Medium-sized Project proposal
Request for GEF Funding
Financing Plan (US$)GEF Project/Component
Project / 972,920
PDF A* / 25,000
Sub-Total GEF / 997,920
Co-financing**
IBRD/IDA/IFC
Government / 1,434,950
Bilateral
NGOs
Others / 219,388
Sub-Total Co-financing: / 1,654,338
Total Project Financing: / 2,652,258
Financing for Associated Activity If Any: N/A
* PDFA approved on 23.03.2004
** Details provided in the Financing Section
Record OF ENDORSEMENT on behalf of the Government:
Constantin Mihalescu, minister of Ministry of Environmental and Natural Recourses of Moldova, GEF National Focal Point / Date: 16 February 2005This proposal has been prepared in accordance with GEF policies and procedures and meets the standards of the GEF Project Review Criteria for a Medium-sized Project.
Steve Gorman
GEF Executive Coordinator, The World Bank / Project Contact Person:
Emilia Battaglini, ECA Regional Coordinator
Tel. and email: (+1-202) 473-3232,
Date: April, 19, 2005
Agency’s Project ID: P084688
GEFSEC Project ID:
Country: Republic of Moldova
Project Title: Renewable Energy from Agricultural Wastes (REAW)
GEF Agency: World Bank
Other Executing Agency (ies): Consolidated Agricultural Projects Management
Duration: 3 years
GEF Focal Area: Climate Change
GEF Operational Program: OP # 6
GEF Strategic Priority: CC 4
Estimated Starting Date: may 2005
Implementing Agency Fee: $146,000
Contribution to Key Indicators of the Business Plan: The project will contribute to the established target for OP#6 by removing barriers for the use of renewable energy from agricultural wastes in Moldova, and will reduce high implementation costs of such energy technologies due to low-volume of replication.
TABLE OF CONTENTS
PART I PROJECT CONCEPT 1
A – Summary 1
B - Country Ownership 1
Country Eligibility 1
Country Drivenness 2
C – Program and Policy Conformity 2
Program Designation and Conformity 2
Project Design 3
Project Rationale 3
Current Situation / Sector Issues 4
Barriers analysis 6
Incremental cost assessment 8
Expected Project Outcomes 12
Project Components and Costs 15
Sustainability Analysis and Risk Assessment 21
Stakeholder Involvement 24
Monitoring and Evaluation Plan 27
D - Financing 27
E - Institutional Coordination and Support 28
Core Commitments and Linkages 29
Consultation, Coordination and Collaboration between IAs, EAs and GEF SEC 30
Implementation arrangements 33
PART II – RESPONSE TO REVIEWS 34
PART III – ANNEXES 37
Annex A: Logical Framework Matrix 37
Annex B: Financial Management Arrangements 41
Annex C: Procurement 43
Annex D: Budget brakedown $USD 45
Annex e: Summary of assessments carried out under PDF A activities 46
Annex F: Environmental Management Plan 52
Annex G: Distribution of straw-productive cereals in Moldova 57
Annex H: REPLICATION UNDER CDCF /SIF 62
Annex I: Country Endorsement Letter 64
Annex J: Country Environmental Clearance of the project 65
Annex K: Co-financing Letters 66
Annex L: Map of Moldova 70
PART I PROJECT CONCEPT
A – Summary
The project will provide a foundation for a broad and efficient use of biomass in substitution for imported fossil fuels (coal), acting as a catalyst for the introduction and promotion of the use of primary agricultural wastes (biomass) to fuel energy generation using efficient technologies. This will (i) reduce greenhouse emissions by replacing fossil fuels and simultaneously reduce environmental pollution from unwanted biomass otherwise being burnt in the fields; (ii) improve energy efficiency in heating systems; (iii) introduce renewable energy from local sources substituting carbon neutral biomass for fossil fuels; (iv) recycle ash residues as a fertilizer; (v) generate the possibility for new income streams for rural population, and (vi) provide social and economic community benefits.
Primary and unprocessed agricultural arable crop wastes, especially wheat straw, have been identified as the most suitable, available and unused biomass for thermal energy production in Moldova[1], initially for use in small scale systems (50-500KWth). The project will initiate the creation of sustainable biomass based energy generation in Moldova, initially using baled straw as the energy carrier, by addressing the institutional, technological, and informational barriers. The project will install demonstration biomass units based on developments in the technologies, used for biomass based energy systems in neighboring countries, the Ukraine and Romania.
Once these barriers are removed, there is significant identified potential for replication throughout Moldova, as half of its population of approximately 2 million people lives in 1,680 rural villages. The country has minimal coal and gas reserves and hydro-electrical potential, and imports 96% of its energy. The main impediment for further replication is the financial barrier for installation of new heating systems. This barrier will be addressed with assistance of Carbon Finance, where as a replication project is already under preparation with Community Development Carbon Fund (CDCF) managed by the World Bank. Ten communities with a successful track record in development – usually schools, which have no access to natural gas and a good availability of locally sourced straw biomass, have been chosen as candidate sites for biomass fuelled thermal energy systems to replace coal based heating systems. Following successful demonstration it is expected that in the period to 2006-2010, replication will follow in no less than 10% and up to 33% of communities undertaking public building development projects. This equates to between 30 to 100 communities, with an expected outcome of no less than 60 communities, facilitated by the financing incentive of the CDCF. Undoubtedly, the demonstration sites supported by the GEF will not be eligible for and will be monitored not to participate in any carbon financing mechanism, including the CDCF activity. Further replication with support of additional carbon funds is feasible and will become more apparent during implementation of the project. More detailed information on replication potential is provided in Chapter E of the Project Brief.
B - Country Ownership
Country Eligibility
Moldova has ratified the United Nations Framework Convention on Climate Change (UNFCCC) on June 9, 1995 and the Kyoto Protocol to UNFCCC on April 22, 2003. Moldova is a developing country and meets all the eligible criteria to receive funding through financial mechanism in accordance with COP’s decisions.
Country Drivenness
The project will support ongoing efforts of Moldova to reduce and mitigate greenhouse gas emissions. As a developing country and a party to the Frame Work Convention on Climate Change and Kyoto Protocol Moldova has undertaken the commitment to contribute, as far as possible, to the international efforts to moderate the anthropogenic impact on global climate. In this respect, activities in various areas were implemented: preparation of greenhouse inventory, estimation of different sector’s vulnerability to climate change, development of action for abatement and adaptation to climate change, reported the First National Communication under the United Nations Framework Convention on Climate Change in 2000, as well as education, training and awareness building among the population, especially the younger generation.
The necessity of developing the use of renewable energy is reflected in various priorities, strategies, action-plans and analyses including:
· The Government Decision On the Use of the Renewable Energy Resources
· Interim Economic Growth and Poverty Reduction Strategy
· Strategy for Agricultural and Rural Development
· National Environmental Action Plan
· National Communication on Greenhouse Gas Emissions Abatement
· Energy Strategy and Indicative Action Plan to 2010
· The National Program of energy conservation 2003-2010
· The National Strategic Action Program for Environmental Protection 1995-2020, 1995 (NSAPEP)
· The Comprehensive Long–Term Program for Environmental Protection and Rational Use of Natural Resources in the Republic of Moldova 1987-2005.
These national priorities, action plans, and programs have set the stage for an implementation program in the upgrade of energy systems, energy conservation and the inclusion of renewable energy into development programs. Specific development of the institutional, legal and regulatory framework within the Heat Sector has resulted in the elaboration of a Heat Strategy, approved by the Government, and a Heat Law. The goal of the act is to establish a legal framework that will increase the efficiency of the supply and use of thermal supply systems, promote effective competition in the heat market and stimulate the usage of renewable energy as effective alternative to imported fuels. The Ministry of Energy has also developed a strategy for the decentralization of heat systems in settlements / towns (including specific economic and technical analyses) which also opens opportunities to install new energy systems on renewable basis for decentralized heating system on local public facilities.
C – Program and Policy Conformity
Program Designation and Conformity
The project falls under the GEF OP6 program and is fully in accordance with its main long term objectives by:
§ Overcoming existing barriers to the update of biomass technologies by providing examples of best practice (demonstration units) in the use of biomass fuelled energy systems as a viable alternative to gas, oil and coal and as a sustainable means of addressing the energy supply problems facing rural communities and agro-enterprises. Demonstration systems would be of a size, scale and cost appropriate for wide replication in rural areas. This would be supported by access to information, technical support and a fund to cover the incremental capital cost in installation of biomass-fuelled systems;
§ Encouraging development of straw bale market and further replication among the agro-enterprises of the biomass production and selling, after the project ends;
§ Additional public buildings, but those implemented by the project, switching to biomass heating system, in base of the learned lessons and gathered results within the project progress;
§ Reducing additional implementation costs persistent existence of which are caused by the fact of brand new, untested and totally untrustworthy technology in Moldova: renewable energy from agricultural wastes;
Project Design
Project Rationale
The project will provide a foundation for a broader and more efficient use of biomass, especially in rural communities, as a substitute for fossil fuels. The project will act as a catalyst for the introduction and promotion of the use of biomass, principally for heat through the efficient use of primary agricultural wastes.
While not heavily industrialized, the Republic of Moldova is an agricultural country facing, the problem of agricultural wastes, especially the cereal one that are commonly burned on the field. Storage, preservation and use of agricultural wastes are still matters of discussion, analysis and planning, or even projects without any adequate practical solution.
A World Bank sector study, ‘Potential Use of Renewable Energy (Biomass) in Moldova’, financed under the Austrian Global Environment Consultant Trust Fund was completed in September 2002. This study clearly identified primary and unprocessed agricultural wastes, especially wheat straw, as the most available and unused biomass suited for thermal energy production in Moldova. This investigation determined that small-scale systems (500 - 1000KWth) in rural communities were suited for initial introduction into Moldova. Successful uptake of small and medium sized systems will lead to the consequential use of larger district heating systems.
The main barrier to the use of renewable energy (agricultural wastes) is that there is no current possibility for an independent and rational decision maker, in Moldova, to be aware of, to investigate or to source a renewable energy / biomass option as a fuel for an energy requirement. The current availability and information is totally geared toward gas, oil, coal and electricity. The means to overcome this barrier have been reviewed at length, drawing on experiences in countries including the Ukraine, Romania, Caucasus, Balkan Countries and Austria. There exists a common perception in Moldova that agricultural wastes cannot be effectively utilized to produce heat other than in simple domestic stoves. This energy source is therefore not considered as a serious option. The development of demonstration sites, information and a commercial infrastructure for the marketing of efficient technologies are the key constraints in the use of renewable energy. Preliminary energy audits have highlighted that the higher capital cost of biomass technology can be offset by the significantly lower annual fuel cost of biomass, obtained from local sources – agricultural lands surrounding rural villages. However, the technology and fuel cycle and the economic package have to be proven so that biomass fuelled thermal energy systems will become a rational economic decision.
The main objective is to overcome the barriers to the update of biomass technology by providing examples of best practice (demonstration plants) in the use of biomass fuelled energy systems as a viable alternative to fossil fuels and as a sustainable means of addressing the energy supply problems facing rural communities and agro-enterprises. Demonstration systems would be of a size, scale and cost using appropriate technology suited for wide replication in rural areas. Making a logical structuring of the emphasized project objective, it could be ramified:
· To develop mechanisms for the provision of replicable, economically viable, and environmentally friendly source of heat in Moldova;
· To replicate the project in no less than 7 and up to 10 communities by replacing the existing coal boilers with the straw fuelled one;
· To create a transaction based market for biomass fuel (straw) on the basis of supply contracts for heating systems in rural communities;
· Apply appropriate technology systems to service the energy demands of rural communities utilizing available and unused biomasses;
· Develop demonstration schemes on a phased basis focusing first on basic amenity in public and social buildings – heating systems;
· Develop training, research, information and technology transfer capacities;
· Develop the commercial infrastructure to produce, promote, market and sell biomass energy systems.
Current Situation / Sector Issues
The Republic of Moldova is a landlocked, country of 33,840 square km, located in the Southeastern part of Europe. From the North, East and South it borders with Ukraine, in the East with Romania. Maximal elevations range from 1.75m to 429 m. The Republic is divided into 33 administrative regions plus the municipality of Chisinau, the autonomous Gagauz region and the Transdneister territory (a self proclaimed Transnistrian Moldavian Republic).
Moldova has predominantly black soils (chyornozems) covering 75% of the total country area. The level of agricultural land use in Moldova is the highest in Europe, arable land accounting for about half of the total land area. Despite all the difficulties of transition to a market economy and the transformation of agriculture (land privatization, transition from large collective enterprises to private entrepreneurship) grain production has remained a stable and key sector of agriculture, production averaging one million tons per year. Most of the unused straw biomass (70%), or an average of 700,000 tons per year, is burnt in the fields. This unused biomass represents the easiest available and utilizable source of renewable energy in Moldova.