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Ministry of Economy,
Labour and Energy White Certificate Scheme
Republic of Croatia RELEEL REPORT
CARDS 2004
Version: 1 Date : 24th July 2008 Page I/32
RELEEL
APPROXIMATION OF EU RENEWABLE ENERGY LEGISLATION AND
ENERGY EFFICIENCY LABELLING
REPUBLIC OF CROATIA
Proposal of White Certificate Scheme for Croatia
Consortium of:
iC consulenten ZT GesmbH
Kaiserstrasse 45
1070 Vienna, Austria
tel. +43 (1) 521 69-0
fax +43 (1) 521 69-75
a.helbl@ic-vienna.at
July 2008
C:\DOKUMENTE UND EINSTELLUNGEN\HEL\DESKTOP\RELEEL\080620_WHITECERTIFICATES_DRAFT.DOC
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EU RENEWABLE ENERGY LEGISLATION & ENERGY EFFICIENY LABELLING
Proposal of White Certificate Scheme for Croatia July 2008
Content
1. Definition ......................................................................................................... 4
2. General set-up of White Certificate Scheme ................................................ 4
3. EC Directive..................................................................................................... 5
4. white certificate scheme Implementation in Italy ........................................ 6
4.1 Obligation Bound Entities in Italy ...................................................................... 7
4.2 Eligible Projects in Italy..................................................................................... 7
4.3 Certificates features.......................................................................................... 8
4.4 Institutional Bodies of Italian TWC Scheme...................................................... 9
4.5 Financing of White Certificate Scheme in Italy ................................................. 9
4.6 Trading............................................................................................................ 10
4.7 Procedure of TWC in Italy............................................................................... 11
4.8 Issues observed in Italian market ................................................................... 13
4.9 ADVANTAGES AND RISKS RELATED TO Italian WHITE CERTIFICATE
SCHEME ........................................................................................................ 13
5. White Certificate Scheme in United Kingdom - The Energy Efficiency
Commitment (EEC) ....................................................................................... 15
5.1 Legal Background........................................................................................... 15
5.2 Stakeholder groups......................................................................................... 15
5.3 Obliged agents................................................................................................ 16
5.4 Trading in EEC ............................................................................................... 16
5.5 Typical Projects .............................................................................................. 17
5.6 Summarizing Overview................................................................................... 18
5.7 Lessons learned in EEC 2002-05 ................................................................... 18
5.8 Lessons learned in EEC 2005-08 ................................................................... 18
5.9 ESCO operation.............................................................................................. 19
5.10 Envisaged and remarked costs and benefits.................................................. 19
5.11 Miscellaneous on particular aspects............................................................... 20
5.12 Critics.............................................................................................................. 21
5.13 ISSUES OBSERVED IN BRITISH MARKET .................................................. 21
5.14 ADVANTAGES AND RISKS RELATED TO british EEC SCHEME ................ 22
6. SWOT Analysis ............................................................................................. 23
7. Comparisons among base principles of Great Britain and the Italian
scheme .......................................................................................................... 23
7.1 General ........................................................................................................... 23
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7.2 Institutional Aspects........................................................................................ 24
8. Recommendations for Croatia .................................................................... 25
8.1 the reasons for introducing white certificates in croatia .................................. 25
8.2 the market assesment .................................................................................... 26
8.3 policy and legal framework for white certificates in croatia ............................. 27
8.4 institutional framework for white certificates in croatia.................................... 29
8.5 Sectors covered by the white certificates scheme .......................................... 32
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1. DEFINITION
White certificates simply are documents that certify that a specific energy reduc-
tion has taken place, through a specified energy efficiency activity at the energy
end-user.
These certificates are usually combined with a national obligation on a group of
organisations, such as electricity suppliers, to bring evidence that they have im-
plemented measures to reduce their clients’ energy consumption generally or by
a given amount.
The intended benefit of implementing white certificates is their tradability: There-
fore, if one organisation has implemented more energy efficiency measures,
hence achieved more energy savings than it is obliged, it could sell the extra
white certificates to another organisation, who has not fulfilled its obligation by
own activities.
The most advanced application of white certificates schemes are in Italy and
Great Britain. As far as the Energy Efficiency Commitment (EEC) of Great Britain
does not foresee a tradability one cannot generally make identical White Certifi-
cates (WhC) and Tradable White Certificates (TWC).
However, both schemes have a common reason behind, a National Energy Effi-
ciency Action Plan, resulting from the EC Directive 2006/32/EC on energy end-
use efficiency and energy services (also known as the „Energy Service Direc-
tive“), where it is defined as certificates issued by independent certifying bodies
confirming the energy savings claims of market actors as a consequence of en-
ergy efficiency improvement measures.
2. GENERAL SET-UP OF WHITE CERTIFICATE SCHEME
Public Body
4
6 %! 1
%! 2 %
%
Obligation- Eligible
Bound Agent Implementer 3
(DSO, TSO, (with Eligible Projects) End-User
ESCO, Producer)
%
%
White Certificate
Trade Market
5
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Legend:
1. Public body (independent) places mandatory and apportioned EE Saving Obligations
to: Electricity suppliers DSOs, TSOs (retail energy sales companies), ESCOs, project
owners (= Obligation-Bound Agents) as final or primary energy to be annually saved
2. Public body defines eligible EE projects and their operators (= Eligible Implementers)
3. Eligible Implementers perform EE measure at end-user
4. Eligible Implementers gain White Certificates through approval of reduction measure
by Public Body (incl. Measurement and Verification Procedure)
5. Eligible Implementers sell WhC to Obligation-Bound Agents (who could also act as
EI‘s)
6. Obligation-Bound Agents comply with WhC obligation by end of period.
3. EC DIRECTIVE
The EC Directive 2006/32/EC on energy end-use efficiency and energy services
(also known as the „Energy Service Directive“), contributes to
• an improved security of energy supply (Directives preamble para #1)
• to the reduction of primary energy consumption, to the mitigation of CO2
and other greenhouse gas emissions and thereby to the prevention of
dangerous climate change (#2)
• help the Community reduce its dependence on energy imports and boost
the Community's innovativeness and competitiveness by a move towards
more energy-efficient technologies (#3)
• implement an earlier asked directive on energy demand management (#4)
This Directive is consistent with Directive 2003/54/EC and 2003/55/EC (common
rules for the internal electricity and natural gas market), which provide for the
possibility of using energy efficiency and demand-side management as alterna-
tives to new supply and for environmental protection, allowing Member State au-
thorities, inter alia, to tender for new capacity or to opt for energy efficiency and
demand-side measures, including systems for white certificates (#5).
Article 5 foresees a review report by end of 2010, especially an examination
of the appropriateness of a directive proposal regarding white certificates.
The General Target of Energy Saving is defined in Article 4.
“Member States shall adopt and aim to achieve an overall national indicative
energy savings target of 9 % for the ninth year of application of this Direc-
tive (2016), to be reached by way of energy services and other energy efficiency
improvement measures. Member States shall take cost-effective, practicable and
reasonable measures designed to contribute towards achieving this target. The
national energy savings in relation to the national indicative energy savings target
shall be measured as from 1 January 2008.
For this regard each member state should:
• submit three Energy Efficiency Action Plans (EEAP) (30 June 2007, 2011,
2014)
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• establish an intermediate national indicative energy savings target for the
third year of application of this Directive, and
o provide an overview of its strategy for the achievement of the in-
termediate and overall targets,
o draw up programmes and measures to improve energy efficiency,
o assign to authorities or agencies overall control and responsibility
for the framework.
The Directive is especially encouraging the public sector in each Member State
to set a good example in energy efficiency improvement considerations regarding
investments, maintenance and other expenditure on energy-using equipment,
energy services and other energy efficiency improvement measures (#7).
Intermediately addressed by Article 6 are
• energy distributors
• distribution system operators (DSO)
• retail energy sales companies
to be chosen by member states to perform energy services or energy efficiency
improvement measures.
Article 11 foresees a funding mechanism in order to subsidise the promotion of
EE improvement programmes, its measures and a market of it. This fund shall
also support the promotion of energy auditing etc. Means of the fund are grants,
loans, financial guarantees or similar. The fund should be open to all addressees
mentioned above.
4. WHITE CERTIFICATE SCHEME IMPLEMENTATION IN ITALY
The introduction of TWCs in Italy is the application of already widely applied prin-
ciple (e.g. in emissions reductions, development of renewable energy sources,
water rights) at end users. Its major aim is to combine the 'guaranteed results' of
regulation (i.e. mandatory energy savings targets) with the economic efficiency of
market-based trading mechanisms. At least in theory and under strict assump-
tions, it is expected to achieve the predefined and compulsory targets at the
minimum total cost.
The white certificate system is managed by AEEG (Italian Regulatory Authority
for Electricity and Gas), which has the task of definition of the technical rules,
administration, monitoring and enforcement of the whole mechanism.
Two Legislative Decrees, the so called Twin Decrees 24 April 2001, finally
updated on 20 July 2004, definitely established the quantitative targets in
terms of primary energy, the suitable actions to fulfil them and the mechanism of
White Certificates trading.
Mandatory quantitative energy saving targets are set as follows:
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Annual Energy Savings
Year (Mtoe/year)
Electricity Distribu- Gas Distribu-
tors tors
2005 0,1 0,1
2006 0,2 0,2
2007 0,4 0,4
2008 0,8 0,7
2009 1,6 1,6
Each targeted sector must comply with at least 50% of its goal (the so called
50% constraint) by means of savings obtained on end-uses relevant to his
proper energy carrier. In other terms, the electricity Distributors must reach at
least the half of their goals with savings on electrical end-uses; the residual part
may be fulfilled with savings on gas or other fuels end-uses (i.e. fuel switching).
Accordingly, the gas Distributors must reach at least the half of their goals with
savings on gas end-uses; the residual part may be fulfilled with savings on elec-
tricity or other fuels end-uses.
4.1 OBLIGATION BOUND ENTITIES IN ITALY
Italian electricity and gas distributors with more than 100,000 customers as of
Dec 31st 2001 are obliged to deliver energy savings; they are the owners of the
distribution networks. Reference parameter for apportionment is the ratio of own
electricity/gas distributed to the total in the previous year.
Supply-side projects are considered not to be eligible to meet the obligation1.
Eligible Implementers of Energy Savings projects are:
• obliged and non-obliged all electricity and gas distributors, regardless of
their market share,
• companies controlled by the above distributors,
• energy service companies (ESCO's) (accreditation by AEEG required).
About a half of the projects were performed by the electricity and gas distributors
(the obliged agents), usually in conjunction to third parties (producers of equip-
ment and plants, installers, ESCOs). The other half of the request of certification
was represented by ESCOs for directly performed projects.
4.2 ELIGIBLE PROJECTS IN ITALY
The targets do not refer to specific end-use sectors and/or type of projects. Con-
sequently, the kind of the eligible projects is open to allow for compliance with
1
This exclusion is specifically mentioned in the decrees. However, a bit contradictorily, eligible projects attached
to the two decrees include small photovoltaic plants (< 20 kW).
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EU RENEWABLE ENERGY LEGISLATION & ENERGY EFFICIENY LABELLING
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target in the widest way. An illustrative (then 'open') list of projects was set up by
law; it includes:
• End-use power factor compensation
• Electric motors and their applications
• Lighting systems
• Electricity leaking (stand-by losses reduction)
• Substitution of electricity with other more efficient energy sources
• Reduction of electricity consumption in thermal uses
• Reduction of electricity consumption for air conditioning
• Promotion of high efficiency electric appliances in offices and homes
• Devices for combustion of non renewable fuels
• Substitution of electricity to other energy sources with reduction of primary
energy consumption
• Heating/cooling and heat recovery in buildings supplied with non renew-
able fuels
• Development of renewable energy sources at users' premises
• Promotion of electric and natural gas vehicles
• Campaigns for education, information and promotion of energy efficiency
4.3 CERTIFICATES FEATURES
Coherently with the framework designed by the Twin Decrees, three types of en-
ergy efficiency certificates issued by AEEG are implemented:
• type 1 certificate: attest the achievement of primary energy savings
through reductions of electricity consumption;
• type 2 certificates: attest the achievement of primary energy savings
through reductions of natural gas consumption;
• type 3 certificates: attest the achievement of primary energy savings
through reductions in the consumption of other fossil fuels (fuel switching).
Usability/Tradability/Fungibility
Electricity Decree Natural gas Decree
Certificate type Achievement of the target related to the reduction of…
electricity primary energy gas consumption primary energy
consumption
Type 1 certificate YES YES NO YES
Type 2 certificate NO YES YES YES
Type 3 certificate NO YES NO YES
Lifetime of these certificates is strictly dependent on time persistence of the re-
lated energy savings measure (5 or 8 years). Lifetime will turn out to spread out
beyond the period 2005-2009 of application of the Twin Decrees.
One certificate equals a saving of 1 toe or 1163 kWh.
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Banking of certificates is allowed, whereas borrowing2 is not. Banking will allow
distributors some additional flexibility in meeting the obligation. No limits were
planned for the bankable amounts of White Certificates.
4.4 INSTITUTIONAL BODIES OF ITALIAN TWC SCHEME
Scheme established by Italian Ministry of Productive Activities
Italian Ministry of Environment
TWC Administration Body Regulatory Authority for Electricity and Gas
(AEEG)
Decision making Body on Market Rules Electricity Market Operator +
Authority for Energy and Gas
Project Verification Body Authority for Energy and Gas
TWC Issuing Body Electricity Market Operator
Obligation Controlling Body (incl penalty) Electricity Market Operator
TWC Trading Market Manager Electricity Market Operator (GME)
In Italy the Electricity Market Operator GME (Gestore Mercato Elettrico) is acting
as Regulating Body, who issues correspondent amounts of White Certificates.
These are deposited at the National Registry to be safely and transparently nego-
tiated.
The above responsibilities and the chronological flow of duties are summarised in
the below figures:
4.5 FINANCING OF WHITE CERTIFICATE SCHEME IN ITALY
Obliged entities cannot recover costs of energy saving projects via tariffs of the
energy sector they distribute. For this reason, the Twin Decrees allow for the
possibility to recover part of the costs borne by Distributors for the development
of projects which has not been financed via other sources.
Only Distributors that are subject to the energy efficiency obligation will be able to
recover part of the costs borne for the development of energy saving projects via
2
That is, issuing of an amount of White Certificates prior to the implementation of the project they refer to.
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these tariff components. The rationale for this choice being that non-obliged ac-
tors who decide to develop energy savings projects, will do so because they see
in this a business opportunity linked to the tradability of the energy efficiency cer-
tificates. The same is true for ESCOs (whose costs could not be recovered via
rates). At present, costs recovery is acknowledged to obliged parties as 100 Euro
per redeemed3 White Certificate (Type I and Type II certificates only4), that is
0.086 Euro per certified saved kWh.
Additionality of incentives coming from other mechanisms is allowed (e.g. instal-
lation of low power photovoltaic plants): in this case, the owner of the plant can
sell the produced power to the grid system taking advantage of a profitable price
fixed by law (feed-in tariff); simultaneously, he can sell the gained White Certifi-
cates to an obliged Operator finding a supplementary source of gain.
At present, the different certificates schemes (White, Green, emission allow-
ances) are not interchangeable in Italy.
4.6 TRADING
The parties involved in White Certificates Trading are
• the operators (project implementers), to whom the certificates will be
awarded:
o all electricity and gas distributors,
o companies controlled by Distributors and ESCOs.
• institutional parties,
• financial intermediates (expected)
• voluntary buyers (expected).
Joint operation of the Authority for Electricity and Gas (AEEG) and of the Electric-
ity Market Operator (GME) will occur in the trading frame according to the
scheme of Figure 1, with roles and duties specified in following sections.
Figure 4-1: Parties involved in Italian White Certificates trading
3
No matter how the Distributor obtained the White Certificate (from a project he implemented or from purchase)
4
Based on equity considerations, it was assumed that electricity and gas consumers contribute to finance the
diffusion of energy efficient technologies only in their respective sectors. Therefore, only savings achieved via
cuts of electricity and gas consumption (evidenced by type I and type II certificates, will be 'eligible' for cost recov-
ery via electricity and gas rates respectively
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White Certificates are issued once the related energy savings projects are ap-
proved by the Authority (for the amount of savings to be achieved in a given
year). Trading of WhC may be negotiated both via bilateral contracts and in the
marketplace organised by the Electricity Market Operator, with trading rules (con-
cerning the periodicity/frequency of trading, safety rules for buyers and sellers,
etc.) jointly defined with the Authority.
There is a penalty for non-compliance. Under-compliance of energy savings must
be recovered within the following two years (grace period). In addition, heaviest
non-compliance will involve penalties. The exact amount of the penalties is still
under definition. The following criteria will drive the future choices:
The penalty must be proportional and greater than the investment required to
compensate the non-compliance.
The penalty will be related to the number of not saved toe‘s with respect to
the specific assigned target
The characteristics and the economic conditions of the non-compliant op-
erator must be taken into account: to this purpose, the value of the penalty
per not-saved toe will be also based on marketdata, i.e.: (on incremental
costs of products and services for energy efficiency, on the price signals given
by the White Certificates market)
4.7 PROCEDURE OF TWC IN ITALY
Assumption is made (see Figure 4-2) that an Energy Service Company (i.e. an
eligible implementer) performs an eligible energy saving project for an end-user
(e.g. wall cavity insulation), while supplying an energy service (e.g. heat in the
winter season) and earning a fee for that. ESCO is able to gain White Certificates
for that, which is issued by the Regulatory Authority after verification. ESCO is
also able to transfer their White Certificates to an obliged actor, the Electricity
Distribution System Operator (DSO), who reaches his targets and surrenders /
clears his White Certificates to the Regulatory Authority (see Figure 4-2, transac-
tions in blue lines)
The Authority is also in charge of defining an amount on the Distribution fee to be
set aside for an Energy Efficiency Fund (Figure 4-2 b and c, transactions in black
lines), which is fed by both ESCO and end-user.
The Energy Efficiency Fund acknowledges some costs of the project to the
obliged agent DSO, who uses them to buy the White Certificates from ESCO (or-
ange lines of Figure 4-2 c). Owing to this supplementary earning, the ESCO can
in principle also reduce the fee to the end-user (see green part of the arrow "re-
duced fee").
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Proposal of White Certificate Scheme for Croatia July 2008
Figure 4-2: Examples of Trading Schemes (a, b, c)
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4.8 ISSUES OBSERVED IN ITALIAN MARKET
At the moment 24 obliged actors exists in the gas sector (10,600,000 customers
served, which is approximately 60% of all gas consumers), while obliged actors in
the electricity sector reach the number of 10 (32,800,000 customers served,
which is 98% of all electricity consumers). The number of existing ESCOs
amounts to about 400.
The market for White Certificates started on March 2006. On the base of the ob-
ligations fixed by AEEG, the largest obliged agents will have to attain for 2005
atotal target of about 155,000 toe.
At the end of March 2006, AEEG concluded the evaluation and certified total sav-
ings of about 280,000 toe.
The certified savings relevant to the household and tertiary sectors were subdi-
vided as follows:
34% white goods and domestic lighting
27% public lighting
20% heating regulation in buildings
14% thermal envelop and boilers
5% industrial electricity uses
about 80% of the total of the certified savings were relevant to the civil sec-
tor
The following issues are observed in Italian white certificate market5:
• very little price fluctuation
• maximum prices just below 100 EUR per toe (~0.022 EUR per kWh)
which is the maximum that distribution companies may recover from their
clients
• prices are significantly higher than in France or the United Kingdom
• Italian system did trigger ESCO activities - 64% of certificates issued in
2005 were issued to ESCOs
• double counting issues: some savings resulting in creation of white certifi-
cates also generate CO2 reduction on the EU ETS and some also gener-
ate green certificates
4.9 ADVANTAGES AND RISKS RELATED TO ITALIAN WHITE CERTIFICATE
SCHEME
As most of the existing or planned White Certificates schemes, the Italian
scheme advantageously combines command and control type of measures
(mandatory quantitative targets) with market based instruments (certificate
trading) and elements of tariff regulation (cost recovery via electricity and gas
rates).
5
Source: http://www.evaluate-energy-savings.eu/emeees/downloads/EWC_WG_Harmelink_WP2.pdf
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The main risk is connected to the complexity of the resulting procedure to imple-
ment this policy and to put it into practice. Another possible risk arises from the
fact that arbitrary/conventional/standardised assumptions used in the above pro-
cedures can originate sometimes too conservative certification evaluations.
Another risk is connected to the conventional savings persistence of 5 years as-
sumed for most measures, which is likely to penalise the implementation of
measures with actually longer lifetime.
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5. WHITE CERTIFICATE SCHEME IN UNITED KINGDOM - THE ENERGY EFFI-
CIENCY COMMITMENT (EEC)
5.1 LEGAL BACKGROUND
Towards energy policy in the United Kingdom, the Energy White Paper (Feb
2003) and the so called Energy Efficiency Action Plan (Apr 2004) has been de-
veloped. Energy efficiency can be seen as core of the national climate change
programme.
Energy Efficiency Action Plan Carbon savings (MtC p.a.)
for 2010
Business and Public Sector 7.9
Households 4.2
Total 12.1
Table: Carbon savings planned within Energy Efficiency Action Plan
The Great Britain scheme for Energy Savings trading is developed in the frame of
the Energy Efficiency Commitment, aiming at reducing use of energy in the resi-
dential sector, contributing not only to carbon abatement, but also to security of
supply and wider social issues. With a strong social focus, at least 50% of the
energy savings have to take place in low-income households.
The EEC runs in 3 phases of 3 year each:
• The first phase of EEC was introduced in April 2002 and ran to March
2005.
• The second runs from April 2005 to March 2008.
• In 2007 Government has consulted on the third phase to run from April
2008 to March 2011.
The Energy Efficiency Obligations Orders set the overall target for each phase:
they were 62 fuel-standardised lifetime-discounted TWh for the first phase (2002-
2005) and are 130 TWh for the second phase (2005-2008).
5.2 STAKEHOLDER GROUPS
Consumers The assumed average cost of EEC to energy suppliers was £3.60 per
fuel per customer per year in 2004, some or all of which may be passed
on to customers through their bills. For EEC 2005-08, costs are as-
sumed to rise to not more than £9 per fuel per consumer per year, as-
suming that full costs are passed on to customers.
To ensure equity between consumers with different levels of income,
under EEC 2002-05 and EEC 2005-08, at least 50% of energy savings
had to come from the ‘priority group’ (defined as those in receipt of cer-
tain benefits and tax credits).
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Suppliers Under the current EEC scheme, all electricity and gas suppliers are re-
quired to achieve energy saving targets in the household sector. This
target is apportioned amongst the obligated suppliers on the basis of
their proportion of domestic customers.
Office of Gas and OFGEM is responsible for administering the current phase of EEC.
Electricity Mar-
kets (Ofgem)
Department for DEFRA is responsible for setting the overall target.
Environment,
Food and Rural
Affairs (Defra)
Third parties Energy suppliers, in general, deliver energy saving to consumers in
partnership with third parties such as insulation installation companies,
boiler manufacturers and retailers of electrical equipment.
5.3 OBLIGED AGENTS
The UK regulator Ofgem (The Office of gas and electricity markets) is respon-
sible for setting suppliers' individual targets, administration of suppliers' activity,
enforcement of the legislation and reporting to Government on progress
Electricity and gas suppliers are mandatory committed to reach the energy sav-
ings targets. Only suppliers with over 15,000 customers are entrusted to operate
EEC programmes.
Suppliers are free to meet their targets in a wide range of ways. Energy Effi-
ciency measures’ actual size ranged from 0.3 GWh on, while an assumption is
made that the most cost effective measures are performed at first.
Suppliers encourage and assist their domestic consumers to make energy sav-
ings through measures (e.g. cavity wall and loft insulation; energy efficient boilers
/ appliances / light bulbs). Companies have to target at least half of their energy
savings at households with low income
5.4 TRADING IN EEC
There are possibilities for trading between EEC suppliers. Trading in the EEC
can be developed through two possible routes:
• Trading of Energy Savings: Suppliers can trade energy savings from the
energy efficiency measures already completed. Energy efficiency meas-
ures will be transferred from one supplier to another.
• Trading of Obligations: Suppliers can trade their obligations. One supplier
can pay another supplier to gain the right to transfer all or part of his tar-
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Proposal of White Certificate Scheme for Croatia July 2008
get to him. One supplier's target will increase while another's will
decrease.
In practice the use of these mechanisms is limited to the final stages of each tar-
get period, when suppliers reconcile their achieved performance against their
targets. All these trades need to be approved by Ofgem. Three forms of trading
were envisaged:
• Horizontal, i.e. between suppliers; at present, no information is available
on this practice.
• Inter-temporal, i.e. transfer/banking of savings between compliance peri-
ods; this solution was very popular, since about 20% of EEC2 targets
were met in EEC1.
• Vertical, i.e. between suppliers and project developers: this is the most
important, since suppliers have contracted out most of their measures to
3rd parties.
Little formal trading of energy efficiency measures occurred through the legisla-
tion. Trading of EE did not involve in Great Britain a formal certification of the at-
tained savings.
The trading of Energy Efficiency (EE) obligations was performed by means of bi-
lateral contracts in terms of saved TWh.
A more standardised platform of trade (e.g. by means of White Certificates
in a suitable marketplace) has not been introduced yet.
At present, there is very little incentive for suppliers to trade within the EEC
scheme. In fact, with only six major EEC suppliers, the market for trading cannot
be sufficiently liquid. Also, most of the suppliers use the same contractors to un-
dertake the work, so it is unlikely any one supplier could run their scheme more
cheaply than another.
5.5 TYPICAL PROJECTS
Building related EE measures Appliance related EE measures
Cavity wall insulation Fridge saver
Glazing E to C rated Appliance replacement: higher efficiency models
Loft Insulation Compact fluorescent light bulbs (extra bulbs)
Hot water tank insulation / Tank Insulation Set Top Boxes
Boiler end-of-life replacement with condens-
ing boiler (B to A)
Fuel Switching
Heating Controls
Draught proofing
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5.6 SUMMARIZING OVERVIEW
Starting date: April 2002
Compliance Period: Each 3 yrs (March '05 and '08)
Obliged parties: Distributors > 15 000 clients
Market size: 1st: 62 TWh
2nd: 130 TWh
Eligible customers: Residential only
Eligible participants: Gas and electricity suppliers only
Penalty Related to size of miss
Nature of savings Lifetime cumulated, 6% discounted
5.7 LESSONS LEARNED IN EEC 2002-05
• At the end of 2004, Ofgem had approved 120 such energy savings pro-
grammes which had achieved savings of 47 TWh. This figure is equivalent to
powering 2 million homes per year (roughly, all the homes in the West Mid-
land). This represented more than three quarters of the savings needed to
reach the 62 TWh target set for the first phase of EEC between 2002 and
2005. Preliminary evaluations, which are being verified, seems to show that
the total savings attained in this first period complied with the target with an
extra savings amount of about 25 TWh, which is bankable for the second pe-
riod of EEC.
• The first phase of EEC achieved about a 1.5% reduction in overall household
consumption. This result was reached through the implementation of about
only 150 projects of relatively large unit size, The most popular measures so
far have been the installation of cavity wall insulation and the provision of en-
ergy saving light bulbs.
• The annual cost of the EEC is around £3.60 per household, per fuel, per an-
num, for the years 2002-2005.
• As for costs for administrating the scheme, according to Ofgem a rough
breakdown of the costs involved showed a total ~£ 300,000 per year. The big-
gest costs were connected to the external auditor and to management of the
database. The team at Ofgem consisted of five people. The cost of operating
the EEC was a very small portion of Ofgem's total budget of £ 400 million.
5.8 LESSONS LEARNED IN EEC 2005-08
The legal and administrative framework was in particular:
• Target of 130 TWh approximately double the level of activity of the first
phase
• Carbon savings likely to be around 0.7 millions tonnes a year by 2010
• Suppliers must still direct at least 50% of energy savings to a priority group
of low-income consumers, which will support UK fuel poverty goals
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A group of Energy Efficiency projects was set up also for this second phase of
EEC. New measures of microCHP were planned; they would be encouraged by
means of a properly devised evaluation of awarded energy savings.
EEC 2005-2008 will add ~£5 per year per fuel to energy bills, on top of ~£4
added by EEC 2002-2005. Therefore, between 2005 and 2008 the total cost EEC
for a customer who uses both electricity and gas was evaluated as ~£18 per
year.
A third phase of EEC is planned for the period 2008-2011. Government has re-
viewed in 2007 the outcomes of the second phase to inform setting of target for
EEC 2008-11. Outcome of review has been statutory consultation in spring 2007.
The third phase is expected to involve a wider range of involved actors.
5.9 ESCO OPERATION
Till 2006, the ESCO operation in this field has not been developed on large scale
yet. A lack of consumer demand had made suppliers reluctant to invest in mar-
keting.
Some Great Britain Energy Companies are active in both energy sale/distribution
and energy services. They must comply with Energy Efficiency Commitment re-
quirements only if their state of suppliers and number of clients oblige them. They
have to meet targets by means of energy savings measures relevant to domestic
end users. To this purpose, they can operate as ESCO and take advantage of an
increased award for the performed measures. No definite information is available
at present of this subject.
5.10 ENVISAGED AND REMARKED COSTS AND BENEFITS
Consumer benefits
• Ongoing financial benefits in terms of lower energy bills or increased comfort
• Suppliers must direct at least 50% of energy savings to a priority group of low-
income consumers
• As a result, EEC contributes to the alleviation of fuel poverty and of the risk of
ill health caused by cold homes
Costs to consumers
• Direct costs of the EEC are born by suppliers. Suppliers' costs are the share
of the cost of measures they have to contribute to induce householders to
take them up.
• Suppliers may pass on costs to consumers through their energy bills. Also the
costs of developing and administering EEC schemes is somehow transmitted
to the consumers
• It is not known whether suppliers will pass on costs to consumers in full or in
part. If passed on in full, the annual cost per household for the three years of
EEC 2005-08 is estimated to be no more than about £16. To give quantitative
sensitivity to this statement, it can be observed that households would need
only install two 20-Watt CFLs in high usage fittings for the extra cost of EEC
2005-08 to be covered by the financial savings
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• While the costs of EEC last only for the three years of the programme (maybe
more), the benefits last for the lifetime of the measures - up to 40 years in the
case of cavity wall insulation or 12 years for cold appliances
Social benefits: carbon saving
• EEC produces benefits to the Society considered in the global, essentially
from the environmental viewpoint.
• The first phase is expected to save about 0.4 million tonnes of carbon a year
by 2005.
• EEC 2005-08 expected to save around 0.7 million tonnes of carbon a year by
2010.
5.11 MISCELLANEOUS ON PARTICULAR ASPECTS
Ways of suppliers of approaching customers
Much of the marketing consisted on leaflets with bills, posters and advertisement
in magazines. The Energy Saving Trust also provided information about the
scheme wherever possible. Interested customers would then contact an EEC
supplier. Suppliers also did a lot of work with landlords, particularly in the social
sector, as the expensive (time and effort consuming) job of identifying properties
is mostly achieved by the landlord. An additional route taken by suppliers was
through retailers of electronic goods. Suppliers received points for sales of en-
ergy efficient products, such as light bulbs and white goods that they subsidise.
Number of suppliers operating within EEC
There are currently nine EEC suppliers in the Great Britain.
Compensation/penalisation for suppliers
The Utilities Act sets the maximum penalty Ofgem can give at 10% of the sup-
plier's turnover. It should be remarked that this is a maximum, possible, not "uni-
versal" value for the penalty, i.e. this value is expected to affect only very serious
faults. No compensation is given, but there is no constraint on how much suppli-
ers charge customers.
Proof for a supplier of complying with his target
Ofgem maintains a spreadsheet of measures carried out by each supplier, re-
cording the savings they have achieved. These are added up and counted
against their target. If trading is carried out, this can be of measures undertaken
or of part of their obligation.
Evaluation of level of additionality for each measure
Different techniques are used for the eligible technologies. For example, for
CFLs, the priority group is getting 100% additionality due to the high cost of the
bulb and the low income of the consumer (i.e. poorer households are unlikely to
purchase CFLs outside the EEC scheme). For social sector measures, the sup-
plier needs to receive a letter from the landlord who self-certifies not to be free-
rider, i.e. that he would not have carried out the EE measures outside EEC.
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Responsibilities of the technical outcome of energy saving measures
The installer should be liable usually, even if it is conditioned to the contractual
arrangement between the supplier and the installer.
Relations between White Certificates and energy performance of Buildings Direc-
tive
General feeling exists on the fact that Directives and Standards are usually very
far from being procedures for energy savings assessment. Nevertheless, Building
Standards can at least provide terms of reference (i.e. baseline) against which
savings can be evaluated.
5.12 CRITICS
In terms of increasing trading, three main issues were identified during the EWC
project6:
1. At present, energy savings in EEC are dominated by those achieved
through insulation, and in particular cavity wall insulation. With an esti-
mated 9-10 million cavities left to fill, there is still considerable potential for
this measure. Concerns have been expressed therefore that it is not de-
sirable at this stage to introduce more trading into EEC as, if the meas-
ures being fitted are broadly similar, then the costs that the energy suppli-
ers are facing are also broadly similar.
However, while the actual cost of the measure is broadly similar, the ac-
quisition costs (i.e. the cost of identifying the household) can vary consid-
erably. The introduction of more players able to generate WhC could
lower acquisition costs.
2. The EEC is a rolling programme with unlimited carryover between
compliance periods. Rather than trading energy savings therefore, en-
ergy suppliers effectively ‘bank’ excess savings they may make in one
EEC period and carry these savings over to count towards their target in
the next EEC period. Limiting carryover between EEC periods could en-
courage more trading.
3. On an informal basis, trading is already taking place. Within the current
EEC, not all activity is supplier led. Looking at CWI, an insulation com-
pany may install a certain number of CWI jobs in residential properties
and then sell the energy savings to an energy company. A WhC scheme
(or increased trading within EEC) would formalise this route.
5.13 ISSUES OBSERVED IN BRITISH MARKET
The following issues are observed in British white certificate market7:
6
EuroWhiteCert Project (Intelligent Energy Programme), Work Package 3.4 – National Case Study UK
7
Source: http://www.evaluate-energy-savings.eu/emeees/downloads/EWC_WG_Harmelink_WP2.pdf
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• The British scheme has unlocked significant energy saving potentials and ac-
tors that were not unlocked by other instruments
• Prices of saving measures have significantly gone down
• Costs are < 1.5 % of fuel prices
• Cost and Benefits:
• Total costs of all participants: £ 690 mln
• Costs for administration: £ 1 mln
• + £ 3.03 on average cons. bill per fuel (<1.5% fuel prices)
Costs in £ / kWh Costs EEC Consumer price (excl.
VAT)
Electricity 0.013 0.0668
Gas 0.005 0.0166
5.14 ADVANTAGES AND RISKS RELATED TO BRITISH EEC SCHEME
One of the biggest risks is probably the uncertainty on the cost evaluations. Ex-
pected costs, expected impact on prices and expected energy savings can be
worked out with a variety of methods. But all these items will have to be moni-
tored and potentially all the instruments have to be adjusted if need of tuning
arises.
Some risk in the Great Britain scheme is connected to possible inadequacy of
manufactures to keep pace with needs of fast target increase required in the
scheme. This fact can induce potential bottlenecks.
Another risk is connected to a not sufficient amount of publicity. A scheme like
EEC must be supported with a consumer-awareness campaign, otherwise the
scheme potentially will not attain the expected goals.
Demographic reason for risks in EEC can be envisaged in the dispropor-
tion of the measures that have to be installed in the so-called “priority groups“
and the actual customers portfolio of the suppliers. In fact, EEC states that 50%
of energy savings must be achieved from a “priority group“ of low-income con-
sumers and those sectors of the population are not evenly spread among suppli-
ers. In other terms, a supplier who has particular high proportion of high income
of households living within their region will find more difficult to reach the priority
group than a supplier serving an inner city borough. So, a need will be likely to
occur to recover a better and rational apportionment of the obligations in EEC,
e.g. through a higher degree of flexibility within the achievement, if the present
exchange ability mechanisms prove not to allow a sufficiently lively market.
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6. SWOT ANALYSIS OF WHITE CERTIFICATE SCHEME
Strengths Weaknesses
Increases investment in domestic energy effi- Timing difference in issuing certificates (The
ciency measures for consumers WhC (in the UK) are generated every 3 years
Lower administrative costs in conversion of after the compliance with the target has been
commodities verified)
Lowers marginal abatement costs and enforces Complexity of the administrative procedure
investments domestically
Supports development of ESCO business
Opportunities Threats
Improves the static efficiency of the EU ETS by Double counting that undermines the overall
overcoming market failures that reduce energy effectiveness of the instruments
efficiency in the end consumers Market opportu-
nities for new technologies, together with em-
ployment in the energy efficiency industry (DE-
FRA, 2001)
7. COMPARISONS AMONG BASE PRINCIPLES OF GREAT BRITAIN AND THE
ITALIAN SCHEME
7.1 GENERAL
A key difference between the Great Britain and Italian approaches was that the
former scheme allows for trading of individual obligation, whereas the Italian
scheme considers only trading of attained savings translated into White Certifi-
cates. Strictly speaking, the Great Britain’s EEC scheme is not a white certificate
scheme, since there is no certification, and trading is made for obligations solely.
The Italian model does not take account of comfort taking. There have not been
any evidence yet in Italy of rebound effects, i.e. that consumers decided to in-
crease temperature levels after installing insulation and more efficient heating
systems. DEFRA pointed out that their evidence was that comfort taking did oc-
cur and also was not restricted to the priority group.
Great Britain savings are calculated with reference to 2010 (i.e. what annual sav-
ings will be by 2010), whereas Italy uses a five-year timescale. The Italian model
calculates savings of a measure assuming a constant amount of annual saved
toe over 5 years, whereas Great Britain model calculates savings as they will be
in the future, when savings are projected to be lower (measures are projected to
make different levels of saving in different years).
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A possible shift of energy efficiency obligation from Distributors to Suppliers is
beginning to be considered in Italy, even if its possible application is unlikely to
occur before full liberalisation of the Electricity Market (2007).
7.2 INSTITUTIONAL ASPECTS
Italy UK
Issuing Regulatory Authority AEEG OFGEM
allowances/certificates
Monitoring and Control Regulatory Authority AEEG OFGEM
Verification Regulatory Authority AEEG Energy Saving Trust
Registration National Registry AEEG OFGEM
Transaction National Registry -- OFGEM
Source: http://www.iiiee.lu.se/files/whiteandgreen/pdf/WG_WC_and_EU_ETS.pdf
Evaluation in the case of the WhC takes place through specific monitoring and
verification protocols. In the case of the UK the electricity and gas savings gener-
ated by energy efficiency projects are predetermined, while the Italian scheme al-
lows a greater degree of flexibility. If the monitoring and verification protocols are
standardized to the EU ETS verification procedures, this hybrid scheme could en-
tail a significantly low cost, while in any other case the transaction costs could be
higher than in the other combinations of policy instruments.
The WhC are generated through baseline setting system, where an implicit busi-
ness is created as usual baseline for the promotion of energy efficiency carried
out by projects of energy suppliers.
However, a potential obstacle that might arise is the double crediting of the emis-
sion reductions. When an energy efficiency project is realized in the end-use,
emissions will be reduced, hence extra allowances are available, whereas they
are also credited as the efficiency value of the project. The cost recovery of the
investment will consist of two indirect ways, through the rise of the electricity price
that the consumers will pay and through the emission reduction value of the
WhC. This double crediting could eventually lead to a reduction of the overall
abatement that could have been achieved if both measures were functioning with
separate objectives.
Another important point that could consist an obstacle is the time frame of the
certificates (e.g. in the UK) that are issued after the compliance with the EEC tar-
get has been verified, hence every 3 years. Thus, under the current status, the
WhC will be eligible to be converted in the EU ETS only at 3 years periods; how-
ever, this issue could be resolved if the WhC could be forward traded (Calder and
Hugh, 2001).
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8. RECOMMENDATIONS FOR CROATIA
8.1 THE REASONS FOR INTRODUCING WHITE CERTIFICATES IN CROATIA
Croatia as an EU candidate country is determined to harmonise its legislative
framework with all EU directives as soon as possible and to take over and fulfil all
obligations that arise from these directives. In the field of energy efficiency of
special importance are the ESD and EPBD directives.
White Certificates scheme is a mechanism for formalising the official quantifica-
tion and endorsement/verification of energy savings. Possible advantages of in-
troducing White Certificates scheme in Croatia are raising interest in energy effi-
ciency saving among distributors and development of energy efficiency aware-
ness at end-users.
The research undertaken during EuroWhiteCert project8 clearly illustrated that EU
Member States have recognized the need and potential for energy savings in dif-
ferent sectors. Different Member States have different priorities in terms of focus-
ing effort for energy savings, often related to their perceived objectives of a White
Certificate scheme. Furthermore, as a result of those priorities, EU Member
States are and will be developing schemes that cover different sectors, measures
and technologies.
The UK, France and Italy currently have White Certificate schemes. More Mem-
ber States have experience with tradable green certificate scheme and even lar-
ger number of other has experience of neither.
Under EuroWhiteCert project Bulgaria, Hungary and UK have been examined for
possible introduction of White Certificate tradable scheme. In all three case stud-
ies considerable potential for energy savings was identified and most other
Member States are likely to be in a similar position. What varied in the case stud-
ies however were thoughts about where most emphasis should be placed: in
Bulgaria it was felt that the a scheme should cover all sectors and elements of
the supply chain; in Hungary and the UK, buildings, and in particular residential
buildings, were identified as areas where a White Certificate scheme could have
most impact.
From the experiences of some EU Member States, some barriers to implementa-
tion of White Certificate scheme could raise also in Croatia:
• Existing price distortions with regards to electricity and especially natural
gas prices for residential consumers are likely to significantly undermine a
system of saving obligations and white certificates – the prerequisite for
establishment of white certificate scheme is establishment of regula-
tory framework which will allow energy prices to be formed on mar-
ket principles.
• Fear of administrative complexity among other due to lack of experience
with certificate schemes.
8
More information and studies available at: http://www.ewc.polimi.it/
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• There are also a number of threats, the major ones being limited experi-
ence with and large suspicion from influential state actors towards innova-
tion in policy making and market-based instruments and no history of in-
volvement of action by energy suppliers beyond the consumers’ meter
(beyond information provision).
For the time being using the environmental consciousness of the general public
as a driver for corporate energy efficiency targets seems less likely. However, re-
search shows that in recent years industries in Member States have radically im-
proved the efficiency of their consumption due to change of ownership, restruc-
turing and, most importantly, competitive pressures.
The introduction of a trading scheme of this nature requires learning by national
regulators, those involved in monitoring and verification (if any!) as well as the
obliged parties and those involved in selling certificates.
The specific aspects regarding possible establishment of white certificate scheme
in Croatia are discussed hereafter.
8.2 THE MARKET ASSESMENT
For tradable certificate scheme to be fully operational and to deliver desired re-
sults, a proper market conditions should be established. There should be suffi-
cient demand for certificates, and that demand is dependant on the number of
market players.
Market players are both obliged parties (suppliers, distributors) and eligible im-
plementers.
It is estimated that obligation to deliver savings in Croatia could (should) be
imposed on suppliers (not distributors), since they are the once that have re-
lations to the final users. In Croatia, distributors are system operators, responsi-
ble for grid related issues, not for end consumers.
Electricity and gas suppliers in Croatia9
Description Number
Supply of electricity 4
Supply of natural gas 32
Supply of heat 18
Total 52
Although there are four registered electricity suppliers in Croatia, de facto there is
only one major supplier (HEP). Regarding natural gas and heat suppliers, there is
significant number of them.
Regarding natural gas suppliers, there are six suppliers with market shares
above 3%. The largest market share of 35,8% has Gradska plinara Zagreb
d.o.o., gas supply company in Zagreb, followed by HEP Plin d.o.o., gas supplier
9
Croatian Energy Regulatory Agency (HERA): Register of permissions for performing energy activities, 2008
(http://www.hera.hr/hrvatski/html/dozvole.html)
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company in Osijek, with 13,3%. Gas suppliers in cities of Varaždin, Čakovec, Ko-
privnica and Vinkovci have market shares 8,5%, 5,6%, 3,7% and 3,2%, respec-
tively10.
Although there are 18 registers suppliers of heat energy, there are 9 major play-
ers in Croatia11. The major player is HEP Toplinarstvo d.o.o., covering almost
90% of total heat consumption in Croatia.
It is obvious that the number of market players in the future white certificate
scheme is limited, and the existence of dominant players could possibly distort
the desired functioning of the system.
Anyhow, these data are very important and should be used for determination of
energy savings obligations for energy suppliers – the principle of their market
share should be respected in this process.
A national tradable certificate scheme requires a white certificate trading market.
As on European level no trading market is implemented, only national trading can
be performed. In general, the Croatian market is much too small to allow for es-
tablishing a trading market. Therefore, it is necessary that energy suppliers will
have the possibility to sell additional (the surplus on the obligated number of cer-
tificates) white certificates generated to the state (competent authority).
8.3 POLICY AND LEGAL FRAMEWORK FOR WHITE CERTIFICATES IN CROA-
TIA
First of all, some important aspects in the current energy efficiency policy in Croa-
tia should be emphasised:
Croatia has prepared the Energy Efficiency Master Plan (EEMP) in 2007 – the
comprehensive basis for development of other strategic and legal acts regulating
field of energy efficiency12;
Based on EEMP the First National Energy Efficiency Action Plan (NEEAP) is
prepared, but still not adopted by the Government;
The Act on Efficient Use of Energy is under preparation and should enter the le-
gal force at the very beginning of 2009 – the Act and secondary legislation that
will come out of it will fully transpose the Directive 2006/32/EC (ESD) into Croa-
tian legislation.
The Croatian draft NEEAP defines a reduction target for Croatia which equals to
19,77 PJ in final energy consumption by the end of 2016. This corresponds to 9%
10
Source: Annual energy report „Energy in Croatia 2006“, Ministry of Economy, Labour and Enterpreneurship,
2007.
11
Source: Annual energy report „Energy in Croatia 2006“, Ministry of Economy, Labour and Enterpreneurship,
2007.
12
Energy Efficiency Master Plan together with all its annexes is available at:
http://www.ee.undp.hr/show.jsp?page=72502
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of previous five year period average and is calculated based on the methodology
provided in the Annex I of ESD.
The draft NEEAP does not foresee the implementation of white certificates
scheme in the period it covers, i.e. from 2008 till 2010. EEMP, however, mentions
the possibility for establishment of such a scheme and requires further analyses
to be made on this issue.
The existence of the national energy efficiency improvement target provides an
opportunity to form a basis for white certificate scheme, Namely, the target or bet-
ter yet a part of target (since there are other programmes that will deliver savings
also) could be translated into reduction quotas to be demonstrated by obligation-
bound agents, i.e. electricity, gas and heat suppliers according to their market
share.
Croatian draft NEEAP, as it is now, follows the model of Austria or Germany
which abstained from the introduction of tradable white certificates.
The introduction of obligations would also require a model for penalties and a
model for tradability, which was explained in details especially on Italian example.
Models like Germany and Austria currently rely on the voluntary support through
energy distribution companies. A stricter model with obligations would require a
stimulation for energy suppliers to identify energy saving measures. This is a fact,
because the implementation of energy saving measures at consumers would re-
duce energy sales at the energy supplier and distributor. In the conditions where
there are not sufficient equally positioned suppliers (such as Croatia), the con-
sumers’ satisfaction, loyalty and environmental friendly image of supply company
are not sufficient drivers for undertaking energy efficiency measures for consum-
ers. However, if stimulation models are introduced, all related participants (the
state, the energy supplier and the consumer) would be in a winning situation. The
state can comply with the obligation of energy reduction through an efficient en-
ergy efficiency programme, the energy supply company can make use of the
stimulation model (e.g. tradable certificates) and the consumers, by investing in
financially viable energy efficiency measures identified by the energy supply
company, will reduce their energy costs.
However, the Directive 2006/32/EC (Article 6) requires that energy distributors,
distribution system operators and/or retailers (suppliers) fulfil one of the following
three requirements:
i. ensure the offer to their final customers, and the promotion, of competitively
priced energy services; or
ii. ensure the availability to their final customers of competitively-priced en-
ergy audits conducted in an independent manner and/ or energy effi-
ciency improvement measures; or
iii. contribute to the funds and funding mechanisms.
Additionally or instead one of the above requirements, voluntary agreements
and/or other market oriented schemes like white certificates should be ensured.
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In any case, i.e. what ever choice is made, it must be legally prescribed in the
new Act on Efficient Use of Energy.
It is clear that energy companies have to be the promoters of energy end-use ef-
ficiency without compromising their business operation. The reason lies in the
fact that utilities (energy suppliers) are the only institutions that have the infra-
structure, capital and customer base to empower lots of people to become en-
ergy efficient.
In Croatia, some efforts in this area have already been made by establishing the
HEP-ESCO company, which is a part of Croatian Power Utility (HEP). It proved to
be very efficient (but only for public and commercial sector, and not addressing
the final users in households) and this practice should be further supported. An-
other good example is find in the gas and heat supply company Energo d.o.o.
from city of Rijeka, which also offers energy services and advices on efficient use
of energy to their customers.
Hence, it is expected that the measure (i) would contribute to further develop-
ment of energy service business in Croatia; hence it is considered to be the most
appropriate solution for Croatia in current conditions.
With further liberalisation of energy market in Croatia, enabling forming energy
prices on market principles and further development of competition within energy
sector, the market-based mechanisms like white certificates will become increas-
ingly important. In current market conditions it is very hard to expect that a fully
operational tradable scheme could be established in Croatia. It is, thus, strongly
recommended to ensure all prerequisites for introduction of such scheme in
Croatia, and to start implementing it in the period of second NEEAP, i.e. from
2011.
However, it is possible also to establish a scheme, which does not rely on the
strong competition among obliged parties, which is explained in the following
chapter. It has to be emphasised once again, that introduction of such scheme
should be prescribed in new Act on efficient use of energy.
8.4 INSTITUTIONAL FRAMEWORK FOR WHITE CERTIFICATES IN CROATIA
Since Croatian energy market is underdeveloped, it is necessary that energy
suppliers have the possibility to sell additional (the surplus on the obligated num-
ber of certificates) white certificates generated to the state (competent authority).
Regarding overall institutional framework for energy efficiency in Croatia, it is es-
timated as insufficient in numerous document, and Energy Efficiency Master Plan
requires establishment of the Agency for energy efficiency and renewables in line
with provisions of the Energy Act.
The Agency will be a central institution responsible for implementation and moni-
toring of energy efficiency policy. It should ensure the coordination of all energy
efficiency activities in Croatia to avoid overlapping and increase policy implemen-
tation cots-effectiveness.
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However, since the proposal for the Agency was developed (in mid 2007), there
were no activities undertaken by the Government for its establishment. Hence, it
is uncertain weather the Agency will be established or not. For the purpose of
managing future white certificate it would be highly recommendable to establish it
as soon as possible.
The possible setup of white certificates scheme in Croatia is shown in figure be-
low.
Agency for 2
4
Energy Efficiency
6
7
6 % 1
-
Obliged Eligible
Obligation Eligible 3
Implementer
BoundAgent Implementer 2
Electricity, Gas and Heat
supplier Eligible Projects)
With Eligible Projects
End-User
Producer )
5
WhiteCertificate
Legend:
1. The Agency for Energy Efficiency (AEE - as already proposed for being estab-
lished in Croatia and being independent)
• defines obligations for Energy Savings through energy efficiency meas-
ures to Obligated Eligible Implementers: Electricity, Gas and Heat suppli-
ers with a certain market share or a certain minimum number of clients.
The percentage of obligation depends on the market share,
• provides eligibility to other implementers, typically energy providers with a
lower market share,
• establishes a data base for administration and verification of white certifi-
cates,
• establishes and execute penalty payments: penalty payments could be
used for subsidising energy efficiency projects through the Fund for Envi-
ronmental Protection and Energy Efficiency.
2. Both obliged and non obliged eligible implementers identify energy efficiency
measures at their customers. Identified measures have to be verified through an
energy efficiency audit paid by the energy supply company.
3. The End User invests based on the energy efficiency audit in the measures iden-
tified. Investments will be paid back on a short term bases through energy cost
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EU RENEWABLE ENERGY LEGISLATION & ENERGY EFFICIENY LABELLING
Proposal of White Certificate Scheme for Croatia July 2008
savings. Other investment models, such as performance contracting can also be
applied.
4. The AEE verifies the measures implemented and approves energy savings and
the number of white certificates generated.
5. White certificates are handed over to the eligible implementers.
6. At the end of the verification period the eligible implementers sell the White Cer-
tificates to the Agency for Energy Efficiency at the incentive price determined by
the Agency.
7. Obliged Eligible Implementers will receive payment for the surplus on the obliga-
tion only.
The operation of the Agency should be supervised by the Croatian Energy Regu-
latory Agency (HERA).
In case that the Agency is not established, it would be very hard to determine the
competent body for managing the system of white certificates. Currently, only two
possibilities are recognised:
1. HERA could take over the responsibility for the scheme (Regulators are man-
aging schemes in both Italy and UK);
2. HROTE (Croatian Energy Market Operator) could take over responsibility for
the scheme – HROTE has already experience in managing incentive
schemes for renewables and cogeneration, which, among others, includes
calculation of suppliers obligation and control of their compliance with the tar-
get, which would be also important parts of white certificates scheme.
In any case, these two institutions would have to be included in the hereby pro-
posed scheme, HERA at least as a supervisory body and HROTE in the more
advanced scheme which would include full market of certificates for the purposes
of setting the market rules.
The establishment of the Agency, would however be more advisable, not only for
this scheme but for overall success of energy efficiency policy in Croatia. Fur-
thermore, for this scheme to be fully operational it is absolutely crucial to have a
competent body for quite demanding task of monitoring and verification of
achieved energy savings.
The set up of the above described scheme would allow for an immediate promo-
tion of energy efficiency measures through a white certificate scheme, even there
is not a suitable market of energy suppliers in Croatia in place. In this way, Croa-
tia would gain a valuable experience on functioning of market-based mechanisms
and prepare for full tradability of white certificates. Another advantage of such
scheme is that it would enhance the development of ECSO business in Croatia.
The scheme could be easily adopted to more market oriented tradable white cer-
tificates scheme as soon as an Europe wide platform for white certificate scheme
is established. This not expected within a short term period.
On the other hand, energy efficiency measures could also be promoted through
subsidies on investments and/or e.g. free of costs energy audits provided by the
Fund for environmental protection and energy efficiency or Croatian Bank for Re-
construction and Development (HBOR) and customer friendly energy efficiency
credit lines.
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EU RENEWABLE ENERGY LEGISLATION & ENERGY EFFICIENY LABELLING
Proposal of White Certificate Scheme for Croatia July 2008
8.5 SECTORS COVERED BY THE WHITE CERTIFICATES SCHEME
The previously analysed Italian and British white certificate schemes, showed
that they can cover all sectors of final energy consumption or can concentrate on
specific sector.
Furthermore, analysis undertaken within the EuroWhiteCert project also showed
that different countries have different priority sectors to be covered by the white
certificate scheme. For example, Hungary would direct its white certificate
scheme to sectors difficult to reach with policy instruments traditionally imple-
mented in Hungary, hence to residential, tertiary and possibly transport sector.
Since the existing building stock is in very poor condition, it is recommended that
white certificate scheme concentrates exactly on this building segment. Industry
is not envisaged to be covered by the scheme, since it has quite good energy in-
tensity and sees it self the commercial interest in improved energy efficiency. The
rationale for such a scheme is recommended to leverage the various economic
and social benefits of improved energy efficiency rather than environmental or
the climate change mitigation goals. Bulgaria, on the other hand, would direct its
possible white certificate scheme to whole energy end-use sector – the reason is
extremely high energy intensity of Bulgarian economy in comparison with EU av-
erage.
The situation regarding energy efficiency in Croatia is more similar to Hungarian
conditions. Buildings (residential and tertiary) are responsible for approximately
40% of overall energy consumption and existing building stock is characterised
by very high specific energy consumption per square meter of heating area.
Hence, these sectors and existing building stock are recommended to be focus of
possible white certificate scheme in Croatia. Eligible measures would not only in-
clude thermal insulation of buildings, but also improved efficiency of all building
energy systems, including HVAC, lighting and use of more efficient appliances.
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