legal regulatory framework to ultimately stimulate effective energy consumption). The programme was to achieve annual savings of 43.4 ktep or eighteen percent (18%) of the consumption in 2002 as reference year.

According to the provisions of the National Efficiency Action Plan for 2013-2015, all District and Municipal Councils (local authorities) must have developed and approved action plans and regional energy efficiency programmes for further implementation. Moldova has committed to reduce final energy consumption in all sectors of its national economy by one point eight (1.8) percentage points (p.p.) annually compared to the reference year 2009. Thus, these proposed measures were considered to be quite innovative.

Meanwhile, the National Efficiency Action Plan for 2011-2020 targets natural gas reduction in the energy structure and increasing the corresponding renewable energy quota, by stimulating the use of energy from renewable sources (RES) relative to total gross domestic consumption: twenty percent (20%) in 2020, with an interim target of ten percent (10%) in 2015; and ensuring the percentage of all fuels will include, bio- fuels of ten percent (10%) in 2020, with an interim target of four percent (4%).

As far as energy efficiency is concerned, the State intends to:

-reduce energy intensity by ten percent (10%) in 2020;

-reduce losses in transmission and distribution by up to eleven percent (11%) in 2020 (thirteen percent (13%) in 2015) for electricity, by thirty nine percent (39%) in 2020 (twenty percent (20%) in 2015) for gas, and by five percent (5%) in 2020 (two percent (2%) in 2015) for heat;

-reduce emissions of greenhouse gases (compared with 1990) by twenty five percent (25%) in 2020;

-reduce energy consumption in buildings by twenty percent (20%) in 2020; and

-increase the share of energy efficient renovated public buildings by ten percent (10%) in 2020.

Preliminary calculations indicate that energy efficiency is two point six (2.6) times lower than in the European Union, resulting in significant financial losses. Therefore, national targets for improving energy efficiency and increasing the use of renewable sources for 2020 are set at ambitious levels. Specifically, these targets are set in accordance with the European Union while following the decisions, recommendations of the Energy Community, with Moldova recognising the benefits and undertaking the efforts.

The strategy targets 2020 as the year by which Moldova will achieve full integration into the internal energy market of the European Union. Therefore, the country's legislation will be timely harmonised with the Energy Community acquis and converged with the EU acquis, thus ensuring legal and regulatory compatibility with these markets.

The Energy Strategy for 2030 reflects the European targets and sets highly progressive objectives, particularly oriented towards attracting investments, emergence of competitive markets as well as ensuring increased use of renewable energy (scenarios for long-term availability of technology for carbon capture and storage); improving energy efficiency; introduction of smart electricity grids, etc.

Sectoral Operational Programmes

One of the most important implemented programmes (2011-2014), aimed to contribute to the creation of a sustainable and competitive renewable energy production, called the Energy and Biomass Project, which was oriented especially towards the heating system and households in rural areas. It laid the foundation for the creation of functional biomass markets that remained viable even after its implementation.

Training programmes and a special national awareness campaign combined with school education programmes were intended to change consumers' attitude towards renewable energy. Financial support was allocated by the European Commission and UNDP Moldova. Modern biomass based central systems were installed in 123 public institutions located in rural areas, the costs for heating was reduced by at least thirty percent (30%) for more than 37,000 inhabitants.

Regarding wind power, until 2014 some 25 wind projects were installed, along with 4 other investment projects in this domain. These wind plants however, have a low installed power, and are used mostly for small enterprises, farms, and vineyards. Also, 10 wind units, of 10 kW each, were installed for experimental purposes by the Technical University of Moldova. A country wind map has been executed in order to facilitate and stimulate new projects in the field.

With regard to solar energy, a Japanese project for the Institute of Oncology has been implemented. Solar panels were installed, both on the roof and on the ground (on a surface area of 8,000 m²), with a capacity covering thirty percent (30%) of the total necessary amount for this Institute. The number of solar collectors is continuously growing since Moldova enjoys an average of 240 sunny days per year.

One of the most successful and recognised events promoting energy efficiency in the Republic of Moldova is the "Eco-Energetic Gala". The goal of the contest is to support initiatives in the production, transportation, distribution and promotion of modern technology in the field of renewable energy.

The Agency of Regional Development implemented various Regional Energy Efficiency Programmes for Sectorial Development.

EBRD provides funds through two credit methods: MoSEFF and MoREEFF. The financing line MoSEFF combined a credit line of EUR 43 million, with a grant component ranging between five percent (5%) to twenty percent (20%) for lending Moldovan companies through EBRD partner banks (local banks). Eligible projects must identify targets to reduce primary energy consumption, reduce CO2 emissions and improve the rational use of energy resources in industrial, agribusiness and commercial buildings.

MoSEFF also provides technical assistance for projects through Fichtner – a leading German company in the field of engineering and consulting. To make investment in energy efficiency and renewable energy sources more attractive, MoSEFF provides grants for eligible projects. The main objective of these grants is to ensure economic viability and feasibility of high-quality projects. Another objective is to encourage the application of advanced technologies in Moldova. This is achieved by offering higher grants for projects using the Best Available Techniques (BAT).

To date, 2,036 loans have been granted for energy efficiency projects through the MoREEFF programme with a total value of EUR 6,817,436 and investment incentives of EUR 1,871,905. The projects concern energy efficient windows, insulation of walls and floors, solar water heating, biomass boilers and stoves, heat pumps systems, etc. Therefore due to MoREEFF, around 15,509 MWh/per year was saved and funding projects helped to reduce CO2 emissions by 3.521 tons per year.

There are numerous opportunities for energy efficiency advancement: (i) in buildings (building envelope, electrical appliances, lighting options, maintenance of the energy system, energy management); (ii) opportunities for municipal energy efficiency (street lighting systems, waste water treatment); and (iii) opportunities for using wind energy, biomass and biogas systems, solar water heaters, heat pumps, etc.

Obligations set forth by the law refer to energy managers, energy service rendering, energy reports, supervision, monitoring and reporting.

District and Municipal Councils must appoint certified energy managers responsible for planning and monitoring the implementation of measures to improve energy efficiency, including those contained in programmes to improve energy efficiency, energy savings record.

Energy managers carry out energy consumption analyses at least once a year in order to determine possible interventions for improving energy consumption, in accordance with the standard developed by the Energy Efficiency Agency ("Agency"). Energy distributors and suppliers present data reports on energy consumption to the Agency every three (3) years, in order to develop the national plan, following and filing out a standard form.

Energy Service Companies provide energy services based on energy performance contracts, in which the following is to be stipulated:

-primary energy consumption before the services rendered that are the subject of the contract;

-the energy savings guaranteed and procedures for achieving them;

-arrangements for works financing; and

-ways to recover investments made by the company’s management, or, where appropriate, by third parties.

Energy distributors, distribution system operators as well as energy suppliers will not undertake any activity that would hinder the development of the energy services market and conduct other measures to improve energy efficiency.

Compulsory insurance of metrology records for the entire volume of energy resources extracted, transformed, transported, stored, distributed and consumed is to be made by approved measuring instruments, metrologically verified and included in the State Register of measuring instruments permitted for use in the Republic of Moldova. Energy savings in the country are calculated based on a methodology approved by the Government.

The Agency carries out supervision and monitoring of energy efficiency improvement programmes for national and local action plans and their implementation.

The Moldovan Tax Code provides incentives in order to consolidate the efforts towards sustainability combined with economic growth.

The Government Decision on the Regulation of Energy Audit No. 884/2012 is the legal basis for determining the objectives, sequence of audit phases in all economy sectors, as well as preparation, execution and results presentation.

For instance, it should be noted that companies are required to cover the costs for audits, as these will eventually be recuperated though efficiency savings.

The cost of the energy audit is determined under conditions of free competition and transparency and depends upon the volume and complexity of the audited subject.

There are no established criteria on how large a company must be in order to be audited, but it can be concluded that it is not addressed/recommended to small or medium enterprises. In the Republic of Moldova a large enterprise has more than 250 employees and has profits exceeding MDL 50 million.

The applicants must submit the following documents for auditing: the specification book; commercial and technical reports on energy resources; contracts with energy suppliers; supply schemes and accounting of energy resources; invoices for the consumption of energy resources; construction execution projects; daily schedules, weekly and monthly tasks; data on production volumes, prices and tariffs; the technical documentation of technological and auxiliary equipment (technological schemes, diagrams, maps regime, operating specifications, regulations, etc.); reports on repairs, commissioning, testing and energy efficiency measures; long-term programmes for more efficient use of energy resources; and the project documentation for technological improvements and organisational development plans of the company. The information collected will be registered in a questionnaire drawn up by the energy auditor who will selectively check the veracity of information provided by the customer. In preparing the questionnaire, the guidelines stipulated by the law will be used, where appropriate.

Additional Information

In order to attract investments for the development and modernisation of the energy sector, an Information Centre for information in the field of renewable energy and energy efficiency was instituted under the Energy Efficiency Agency. A statistical database on energy efficiency and renewable energy sources, as well as the communication strategy developed and implemented energy efficiency and renewable energy sources were also created, making it possible to conduct various events, seminars, workshops and trainings in the field.

National Programme for Energy Efficiency 2011-2020, approved by Government Decision No. 833/2011, generally encourages the best allocation of resources and aims to provide a stable integrated framework with the following general sectorial objectives:

-The electricity sector

-stimulating investments in electricity production;

-promotion of electricity production from RES; and

-promotion of household appliances and energy-related products which correspond to the EU energy efficiency standards.

-Natural gas sector

-examination of the National Gasification Programme through the use of the opportunities offered by RES. Local authorities, with the support of Energy Efficiency Agency will study the potential and possibility and use of biogas for public buildings; and

-examining the possibility of using the difference in pressures from the transmission and distribution of natural gas for electricity production.

-Thermal energy sector

-reducing losses in transportation and distribution systems;

-optimising the existing capacity of production of thermal energy;

-use of renewable thermal energy purposes;

-promotion of cogeneration as a measure to save energy. To this end, the central public authority responsible for managing the thermal energy sector will promote high-efficiency cogeneration based on useful heat demand. Efficient use of energy from cogeneration will contribute positively to the security of energy supply, considering the potential benefits of cogeneration with regard to saving primary energy, avoiding network losses and reducing emissions, especially greenhouse gas emissions;

-reducing and optimising energy use heat to final customers;

-diversification of energy for hot water, heating and cooling;

-improving the regulating of indoor climate; and

-effective promotion of new technologies and equipment designed to help reducing heat consumption.

-Industry sector

-stimulating investment in the industrial sector regarding technological retooling plants with low yield; and

-use of equipment, machinery and technology with lower power consumption.

-The construction sector

-rational use of natural resources, petroleum products, natural gas and solid fuels;

-reducing carbon dioxide emissions;

-management of energy demand in buildings;

-improving the security of energy supplies in the medium- and long-term;

-the development of administrative, legal and financial potential, in order to enable widespread implementation of a complex of energy efficiency measures in housing; and

-public and private sector incentives for investments in energy efficiency in housing.

-The transport sector

-promoting bio-fuels as a blending component for traditional fuels, which will contribute to a gradual reduction in CO2 emissions and dependency upon imported energy;

-increasing safety and economic efficiency and ecological road transport by promoting efficient tyres in terms of fuel consumption, safer and low noise levels; and

-reducing the consumption of electricity and liquid fuel to electric transport and rail transport by replacing old units with new more efficient ones in terms of energy.

-Public sector

-informing individuals and businesses about best practices, costs and benefits of efficient equipment and tools, renewable energy, etc.; and

-launching programmes to improve street lighting, rehabilitation of publicly owned buildings and social facilities, construction of passive or low energy consumption or close to zero, and the use of renewable energy for heating social objects, etc.

In order to reduce its dependence upon energy imports and the impact of the energy sector on climate change, the national programme provides the following key objectives for Moldova, relative to the reference year 2009:

-streamlining global consumption of primary energy to twenty percent (20%) by 2020;

-increasing the amount of renewable energy in the total energy mix from six percent (6%) in 2010 to twenty percent (20%) in 2020;

-increasing the share of bio-fuels to at least ten percent (10%) of all fuels by 2020; and

-reduction by 2020 of greenhouse gas emissions by at least twenty five percent (25%) compared to 1990.

The expected economic effect following the completion of the programme is characterised by the achievement of the following targets relative to the reference year 2009 and taking into account the increase of energy consumption by 2020, calculated based on trends in the last five (5) years:

-National target for energy savings

According to the energy efficiency goals of the EU and given the commitments of the Republic of Moldova aligned with the acquis communautaire, the programme identifies as the national target for energy savings in the long-term, by 2020, amounting to twenty percent (20%) which represents 14,167,857 TJ and will help reduce greenhouse gas emissions by 761,498.7 tons effect CO2eq.

-Intermediate target for energy savings:

Intermediate energy saving target will be reached by 2016 is established in the amount of nine percent (9%) which is equivalent to 6,021,350 TJ and will help reduce greenhouse effect gas emissions by 323,637.5 tons of CO2eq.

-The annual energy saving target is set at the level of one point eight percent (1.8%), compared to the year 2009.

State policy in the field of renewable energy is implemented through national, sectorial and local programmes. Their implementation is monitored by the Ministry of Economy.

Finally, the State policy in the field of RES, according to national policy documents, is reflected in:

-continuous adjustment of national legislative framework to European Union norms and standards;

-promotion of energy from renewable sources, energy efficiency and energy saving through schemes and support measures in accordance with best international practices; and

-ensuring social and territorial cohesion, as well as access of individuals and businesses to information on the production and use of renewable energy and energy efficiency.

The Republic of Moldova reaffirms its strong commitment towards building a modern welfare state within nature’s limits, by safeguarding the environment and by building a functional infrastructure for the use RES.

Given the fact, that Moldova is not an EU Member State and rather recently acknowledged the importance of addressing ways to implement environmentally-sound, cost-effective and logistically-feasible measures, there is great hope and emphasis within the country to achieve these ambitious targets.

3. OBLIGATIONS

4. MANDATORY AUDIT OF LARGE INDUSTRY

5. STRATEGIES

6. TARGETS

CONTACT

In cooperation with

ACI Partners Law Office, Chisinau, Moldova

www.aci.md

Contributing authors: Partner Dr. Cristina Martin and Associate Marina Zarija

BRYAN W. JARDINE

Partner

Wolf Theiss, Romania

+40 21 3088 102

bryan.jardine@wolftheiss.com