energy efficiency strategy to mitigate ghg emissions ... gef/en edit… · system was selected as a...

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The Global Environment Facility (GEF) is a financing mecha-nism. It is structured as a thrust fund, operating in collaborationand partnership with its three executive agencies - the UnitedNations Development Programme (UNDP), the United NationsEnvironmental Programme (UNEP) and the World Bank, withthe aim to achieve global environmental benefits.

The United Nations DevelopmentProgramme (UNDP) is the UN global net-work for introducing change and facili-tating the exchange of knowledge,experiences and resources amongthe states with the aim to helppeople build a better life.UNDP is present in 166states and works jointlywith them for resolution ofglobal issues and thenational problems theystumble upon. Untilthey deve-lop theirown local capacitythey may draw onthe experience ofUNDP and itsnumerous part-ners.

UNDP/GEF sup-port environ-mental projectsin the field ofbiodiversity, cli-mate change,i n t e r n a t i o n a lwaters, deple-tion of theozone layer inthe atmos-phere, durableorganic pollutersand soil erosion.

The project is financed by the GlobalEnvironmental Facility through the UNDP. It

aims at dissemination among Bulgarianmunicipalities of policies and practices that

can assist them to overcome successfullythe barriers to energy efficiency

improvement and reduction of GHGemissions and other environmental

polluters.

The project comprises two major components:

Local capacity building in Bulgarianmunicipalities in the field of energy

efficiency;

Supporting demonstration projectsin typical energy end-user municipal sites.

The activities incorporated in the first projectcomponent are its core. They comprise

introduction of energy efficiencymanagement in municipalities, training of

local decision-makers and experts andintroduction of financial tools and

mechanisms for implementation of energyefficiency projects.

The demonstrations under the secondproject component aim at supporting the

development of local institutional and humancapacity and consolidating its importance for

and impact on the municipal policy. Theycomprise representative projects in the field

of street lighting, district heating andbuildings. The demonstration projects

illustrate how the local institutions and thenewly acquired knowledge and skills might

be applied under real conditions.

The activities under the two projectcomponents are concentrated in Gabrovo.

This municipality acts as a specificlaboratory in which different management

and technical approaches and solutions areelaborated and tested. In fact, the impact of

the project is spread among all themunicipalities-members of the Municipal

Energy Efficiency Network EcoEnergy andin a number of cases even beyond its

boundaries. The number of municipalitiesinfluenced by the experience of the Energy

Efficiency Demonstration Zone in the city ofGabrovo provides grounds to consider that

the reforms in the field of sustainablemanagement of natural resources are

welcome throughout the country.

Energy Efficiency Strategy to Mitigate GHGEmissions. Energy Efficiency

Demonstration Zone in the city of Gabrovo

UNTAPPED DISTRICTHEATING POTENTIAL

Demonstration project for Energy EfficiencyRenovation of District Heating and Heating End Use

in the city of Gabrovo

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STUDY

Problems of district heating in theconditions of transition to marketeconomyMunicipalities and the development ofdistrict heatingThe demonstration site

INTRODUCTION

PROJECT DESIGN

MONITORING ANDRESULTS

IMPLEMENTATION

CONCLUSION

REFERENCES

5

SUMMARY3-4

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20-21

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The demonstration project "Energy Efficiency

Renovation of District Heating and Heating End Use"

was implemented in the framework of the project

"Energy Efficiency Strategy to Mitigate Greenhouse

Gas Emissions. Energy Efficiency Demonstration Zone

in the city of Gabrovo, Republic of Bulgaria", financed

by the Global Environment Facility (GEF) through the

United Nations Development Programme.

The project was implemented in the period 1998-2004

under the guidance of the Center for Energy Efficiency

EnEffect in collaboration with the management of

Toplofikatsiya Gabrovo EAD (District Heating Gabrovo -

Sole Proprietor Joint Stock Company, SP JSCo.). The

project was financed by GEF/UNDP, Toplofikatsiya

Gabrovo and contributions by the DH end users.

Experts from the Ministry of Energy and Energy

Resources, Toplofikatsiya (District Heating) Sofia EAD,

the Technical University of Sofia, the Energy Institute

AD (Joint Stock Company, JSCo.), equipment suppliers

and engineering services providers, as well as

independent experts took part in the study of the

condition of the district heating system in Gabrovo and

its upgrading. The technical departments of the

Gabrovo Municipality have actively cooperated.

The objective of this paper is to present the results and

conclusions from the implementation of the project and

to serve as an example for successful overcoming of

the barriers, which are typical for such kind of projects.

It may be used by district heating companies and

municipalities in Bulgaria, as well as in other countries

with economy in transition.

Selection of subcontractorsInstallation worksProject financingInvestment recovery mechanismTraining of the personnel

16-19

MonitoringProject resultsDissemination of the project results

TABLE OF CONTENTS

Investment package "Buildings''Investment package "Substations"Investment package "Heat transporta-tion network"

Preliminary study of the system of dis-trict heating and heatimg and useSelection of measures, and technicaland economic analysisUpdating of the study

The demonstration project has passed through four major phases: study,

design, implementation and monitoring. The 1996 energy consumption of the

system was selected as a baseline. The preliminary study covered the entire

existing district heating system, namely the following units:

- the Gabrovo Heat Power Plant (HPP);

- two water mains with a common transit section at the outlet from the HPP,

which makes them hydraulically interdependent, and their distribution

networks;

- 204 substations, connecting end users to the water-based heat

transportation network;

- the steam mains South, East and North, and their respective distribution

networks.

The study helped formulate the possible measures for upgrading of the

components of the system - heat source, heat transportation network,

substations and indoor heating installations. On the basis of pre-set criteria,

by technical and economic analysis a list of three groups of measures was

compiled, which may be viewed as separate investment packages.

Investment package "Buildings"

- fitting of heat allocators for all end users in the residential sector;

- fitting of thermostatic valves at the radiators in the flats.

Investment package "Substations"

- replacement of 64 direct substations by modern automated indirect

substations;

- introducing automatic control systems in the rest 140 existing indirect

substations.

Investment package "Heat transportation network"

- replacement of 680 m (by trench lenght) depreciated trench pipelines (laid

in foam concrete) of the water-based heat transportation network by new,

pre-insulated pipelines;

- replacement of the existing gland compensators of the water-based heat

transportation network by new expansion joints (66 units);

- upgrading of a section of the steam main South - from the Belorussia

Square to the Railway Bridge (replacement of the pipelines laid inside an

unpassable channel, by new ones laid above the ground);

- installing a frequency regulator at the plant - for the operation of the winter

networking pump at variable speed.

In addition to the target funding from the Global Environment Facility,

financing for the project was expected also by the following sources: the

National Environmental Protection Fund (NEPF), the National Trust EcoFund,

the World Bank, the Toplofikatsiya Gabrovo SP JSCo., bank loans and

contribution by the end users.

The implementation of the demonstration project coincided with the

introduction of a restrictive regime of water supply, which repelled a

considerable number of potential consumers of domestic hot water (DHW).

Therefore, the investments in the substations' systems for domestic hot water

supply dropped out from the project. Part of the industrial consumers of

steam declined the service and switched to hot water as heat carrier. Under

these conditions, the use and maintenance of the section of the steam main

South, as envisaged in the rehabilitation project, turned out to be inefficient,

so in the summer of 1999 that section was disconnected from the system and

was deleted from the project scope. That circumstance entailed the update of

the preliminary study (Table 1).

Under the applied economic assumptions (nominal interest rate 10.2% and

inflation rate 3%), the financial indicators of the project are as follows:

payback period 4.1 years, net present value USD 1827 thousand and internal

rate of return 24%. The avoided GHG emissions were estimated at 10 406

t/year or more than 156 thousand tonnes for the entire project life cycle.

By the end of 2002, in the course of processing the preliminary results, a

serious decrease was identified in the number of connected subscribers. A

question emerged: whether and to what extent the application of measures in

heat distribution and heat end use was effective, under the existing

configuration of the generation capacities of the HPP and its current

operation cycle. The opportunities for attraction of new subscribers had to be

evaluated - to take into account the emergence of a gas distribution company

uunnttaappppeedd ddiissttrriicctt hheeaattiinngg ppootteennttiiaall 3

SUMMARY

Table 1. Updated project parameters

Investment package

Total

thousand USD

289

490

740

77.4

116

174

1161

1740

2610

Heat equivalent of fuel 131 GWh


thousand USD thousand USD

1.

2.

3.

Investment package

1519 367.4 Heat equivalent of fuel 422 GWhElectricity 11 223 MWh

5511

Annual savings Energy savings for 15 years

Heat equivalent of fuel 64 GWhElectricity 11 223 MWh

Buildings

Substations

Heat transportation network

and its activity, as well as the commitments undertaken with respect to

implementing the Directive 2001/80/ÅÑ of the European Union [7]. All these

circumstances required the conducting of a new study over the district

heating company in 2003, in order to try to design an optimized technological

scheme and operation cycle of the district heating system.

The design phase followed the logical sequence in the application of the

energy conservation measures in the framework of the procured financing.

The project was implemented in several phases, in direct relationship with the

procured financing:

a) In 1998, in the framework of a target credit line from the World Bank, heat

meters for measurement of the substations' heat consumption were

delivered. A successful form of collaboration between the different

international programs, aimed at providing assistance to our country, was the

implementation of demonstration projects under the PHARE Programme

BG9307-02-01. Under this Programme, in 1998 seven substations were

replaced by new, modern ones.

b) In 1999 the district heating system in Gabrovo was entirely equipped with

heat allocators, operating on the evaporation principle. The "top-down"

approach in introducing heat accounting, under which the allocators became

property of the company (not of the individual subscriber) and were

accounted as long-term assets, was applied for a first time in the country.

Toplofikatsiya Gabrovo became the second company with allocators

generally installed (after Loznitsa) and the first one to apply "heat accounting"

in the scale of over 20 thousand units. The subscribers started to equip their

dwellings with thermostatic radiator valves (TRV).

c) In the year 2000, six indirect substations were reconstructed, and three

direct substations were replaced by new ones. In 2001, further six indirect

substations were reconstructed, and six direct substations were replaced by

new indirect ones.

d) In 2001 four gland compensators were replaced by new expansion joints.

e) In the period from July 2000 till December 2001, EnEffect, jointly with

Toplofikatsiya Gabrovo, worked out and applied a scheme for targeted

incentives for introduction of TRVs. The citizens, who were entitled to energy

assistance benefits, had the right to get one TRV installed free-of-charge. All

the other subscribers, in the case of purchasing one or more valves, had the

right to get, free-of-charge, an additional valve, installed for the account of

the project. Free valves and free installation were also made available to the

residents of the demonstration apartment block The operation of the scheme

"one free TRV against a purchased one" allowed the distribution of 1533 TRVs

by December 2001. That is how the purchase of 2570 TRVs was initiated. One

free-granted valve leveraged the purchase of 1.7 valves, on the average. The

mechanism proved to be successful and may be applied in all cases of

financing through grants. The end users welcomed the provided

opportunities for delivery and installation of TRVs under the different

schemes.

f) Since the beginning of 2002, the district heating company has

commissioned into operation a new networking circulation pump. The new

pump is driven by a 380 V electric motor with a possibility for frequency

regulation.

By September 2003, the investments total amounted to USD 431.9 thousand,

including about 26% targeted grant from the Global Environment Facility,

21% input by the end users mainly in TRVs, and the rest was contribution by

Toploficatsiya Gabrovo. All activities, related to the supply and installation of

the equipment, were accompanied by training of the employees of the district

heating company or the respective sites to acquaint them with the technical

and operating characteristics of the equipment.

In the course of the project implementation, EnEffect and Toplofikatsiya

Gabrovo established adequate organization for collecting information to

record the progress of the project. For the purposes of monitoring,

information was collected, processed and analyzed - about fuel

consumption, consumables, heat and electricity generation and sales, as

well as about the technical state of the individual components of the district

heating system.

By taking into consideration the assumed baseline level of energy

consumption and the project's 15-year economic life cycle, the long-term

monitoring on the operation results of the Household Heating Division in

Gabrovo by the end of 2002 showed that the achieved heat savings to date

were as follows: 10% for 1999, 15% for 2000, 14% for 2001 and 15% for

2002. Therefore, the cumulative figure for 4 years amounts to 37.9 GWh of

heat, 388.8 MWh of electricity, at the value of more than USD 1482 thousand.

The comparison has been effected with due account of a complex of

influencing factors, for which corrections were introduced about: (1) the

dynamics in the connected heated-space volume, (2) climate factors,

including length of the heating season (3) efficiency of the system of energy

generation, transmission and distribution. The effect, expressed in avoided

GHG emissions, as a cumulative figure for 4 years, is equal to 14 887 t CO2equivalent, or 3719 t/year on the average, or a total of 55 785 t extrapolated

for a period of 15 years.

energy efficiency demonstration zone in gabrovo4

INTRODUCTION

Problems of district heating in theconditions of transition to marketeconomy

District heating is an economic activity of regionalimportance; it is related to the infrastructure, whichis aimed at resolving basic daily problems of thepopulation, public organizations and companies inthe respective population centers. By 1996, thedistrict heating (DH) activities were concentratedin 22 commercial companies, mainly in the district-center cities. 21 of these companies were 100%state-owned. The biggest company, theToplofikatsiya Sofia EAD (District Heating Sofia SPJSCo.), was 100% municipal property. These com-panies used to supply heat to more than 570 thou-sand flats, with more than 1550 thousand occu-pants, or about 20% of the country's population.The public buildings connected to the districtheating networks had a heated space volumeequal to that of about 240 thousand standard flats.

By the summer of 1997, heat was sold at pricesdetermined as per the Law on District HeatingPricing and the Regulation for its application, aswell in accordance with Decree No. 194 of 6October 1995 of the Council of Ministers, amend-ed and supplemented by Decree No. 153 of 2June 1996 of the Council of Ministers, as follows:

- for the residential sector: at a fixed price, deter-mined and periodically amended by the Council ofMinisters;

- for the business sector: at a limit price, coveringthe costs for generation and supply of a unit ofheat to the end user, with up to 7% profit marginper year;

- for public use, inclusive of municipal and othersites funded by the budget: at a fixed price until 30June 1997 and a limited price as of 1 July 1997.

The difference between the fixed price and thecompanies' costs used to generate a plannedloss, which was covered through subsidies fromthe state budget. This approach did not createincentives for the producer to improve the efficien-cy of heat generation and to reduce the productioncosts of heat.

Until 1998, a significant share of the district heat-ing substations in the country were not equippedwith commercial metering devices (heat meters),and pricing was performed on the basis of the

heated-space volume. This approach, besidesbeing inaccurate, provided no incentives for ener-gy conservation at end users. There were nomechanisms and tools for billing the individualconsumers as per their real heat consumption.

Municipalities and the developmentof district heating

Municipalities' involvement in the managementand development of the district heating systems inthe population centers is an issue of great impor-tance for the future existence of the DH systems.Under the provisions of the currently abrogatedLaw on Territorial and Administrative Division, themunicipalities used to invest in the development ofthe infrastructure of the settlements and had toafterwards transfer the constructed facilities to therespective state monopolists - for operation. Thisduality in the financing and construction of thematerial assets of the DH companies is the reasonwhy the issue of incorporating the municipalitiesas shareholders of these companies is still topical.Despite the significant amount, in the past, ofinvestments made by municipalities in the DH net-work infrastructure in the cities, the district heatingcompanies in the country, except for ToplofikatsiyaSofia, continue to be state property.

The Strategy for Development of District Heatingduring the Period 2000-2005 [1], envisages that inthe case of ownership rights restructuring, "shar-ing of the financial burden for the year 2001 shouldbe negotiated with the local authorities of the citieshaving district heating companies on their area".The Strategy takes also into consideration the rec-ommendations of the World Bank - "to launch aprocedure for privatization and/or transfer of prop-erty rights on the DH companies, for which budg-etary support will be ceased before the year 2004,to the local authorities".

Under the current circumstances in Bulgaria, itmay be reckoned that involvement of municipali-ties in the management of the city DH systems willbe timely and useful. The implemented energy effi-ciency demonstration project in the Gabrovo dis-trict heating system has demonstrated that, evenunder the conditions of a not fully completedprocess of restructuring the ownership on the dis-trict heating systems, yet collaboration betweenthe local authority and the DH company is possi-ble, provided the will exists for joint efforts withinthe framework of assuming by owners the due

responsibilities for their respective components ofthe DH system.

The demonstration site

Until 1996, the sole proprietor of the Gabrovo HPP(later registered as Toplofikatsiya Gabrovo SPJSCo.) was the state, in the person of theCommittee of Energy. The subject of activity of thedistrict heating company was generation, trans-portation and sale of heat and electricity, pro-duced under co-generation principle. The existingDH supply system in Gabrovo comprised:

- the Gabrovo HPP;

- two water mainlines with a common transit sec-tion at the outlet from the HPP, which makes themhydraulically interdependent, as well as their dis-tribution networks;

- 204 substations, connecting end users to thewater-based heat transportation network;

- three steam mains, named South, East andNorth, and their respective distribution networks.

In 1996, the company possessed 4 steam genera-tors with energy generation parameters - 2 coal-fired boilers (type CKD) and 2 mazut-fired boilers(type BKZ), as well as 2 auxiliary mazut-fired boil-ers (type KM). In order to achieve lower productioncosts of the generated energy, coal was predomi-nantly used as fuel. The power generation capaci-ties comprised three steam turbines with backpressure and nominal capacity of 6 kWel. The gen-erated electricity was sold to the National ElectricCompany (NEK SP JSCo.) at prices, which provid-ed no incentives for combined heat and powergeneration. Steam output from turbines and auxil-iary boilers was supplied to end users from indus-try and to the boiler system for production of hotwater for water-based heat transportation network.

Some of the generation capacities featured obso-lete design type and were heavily depreciated. A

Problems of district heating in the conditions oftransition to market economy. Municipalities and the development of districtheating. The demonstration site

To reduce the costs for heat generation,

distribution and end-use - through application

of energy efficiency measures, which will also

lead to reduction of the harmful emissions.

To contribute to overcome the barriers to energy

efficiency projects.

To contribute to the formulation of sustainable

energy policies and programs in the

municipalities.

To demonstrate the entire process of design

and implementation of an energy efficiency

project in the district heating system of a city

and thus create a model for the implementation

of such projects by other heat supply

companies in municipalities in Bulgaria and

other Central European countries.

PROJECT OBJECTIVES:


Preliminary study of the DistrictHeating and Heating End Use

The technical and economic study was conductedin May 1977. The possible measures (Long List ofMeasures) for the renovation of all components ofthe system - heat source, heat transportation net-work, substations and indoor heating systems -were identified on the basis of the analysis of theexisting condition and the specificity of the heatsupply system in Gabrovo.

UPGRADING OF THE BUILDINGS

Reduction of heat losses

- weather-stripping of doors and windows and/orinstallation of new framings;

- additional insulation of external walls and ceil-ings;

- insulation of the heating systems in the basementand the attic;

- insulation of the risers of the hot water facilities.

Creation of opportunities for control and monitor-ing of the energy consumption

- fitting of thermostatic radiator valves;

- fitting of heat allocators;

- installation of re-circulation pumps for DHW;

- installation of hot-water meters.

UPGRADING OF THE SUBSTATIONS

Upgrading of the DH substations

- replacement of direct substations by modernindirect ones;

- partial replacement of indirect substations (heatexchangers) by new ones.

Automation of the DH substations

- introducing automatic control on the space heat-ing, the DHW temperature and the pumps;

- installation of closed-type expansion tank andautomatic topping-up systems for the water-basedheating facilities;

- introduction of heat energy metering - installationof heat meters, water meters, etc.

UPGRADING OF THE HEAT TRANSPORTATIONNETWORK

Water-based network

- replacement of pipelines laid in foam concrete,by pre-insulated pipes;

- replacement of gland compensators by expan-sion joints;

- replacement of channel-laid pipelines in poorcondition by pre-insulated pipes;

- replacement of worn-out fittings;

- improvement of the thermal insulation ofpipelines laid above the ground.

Steam network

- replacement of existing channel-laid sections bynew pipelines, laid above the ground;

- improvement of the thermal insulation of the heattransportation pipelines;

- optimization of the diameters of certain sectionsin the course of the reconstruction.

UPGRADING OF THE HEAT SOURCE (HeatPower Plant)

Generation capacities

- reconstruction of the coal-fired boilers CKD-35:membrane screens, combustion systems, com-bustion technology;

- reconstruction of mazut-fired boilers BKZ-75:membrane screens, combustion systems;

- rehabilitation of the system for automatic controlof Turbine No. 3 (with adjustable steam separationand back pressure) and transition to 1.2 bar backpressure operation cycle.

Network pumping plant

- frequency control of the winter networking pumpat variable speed;

- variable hydraulic regime, automatic controldepending on the parameters in the network.

Introduction of a system for control of the techno-logical processes in the HPP

STUDY

Preliminary study of the District Heating andHeating End Use. Selection of measures, and

technical and economic analysis. Updating of the study

new steam boiler of 25t/h capacity was commis-sioned in 1998. During the next year, a new boilerreplaced one of the auxiliary boilers. The compa-ny had considerable reserve in terms of generat-ing capacities and heat transportation network,because of the grave drop in industrial loads(steam) and the stop in further expansion of thewater-based heat transportation network.

During the selected baseline year 1996, the heatload for space heating was 47.1 MW, while theheat supplied to end users amounted to 67 494MWh. Steam delivered to industrial customers hadreached 86 056 MWh. The Gabrovo HPP used tosupply heat to 6678 dwellings, 31 public buildingsand 29 industrial enterprises.The space heating in1538 dwellings (23% of the total number of sub-scribers) had been entirely disconnected, and inabout 17% of the subscribers it was partially dis-connected. Domestic hot water was supplied onlyduring the heating season. Since the spring of1994, in relation to the introduced water rationing,the district heating company had entirely can-celled DHW supply.

The missing automation of the basic technologi-cal processes in the plant resulted in lower effi-ciency of the energy supply, as compared to theHPP generation output - 73.3%. Centralized qual-ity control of the heat supply was in place -based on constant flow of primary heat carrierand variable supply temperature. The share ofelectricity consumption for the HPP's own needswas quite high - 47%.

The length of the water-based heat transportationnetwork was 19 400 m. It included 1505 m pre-insulated pipelines. 56% of the pipeline lengthcomprised pipes aged 10 to 20 years. The trans-portation losses in the water network (inclusive atsubstations) amounted to 16.6%. The losses inprimary heat carrier were also high - the toppingup of the network used to reach as much as 16times a year, at six months duration of the heat-ing season.

Most of the substations were of obsolete designtype, and the available automatic controls were inpoor condition. Until 1998, only some 25% of thesubstations were equipped with heat meters. Thelength of the steam and condense mainlines was22 535 m. A considerable portion of those wasaged above 30 years. Heat losses in steam trans-portation were also high - 28.7%. Because ofreduced steam consumption by industrial cus-tomers, by the year 2000 the utilization length of thesteam network had dropped to about 2500 m [6].


MEASURES FOR PROTECTION OF THE ENVI-RONMENT

Reduction of harmful emissions in the fume gases

- from the coal-fired boilers;

- from the mazut-fired boilers.

Reduction of the pollution from the residual ash

- new sedimentation pond and transportationpipeline;

- new ash excavation pump.

Trapping and processing of oil products from thewastewater

Processing and neutralizing of the sewage from thechemical department

Leading off the domestic sewage for discharge intothe city sewerage system, instead of into the river

Additional processing of the drinking quality andnetwork water for improvement of its stability andprevention of depositings on the pipelines - con-struction of an aerated equalizer with 560 m3capacity and 15 portioning nozzles

Introduction of permanent control of the propertiesof the feeding and network water

Selection of measures, and techni-cal and economic analysis

The priorities of the rehabilitation intervention(Short List of Measures) were determined on thebasis of the following criteria:

- the rehabilitation measures should improve thereliability of the district heating system;

- the invested funds should ensure the highestpossible effect through improvement of the energyefficiency performance of the plant;

- the savings achieved as a result of the rehabilita-tion should ensure an acceptable period of invest-ment recovery;

- to ensure the highest possible degree of reduc-tion of GHG emissions.

The rehabilitation of the heat source required con-siderable amount of investments (USD 5.4 million)and the assessment had revealed that in a realis-tic future the invested money could not be repaidalone from the energy savings achieved thanks tothe estimated energy efficiency improvement (1.8

to 2.0%). Some of the measures on the buildingspresumed that the owners should play a leadingrole, which did not allow their coordination in termsof time schedule, nor their management in theframework of the project. Another portion of themeasures related to environmental protection didnot have a direct connection to the reduction offuel consumption and the ensuing reduction ofGHG emissions. Therefore, since these groups ofmeasures did not satisfy the criteria mentionedabove, they were not included in the Short List.

The Short List, on which the investment pro-gramme was based, comprised three groups ofmeasures, each of which might be implementedseparately, however their joint implementationwould raise significantly the effect from their imple-mentation. These three groups can be consideredas separate investment packages.


- Fitting of heat allocators on the radiators of allend users from the residential sector;

- Fitting of thermostatic valves at the radiators inthe flats.

Investment package "Substations"

- Replacement of 64 direct substations by modernautomated indirect substations. The new substa-tions had to be equipped with flat-plate heatexchangers for space heating and domestic hotwater, motor-valve for the space heating loop,heat-control valve for the DHW, circulation pumpfor the space heating, circulation pump for DHW,differential pressure regulator, programmable reg-ulator with weekly and hourly control schedule.

- Introduction of a system for automatic control inthe rest 140 existing indirect substations, whichincluded motor-valve for the space heating systemloop, heat regulation valve for the DHW, circulationpump for DHW, differential pressure regulator, pro-grammable regulator with weekly and hourly con-trol schedule.


- Replacement of 680 m depreciated trenchpipelines (laid in foam concrete) from the water-based heat transportation network by new pre-insulated pipes.

- Replacement of the existing gland compensatorsin the water-based heat transportation network by

new expansion joints - 66 units.

- Upgrading of the steam main South - from theBelorussia Square to the Railway Bridge - replace-ment of pipelines laid in an unpassable channel,by new ones, laid above the ground.

- Installation of a frequency converter for operationof the winter networking circulation pump at vari-able speed. (Table 2.)

The estimated reduction of GHG emissions was 12817 t/year.

The possible sources of funding for the projectoutside the targeted funding from the GlobalEnvironment Facility were the NEPF, the NationalTrust EcoFund, the World Bank, the DH companyin Gabrovo, bank loans and contributions by DHend users.

Updating of the studyIn February 1999, the study about the state of thedistrict heating system and the envisaged activi-ties for improvement of its technical and environ-mental performance was revised. The technicaland economic indicators of the company by 1998and the indicators related to environmental protec-tion were reviewed and updated.

Since the spring of 1994, in connection with theintroduced restrictive regime of water supply(water rationing during a certain part of the 24-hour cycle) and as a result of the poor financial

Table 2. Financial indicators of the project included in the short list of measures (before update)

Investment packages

TOTAL

thousand USD

487.8

859.0

779.2

416.6

911.5

848.0

21.1

23.0

21.8

7.8

6.8

7.1

thousand USD years%

1.

2.

3.

Investments

2126.0 2176.1

Net Present Value Pay off periodInternal Rate of Return


Buildings

Substations

Heat transportation network

state of the district heating company, DHW supplyhad been suspended even during the heating sea-son. As a consequence, a portion of the designload for DHW to the amount of approximately 19.6MW and annual consumption to the amount ofapproximately 15 000 MWh heat load were can-celed. During the 1998-1999 heating season thetechnical opportunity for DHW supply wasrestored. By the end of 1998, however, only 14 sub-stations had been re-connected to the use of DHWservice. In 2000-2001, rationing of water supplywas introduced anew, which led to additional tech-nical difficulties related to the operation of facilitiesand to solutions, which made the individual proj-ects more expensive. Upon resumption of normalwater supply the share of subscribers, who wishedto use the domestic hot water supply services, wasstill negligible. This circumstance providedgrounds for exclusion of the components, servicingDHW systems, from the activities for replacementand modification of the substations, both becauseof the seasonal nature of the service and the poorinterest on the part of the end users.

The dynamics of the number of heat consumers inthe recent years, especially in the industry sector,had put forward significant changes in the condi-tions, under which the project was conceived andevolving. The market for industrial steam manifest-ed a steadily diminishing trend. (Table 3)

Because of the transition of a portion of the endusers from industrial steam to hot water as heatcarrier, and the resignation of the remainingsteam consumers along the steam main South,the further use and maintenance of the envis-aged-for-reconstruction section of the steam-based pipeline network became inefficient and itwas disconnected from the network in the sum-mer of 1999. This development providedgrounds for excluding the rehabilitation of this

section from the project scope. The replacementof direct substation by new indirect ones, con-ducted in the year 2000, permitted a more pre-cise assessment about the investment require-ments for the investment package "Substations".

All these considerations imposed the need ofrevision of the activities covered by the projectand the investment program. The investments forsubstations were optimized, whereby the com-ponents related to the reconstruction of the sys-tems for domestic hot water were cancelled. Theinvestments for the steam-based heat trans-portation network were also cancelled. Theupdated project parameters were as follows:(Table 4)

Under the applied economic assumptions - nomi-nal interest rate 10.2% and inflation rate 3% - thefinancial indicators of the project were as follows:

Payback period 4.1 years

Net Present Value USD 1 827 000

Internal Rate of Return 24%

The avoided GHG emissions were estimated at 10406 t/year or above 156 thousand tonnes for theentire project life cycle.

By the end of 2002, in the course of processing ofthe preliminary results, a serious drop in the num-ber of connected subscribers was identified.Despite the achieved minimizing of the heat carri-er losses in the water-based heat transportationnetwork, the losses during transportation and dis-

tribution in the Household Heating Divisionshowed a relative increase. A question emergedwhether and to what extent the application ofmeasures in heat distribution and heat end usewas effective under the existing configuration ofthe generation capacities of the plant and the cur-rent operation cycle. The district heating companywas operating inefficiently and at considerablelosses. It was supposed that there were possibili-ties for improvement of its economic parametersand for reduction of emissions. It was necessary toassess the opportunities for attraction of resignedcustomers and eventually for attraction of newones. Account was also taken of the fact that thegas distribution company, registered on the areaof Gabrovo, was undertaking serious steps forconstruction of a gas distribution network. The DHcompany had to take account also of the conse-quences from the implementation of the commit-ments undertaken by the country in the context ofEU Directive 2001/80/ÅÑ with respect to curtailingof certain air polluters from the large combustionsystems, which applied also to ToplificatsiyaGabrovo. All these circumstances made neces-sary the conducting in 2003 of a new study of thedistrict heating company in order to seek for anoptimized technological scheme and operationcycle of the system. The selection of the mostappropriate decision was based on a technicaland economic assessment of different scenarioswith a view to achievement of minimum productioncost of the generated heat.

Table 4. Project indicators after update

Table 3. Trend on the market for industrial steam

1996

29

86 065

Year

Number of consumers

Steam sold to industry, MWh/year.

Investment packageInvestments

thousand USD

Annual savings

thousand USD thousand USD

Energy savings for 15 years

1. Buildings

2. Substations

3. Heat transportation network

Total

289

490

740

1519

77.4

116

174

367.4

1161

1740

2610

5511



Heat equivalent of fuel 64 GWhElectricity 11 223 MWh

Heat equivalent of fuel 422 GWhElectric power 11 223 MWh

1.

2.

3.

1997

20

59 400

1998

15

38 437

1999

12

23 325

2000

9

10 327

2001

3

7632

2002

3

5655


The design followed the logical sequence of appli-cation of the energy conservation measures in theframework of the procured financing. Since a con-siderable portion of the financing had to be attract-ed funding from the NEPF, the original efforts wereoriented towards activities procured for underother programmes, targeted funding allocated byGEF, funds allocated by the district heating com-pany and contributions by the end users.


In May 1999, EnEffect, joint-ly with ToplofikatsiyaGabrovo SP JSCo., workedout a Technical AssignmentNote for delivery, installationand servicing of 20 000 heatallocators for individualreading of heat consump-tion by the subscribers ofthe Household HeatingDivision of ToplofikatsiyaGabrovo. One of the termsfor submitting bids was theexplicit requirement that thedevices should be of theevaporation type. The ten-der was announced in fullcompliance with the restric-tive procedure that only

candidates, invited in writing by the district heatingcompany, should participate. The procedure wasapproved by the former Committee of Energy.

In June 1999, a study of the thermostatic valvessizes 1/2" and 3/4", available on the Bulgarianmarket, was conducted with respect to manufac-turer, type, performance characteristics of thevalves and prices for quantities above 500 units.The study revealed that a group delivery of ther-mostatic valves of the most common configurationfor residential buildings (with a sensor built in thehandle) would allow obtaining a price, which is20% to 30% lower as compared to the price forindividual purchases at retail prices.

Investment package "Substations"The activities on the substations began with thedevelopment by EnEffect of a group of projects,aimed to serve as technical assignment notes forconducting of tenders for reconstruction of indirect

substations and replacement of direct substations.

In May 1999 EnEffect worked out and coordinatedwith Toplofikatsiya Gabrovo a TechnicalAssignment Note for a project design for introduc-tion of automatic controls in existing indirect sub-stations and replacement of existing direct substa-tions by new indirect ones. In June 1999, the proj-ects for reconstruction of 6 existing indirect sub-stations and replacement of 16 direct substationswere ready. The replacement projects covered themost common types of substations in terms of sizeand capacity.Thanks to the introduced type-basedapproach for the direct substations the projectsturned out to be applicable to 34 substations, with-out revision or at minimum re-design.

In May 2001, projects were developed for recon-struction of further 6 existing indirect substations.The existing indirect substations did not allowapplication of common type-based approach andit was necessary to develop individual projects foreach concrete case. The reconstruction com-prised installation of modern equipment for controlof the space heating systems at the substationlevel.

The projects, developed at a high technical level,provided equitable conditions for the participantsat the pricing of the offers for delivery of equip-ment and labour.

Investment package "Heat trans-portation network"

In March 2001, a project was developed forreplacement of four gland compensators in thewater-based heat transportation network by newexpansion joints. The activities related to thereplacement of the section laid in foam concretewere to be financed mainly by the NEPF. Becauseof the change in the preliminary negotiated termsof financing from the NEPF the design phase waspostponed.

The main obstacle to the application of frequencycontrol of the winter circulation pump was thetechnological requirement that such control shouldbe applied after completion of the reconstructionof the existing indirect substations and replace-ment of the direct ones. The technical pre-condi-tion for the application of frequency control, wasthe availability of only indirect substationsequipped with a regulating valve for the maintain-ing of a pressure difference between the supplyand return main of the primary carrier. The techni-cal obstacle, provoked by the supply of the wintercirculation pump rated for medium voltage of 6 kV,instead of 380 V low voltage, was removed at theend of 2001.

PROJECT DESIGN

Investment package "Buildings".Investment package "Substations".


Principal scheme of a new modern substation,equipped with control devices


Selection of subcontractorsThe procedure for selection of subcontractor fordelivery and installation of heat allocators wasconducted by a commission with the participationof representatives of Toplofikatsiya Gabrovo, theCommittee of Energy and EnEffect. By 1999 themarket for devices and technology for heataccounting was not yet sufficiently developed. Inthe process of working out of the TechnicalAssignment Note it was found out that there areonly three companies operating in this field in thecountry, which would be able to bid for implemen-tation of an order for 20 000 heat allocators in theframework of four months. One of them did notapply for participation in the tender. The bids wereevaluated on the basis of a complex of criteria fortechnical and financial qualities of the proposals.In July 1999, the company Brunata Bulgaria Ltd.was declared winner of the tender. The deliveryand installation of the equipment was financed bythe former Committee of Energy and by theGEF/UNDP. A total of 20 160 allocators were deliv-ered and installed in two stages, prior to the begin-ning of the 1999/2000 heating season, and endusers from the residential sector were entirely cov-ered by the heat accounting service. The share ofthe equipment financed by GEF accounted for37% of the total. An integral component of the sub-contractor's quotation with respect to the introduc-tion of the heat accounting system was the infor-mation campaign, launched with the aim to popu-larize this service among DH end users.

A campaign for introduction of thermostatic valvesat the subscribers of the District Heating Companywas run in parallel with the campaign for raisingpublic awareness on the issue of heat accounting.The District Heating Company negotiated with twomanufacturers - Sakar-Istra JSCo., town of Svoge,and Danfoss SP Ltd., Sofia - terms of contract,which allowed it to facilitate its subscribers by sell-ing the products of these manufacturers underconsignment at preferential prices and to ensurefitting of the valves by its own installation teams.The citizens took advantage of this opportunityand by June 2000 approximately 4000 TRVs weresold and installed.

In the summer of 2000, EnEffect initiated a newcampaign for introduction of TRVs at the end usersthrough a scheme for targeted incentives. EnEffectannounced the tender for delivery of 2000 TRVs inJune 2000. Seven representative offices of well-established world manufacturers and the only

local manufacturer were invited to participate.Every participant submitted technical documenta-tion and samples. The evaluation commission wascomposed of representatives of EnEffect,Toplofikatsiya Gabrovo and the GabrovoMunicipality. The bids were ranked by a group ofindicators - price, quality, warranty, delivery term,advance payment request - each of which wasevaluated according to a scale of scores. DanfossSP Ltd. was declared the winner. The companyoffered a User Guide free-of-charge with everyvalve. It was negotiated that the installation of thevalves would be performed by employees ofToplofikatsiya Gabrovo under the targeted incen-tives scheme and will be financed by the projectand would be free-of-charge for the subscribers.

In 2000 and 2001, EnEffect organized and con-ducted a series of competitions in connection withthe reconstruction of the indirect substations andreplacement of direct substations. A two-phaseprocedure was applied (including direct negotia-tions as well). Invited to participate were pre-selected companies. The evaluation commissionwas composed of representatives of ToplofikatsiyaGabrovo, the Gabrovo Municipality, EnEffect andconsultants. The bids were ranked according tothe above indicators, for which a range of scoreswas assigned. Under the conditions of competi-tion, attractive prices were achieved for implemen-tation of the planned activities. The worked outtechnical assignment notes and procedures forevaluation of the bids may be used also during thefollow-up phases of investment in the system.

In May 2000 a competition was announced forreconstruction of six existing indirect substations.These were the substations of the demonstrationsites - three of them in the Otetz Paisii GeneralSecondary School, and another three in thedemonstration apartment block, 11-19 TotaVenkova Street. All of the five invited companiessubmitted bids. Under conditions of competitiveprices, Thermokomplekt Ltd., Sofia, was declaredthe winner by a secret vote. In August 2000 a ten-der was announced for replacement of five directsubstations by new complete indirect substations,equipped with control devices. Five companiessubmitted bids. The complex evaluation declaredBrunata Bulgaria Ltd., Sofia, to be the winner withconsiderable amount of scores ahead of the rest.The district heating company played an importantrole in the contractual relations related to these twotender procedures. It undertook the obligation toperform part of the dismantling of the old equip-ment and the installation of the new one as equitycontribution to project financing. The assemblysupervision was provided by the subcontractors.

In May 2001, a tender was announced for replace-ment of four direct substations by new completedindirect substations, equipped with control

IMPLEMENTATION

Selection of subcontractors. Installationworks. Project training. Investment recovery

mechanism. Training of the personnel

Intermediate evaluation of project implementation by an international review team, December 2000.


devices. Six companies submitted bids. The com-plex evaluation revealed very close results andafter secret voting Thermokomplekt Ltd. wasannounced the winner. In June 2001, a tender wasannounced for reconstruction of six existing indi-rect substations and their equipment with auto-matic controls. Five companies took part in the ten-der. The subcontractor was supposed to conductthe dismantling operations, delivery and installa-tion of the equipment, tuning, testing, test runs andcommissioning. The complex evaluation identifiedFesto Bulgaria SP Ltd., Sofia, as the winner. In May2001, another tender was announced for replace-ment of four gland compensators by new expan-sion joints in the heat transportation network ofToplofikatsiya Gabrovo. Three companies partici-pated. The bids were ranked by a group of indica-tors - price, advance payment requirement, quali-ty of the equipment, technical performance data,warranty - by means of scores. On the basis of thecomplex evaluation, Direct-Tsoko Nehrizov SP Co.was declared as the winner.

In response to the decisions made during thereview of the advance of project implementation ofMarch 2002 and in connection with the changedcircumstances, EnEffect, together with Toplo-

fikatsiya Gabrovo and in accord with the Ministryof Energy and Energy Resources worked out an"Assignment Note for Study of the Opportunitiesfor Reconstruction of the District Heating System inthe city of Gabrovo". The main task of the studywas to propose a solution for optimized techno-logical scheme and operation cycle of theGabrovo DH system. After a competition, in whichpreliminarily invited companies participated, thework was assigned to the Energy Institute JSCo.,Sofia. One local and one international consultantwere invited to take part in the evaluation of thework performed by the selected subcontractor.

Installation works

Package "Buildings"

After the delivery of heat meters in 1999 in onebatch, teams from Toplofikatsiya Gabrovo con-ducted the installation. The availability of meteringdevices in the substations was of decisive impor-tance for abolishment of the practice of billingaccording to the heated space. The centralizedtender for delivery of the units contributed to mini-mizing of the costs. The fact that the tender washeld in compliance with the requirements of the

World Bank was a guarantee for the high qualityand reliability of the equipment. Purchasing theheat meters from one supplier allowed inter-changeability, simplified maintenance and guaran-teed servicing. Reading the data by means of theterminals eliminates the subjective factor and alldevices are read at one and the same point of time- at midnight of the last day of the month. The dataare transmitted in digital format and the probabili-ty of error and manipulation is reduced to the min-imum. Consumption data collection in electronicformat facilitates considerably their processing,preparation of the bills and performing referencechecks, and hence leads to improvement of thequality of the service provided to subscribers. Theavailability of heat meters in the substations wasone of the technical prerequisites for application ofheat accounting and billing according to the realheat consumption.

The installation of the heat allocators was per-formed by Brunata Bulgaria Ltd. One of the majorproblems related to the introduction of heataccounting - ensuring conditions for planned andfree access of the installation teams to the sub-scribers' dwellings - was successfully resolved.This was made possible within four months onlythanks to the strict organization, precise hourlyschedule and its broad announcement via thelocal press and on-the-spot notices by blocks andentrances.

Toplofikatsiya Gabrovo became the second districtheating company (after Loznitsa), in which heatallocators were generally installed, and the firstone in which a heat accounting project was imple-mented on such a scale. The "top-down" approachused for introduction of the heat accounting,whereby the allocators remain property of the DHcompany (rather than of the individual end user)and are recorded among its long-term assets, wasinnovative for Bulgaria. The fact that heat alloca-tors of one common type were installed at all sub-scribers allowed performance of the heat account-ing service by the company itself as a joint activitywith the equipment supplier under the shared dis-tribution of savings technology. In this way, fourworkplaces were preserved.

In July-October 1999, part of the subscribers, whohad entirely stopped their radiators, appreciated

Electronic unit of the heat meter Notice in the "100 Vesti (100 notices)" newspaper for publicannouncement of the schedule for installation of the heat allocators

New modern DH substation

Radiator in the demonstration apartment block,equipped with TRV and heat allocator


the benefit from heat accounting and applied forre-connection of one or two of their radiators, sinceit was already possible to use the radiators as perindividuals' preferences and financial ability. Thus,the number of the fully disconnected dwellingswas reduced by 112. This was a form of two-waypartnership between the supplier of the serviceand the customers.

- the subscribers obtained the opportunity to paybills made on the basis of the real consumption ofthe radiators, without having to pay for the deviceand the installation works;

- the DH company, on its part, was able to fulfillone of its objectives [6] - to retain and possiblyincrease the number of its subscribers.

The intermediate recording of the readings inJanuary 2000 (immediately after the installation ofthe heat allocators) had an important psychologi-cal effect. It provided an opportunity for the sub-scribers to get the immediate idea about the theircurrent heat consumption. The readings demon-strated that those who had applied some limitationto their consumption, were paying considerablyless than in the case if the distribution would havebeen performed as a function of the heated space.The January 2000 bills of numerous customerswere relatively low - under BGL 50, and 842 sub-scribers were reimbursed for collected excesscharges. During the annual balance drawing onthe bills for the 1999/2000 heating season, thenumber of subscribers who had to be reimbursedfor surcharged bills, was 638, and the amount tobe paid back was BGL 24 603.

After completion of the 2001/2002 heating season,balance drawing on the heat-consumption billswas performed. As a result from that balancedrawing, money to the total amount of BGL 224769 was refunded to 2305 subscribers. At thesame time 2849 subscribers had to pay addition-ally different amounts to the total of BGL 222 779.The deviations between the amounts due and thesurcharged amounts were in the range of 10%.These facts prove that:

- heat accounting allows to outline the individualprofile of every consumer and to apply a moreequitable drafting of the bills, as compared to cal-culation of the consumption rates according to theheated space;

- the technical devices permit control of the heatconsumption bills in compliance with the prefer-ences and the financial capacity of the end users.

The targeted investments scheme with respect tothe introduction of the thermostatic valves, envis-aged that in the case of purchasing one or moreTRVs, the subscriber would obtain one valve,including installation, for free - on the account ofthe project. Every subscriber had the right to takeadvantage of this opportunity only once. Citizensqualifying for energy assistance benefits had theright to obtain one TRV for free, including installa-

tion. This approach allowed even low-incomehouseholds to take part in the project. Free valvesand installation service were provided also to theresidents of the demonstration apartment block.The applied scheme of distribution of the grantfunding provided an opportunity to diminish theburden of investment costs on the budgets of theaffected households. The scheme was appliedduring the period July 2000 - December 2001. Thedistribution and installation of the valves were per-formed by teams of Toplofikatsiya Gabrovo, whichguaranteed observation of the principle of distri-bution within the three target groups envisaged bythe program.

The incentive campaign was broadly reported inthe local press and by the local broadcasting com-panies. Every subscriber, who had obtained athermostatic valve under the targeted incentiveprogram, received also a User Guide, developedby the valve supplier, the Danfoss Company. Theincentive scheme of "a free-of-charge thermostaticvalve for every purchased valve" allowed distribu-tion of 1533 TRVs by December 2001. In this waythe purchase of 2570 TRVs was leveraged. Onevalve allocated free of charge, leveraged the saleof 1.7 valves on the average. The incentivescheme demonstrated that it was applicable toother modalities involving partial grant financing.

The residents of the demonstration apartmentblock obtained, for free, 235 TRVs, installed on theradiators in their flats. The degree of penetration ofTRVs in the demonstration block reached 71%. Inone of the three substations of the same blockpenetration of 90% was achieved. This may beviewed as a favourable exception, rather than as arule in the light of the following circumstances:

- some of the subscribers from the demonstrationapartment block had accumulated overdue pay-ments to the company and did not qualify forreceiving thermostatic valves for free;

- another part of the residents had fully resignedfrom the district heating service and, in order toreceive thermostatic valves, had to resume theirsubscription;

- some of the flats were unoccupied, and the own-ers did not respond to the opportunity to obtainthermostatic valves.

The third end-user group, to which the targetedinvestments scheme was oriented, were the sub-scribers who had the right to targeted energyassistance benefits for space heating. The list ofthese subscribers is a dynamic figure, and theirnumber is changing month by month, bothbecause of changes in the social status of the sub-scribers and because of changes in the regulato-ry framework. By August 2000, the list contained494 confirmed subscribers qualified for socialassistance benefits. Irrespective of the dynamicsof the list, this number remained constant. TheGabrovo heat supply company, again, forestalledthe events. The availability of heat allocators at allsubscribers and the operating incentive systemdid not allow the company to participate in the jointprograms [4, 5] of the Ministry of Labour andSocial Policy and the former State Energy andEnergy Resources Agency for equipment of theflats of these citizens with TRVs and heat alloca-tors. Thus, in real terms, the targeted incentivescheme in the framework of the project was thesole mechanism under which this group of endusers could receive free of charge one thermosta-tic valve. Despite the broad announcement by themedia, by the end of the campaign in December2001 it was found out that the number of sub-scribers from this group, who had obtained a ther-mostatic valve for free including installation, was232, i.e. the share of penetration among this end-


User Guide, developed by Danfoss, the TRV supplier

Occupants of demonstration apartment block talkingto representatives of Toplofikatsiya-Gabrovo SP JSCo.and EnEffect

Interview with a representative of the occupantsof the demonstration apartment block


user group was below 50%. The existing opportu-nity for full coverage of the subscribers qualifyingfor energy assistance benefits for space heating,in terms of equipment with thermostatic valves,was not realized in the best possible manner,because of the low activity of these subscribers.The lack of capacity for some subscribers to afforddistrict heating, was not a justified reason for theirexclusion from the scheme. A more active cam-paign through the media might have contributed tothe achievement of a better effect.

Anyway, the majority of the subscribers tookadvantage of the available opportunities for deliv-ery and installation of TRVs under the differentschemes. By mid-May 2003, the number ofinstalled TRVs in the system was 9021, and thesaturation rate of end users with TRVs reached45%. Since the project start, the subscribers hadinvested in TRVs personal funds to the amount ofnearly USD 91 thousand, which was a consider-able contribution on their part. A certain delay had,however, been noted in terms of the rates of pen-etration of TRVs in the system. The most probableexplanation of this trend, was that the number ofcustomers possessing the necessary purchasingability had reached the "point of saturation withTRVs", and the rest of the subscribers had neitherthe intention, nor the financial ability, to have suchvalves installed. Unfortunately, it is difficult to ratethe place of Gabrovo, with respect to the satura-tion of subscribers with TRVs, as compared to theother district heating companies in the country,since there is no reliable information on this issue.

Package "Substations"

In the year 2000, six indirect substations werereconstructed, and three direct substations werereplaced by indirect ones. In 2001, six direct sub-stations were replaced by indirect ones, and sixindirect substations were reconstructed.

The activities related to reconstruction and

replacement of substations during 2000 and 2001,were stamped by principle differences withrespect to the contractual relations with the sub-contractors. Under the approach prevailing in theyear 2000, the district heating company played asubstantial role in the installation activities. Afterthe delivery of the equipment, the company per-formed considerable amount of the activities relat-ed to dismantling the old equipment and installa-tion of the new one in the form of corporate contri-bution to project financing. This approach hadraised considerably the role of ToplofikatsiyaGabrovo in the process, however it had somewhatcomplicated the co-ordination between EnEffect,Toplofikatsiya Gabrovo and the subcontractors.

In the course of the negotiations in 2001, the roleof Toplofikatsiya Gabrovo was reduced to disman-tling activities and preparation of the site, afterwhich the responsibility for the quality of workman-ship of the engineering service was vested withthe subcontractors. The practice had, however,indicated that the best option of contracting theengineering services for reconstruction andreplacement of substations was "turn key" assign-ment to a subcontractor selected by tender andincorporation of a "Performance guarantee" clausein the contract. Specific attention should be paid tothe survey of the site by potential subcontractors,prior to their proposal submitting. Emergence oftechnical problems and additional unforeseencosts is possible in the cases where such prelimi-nary project site visit has not been conducted.

Package "Heat transportation network”

After a tender for selection of subcontractor, heldin September 2001, replacement of four glandcompensators was conducted. The compensatorsof two of the trouble-causing heat transmissionchambers and the reinforcing structures werereplaced. Representatives of ToplofikatsiyaGabrovo took part in the installation works andaccumulated valuable experience for their futureactivity.

The significant changes in the peak heat load andheat consumption during the recent years haveimposed the need of changes in the characteris-tics of the heat transportation network. Adjustmentof the supplied quantity of heat is effected by con-trolling the heat carrier flow rate. In order to reduceelectricity consumption for transportation of theheat carrier, in 1998 the DH Company had initiatedundercutting of the pump wheel blades. Since thebeginning of 2002, the company has commis-sioned into regular operation a new networkingcirculation pump. The optimized performancecharacteristics of the network, at the backgroundof the reduced heat load, allowed operation of thepump at 260 kW capacity, which was by about 100kW less than the operating parameters of the mainwinter circulation pump after the undercutting ofthe blades. The electric motor of the new pump,

fed by 380 V, creates pre-conditions for applicationof frequency control.

Project financingThe implementation of the full packages of meas-ures envisaged by the project required a consid-erable amount of funding, which could be pro-cured only through combining funding from differ-ent sources. In 1998, under the target credit lineestablished by the World Bank for all district heat-ing companies in the system of the Committee ofEnergy, heat meters were delivered for substa-tions. Toplofikatsiya Gabrovo received 204 heatmeters and 3 terminals for automatic collection ofthe readings of the heat meters. The debt underthe credit was serviced by the district heatingcompany. In this way all substations wereequipped with one and the same type of heatmeters and billing according to their readings waslaunched. This was an important step in the direc-tion of introduction of heat accounting.

With funding provided under the PHAREProgramme and as part of the “Regional EnergyConcept” for the Lovech Region, seven existingsubstations in cooperative residential buildings,subscribers of Toplofikatsiya Gabrovo, werereplaced by new modern ones with automatic con-trols to the total value of ECU 32 095.

A significant share of the money for implementa-tion of the demonstration project had to be provid-ed by Toplofikatsiya Gabrovo. The company tookon itself the burden of the investments in heatmeters, heat allocators and repairs on the heattransportation network. The money of the citizenswas invested in the thermostatic valves and the

State of direct substation prior to and afterreplacement

State of the heat transportation network prior toand after replacement of the gland compensatorsby expansion joints

Intermediate evaluation of project implementation by the international review team, December 2000

GEF grant was used for partial funding of the"Buildings" and "Substations" packages.

The main portion of project financing was expect-ed to come from attracted funding from theNational Environmental Protection Fund. In compli-ance with the financial scheme negotiated with theMinistry of Environment and Water and incorporat-ed in the Project Document, signed on May 12,1996, the NEPF was supposed to contribute toproject financing by a sum to the amount of USD815 thousand. According to the preliminary inten-tions this money had to cover the costs of rehabili-tation and replacement of substations in residentialand municipal sites, as well as the installation ofTRVs at the end users from the residential sector.The beneficiary of the expected grant was sup-posed to be the Municipality of Gabrovo. Such anapproach would have had a great significance forthe forthcoming restructuring of ownership rightson district heating companies and enhancement ofthe role of municipalities. However, as a conse-quence of the changes made in the status and pro-cedures of the NEPF with respect to lending grantsand the replacement of grants by zero-interestloans for the municipalities, it became necessary toseek for other modalities of application for funding.

At the end of the year 2000 EnEffect assistedToplofikatsiya Gabrovo to work out a proposal tothe National Environmental Protection Fund for aZero-interest loan to the amount of USD 489 thou-sand as the first stage of the application for fund-ing. The proposal comprised the costs for replace-ment of 59 direct substation by new indirect ones,replacement of the control systems of 125 indirectsubstations and replacement of 4 gland compen-sators by new expansion joints. The intentions wereto apply during Stage Two for another USD 326thousand. The proposal was accompanied by let-ters of support by the Regional Inspectorate onEnvironment and Water Veliko Tarnovo, theGabrovo Municipality, the State Energy and EnergyResources Agency and EnEffect. It was submittedto the National Environmental Protection Fund onbehalf of Toplofikatsiya Gabrovo at the beginning of2001. Unfortunately, the application for a loan wasnot honoured. The deteriorating financial state ofdistrict heating companies as a consequence ofthe diminishing heat loads for residential andindustrial end users did not allow procurement offinancing of the project through a commercial bankloan. The investments made till September 2003have been financed as shown in Table 5.

The major portion of the targeted funds from GEF(more than 25% of the total investments) has beenalready spent. The district heating company alsomade a significant contribution to the project. It isa rewarding fact that end users also participatedwith almost USD 91 thousand (about 21%), mainlyfor equipment (thermostatic valves), for which thecampaign for targeted incentives for consumersplayed an important role. The still pending invest-ment activities depend above all on the allocationof financing by the Enterprise for Management ofEnvironmental Protection Activities (the formerNational Environmental Protection Fund) toToplofikatsiya Gabrovo or the procurement of alter-native financing from some other source. An addi-tional complication emerged from the fact that theprocedure for lending financing was changedonce again and the Fund was transformed into abudgetary institution, which encumbers financingof the demonstration project. Other forms andopportunities for presentation of the project toother potential sources of financing and pro-grammes have been used in the course of projectimplementation as well in order to procure therequired additional money for completion of theproject.

In October 1998 the project "Energy EfficiencyStrategy to Mitigate GHG Emissions. EnergyEfficiency Demonstration Zone in the city ofGabrovo, Republic of Bulgaria" in general, and thesubproject on the district heating system in partic-ular, was presented at a seminar on CapacityBuilding for Joint Implementation (JI) in Centraland Eastern Europe. Among the participants, therewere a considerable number of representativesfrom the Netherlands. In compliance with theestablished procedure for application under the JImechanism, the proposal was addressed to theMinistry of Environment and Water and the Ministryof Trade and Tourism of the Republic of Bulgaria. InApril 1999, the subproject for the DH system inGabrovo was formulated as a project for funding inthe framework of the PSO Programme for econom-ic cooperation between the Netherlands andBulgaria for 1999. Neither of the applications wasapproved.

Investment recovery mechanismThe money invested in the project should be paidoff from the achieved reduction of current costs forall participants benefiting from the project results.


Table 5. Project financing by sources and activities

Instance from the installation works on replacement of gland compensators by expansion joints, September 2001

Measure

Heat meters in substations

Heat allocators

TRVs

Replacement of direct substations

Automation of indirect substations

Compensators

New winter circulation pump

Repairs on the heat transportation network

Study (2003)

Total

Funding source AmountEnd usersGEF/UNDP "ToplofikatsiyaGabrovo SP JSCo.

28.6

20.2

33.0

20.1

3.0

6.4

111.3

90.8

90.8

120.0

83.7

111.0

35.5

21.3

4.0

5.0

45.0

6.4

431.9

thousand USD

120.0

55.1

2.5

1.2

1.0

5.0

45.0

229.8

Preservation of the balance of interest among thedifferent participating parties is an importantachievement of the project.

With the implementation of the project, energy endusers obtained the opportunity to control their heatconsumption - depending on their requirements atany specific point of time - by means of the ther-mostatic valves. Consumers' commitment to ener-gy conservation reflected on the readings of theheat allocators. The system of heat supply to theresidential sector became more flexible and moreconvenient for the end users. This new qualityrelieved the DH system from its major shortcoming- the absence of opportunities for control - andimproved its competitiveness towards the otheralternatives for space heating.

The demonstration project at ToplofikatsiyaGabrovo contributed to stabilization of the compa-ny under the conditions of deteriorating indicatorsfor total efficiency of the system because of thedrop in production output and diminishing sales ofheat and energy. The company reduced theabsolute share of losses in transmission and distri-bution. Additional benefits for the DH company,were: (1) the return of part of the subscribers, whohave resigned from its services in 1999, and (2)the weakening of the trend toward increase of thedisconnected heating space. Despite the signifi-cant drop in heat generation and sales, and itsnegative impact on efficiency, the company suc-ceeded to cut the trend of accumulation of losses,to minimize them and even to report profit in 1999and 2002 under conditions of subsidized heatprice for end users from the residential sector.

The grant from GEF to date amounts to USD 111thousand or more than 25% of the investmentsmade. Although this amount appears to be quitehigh, it was Toplofikatsiya Gabrovo that played adecisive role for the implementation of the projectwith an investment of about USD 230 thousand or53% of the total. The improved financial indicatorsof the company will allow it to continue to operateunder an unfavorable situation on the district heat-ing market and in the years to come to be able toobtain financing, including bank loans, for furtherrenovation of the system. One of the prerequisitesfor this was the Study of the Opportunities forReconstruction of the DH System [8], including theheat source, through the introduction of alternativeenergy carriers. The study was conducted in 2003with funding provided by GEF.

End users also took up part of the investment bur-den, mainly with respect to the purchase andinstallation of TRVs. This had its logical explana-tion, since TRVs have a considerable life cycle,they remain their property and can be paid packfrom the achieved savings.

By its nature, the demonstration project is aninvestment project suitable for bank financing. Animportant condition of Bulgarian banks for lendingcredit, however, is that the borrower should pro-vide at least 30% of the project costs. The projectsatisfies this condition by virtue of the fact that theinvested equity assets in it amount to 53% of thetotal value of investments. The availability of a sta-ble district heating market is a matter of exclusive

importance for bank financing of projects in districtheating systems. The market share, on which thedistrict heating companies may rely, will be finallydetermined upon completion of the process ofrestructuring and the reform of heat prices.

The start of the project "Energy Efficiency Strategyfor Mitigation of GHG Emissions. Energy EfficiencyDemonstration Zone in the city of Gabrovo,Republic of Bulgaria" (May 1998) preceded therestructuring and privatization of the banking sys-tem in Bulgaria. That was the reason for envisag-ing in its budget funds for direct financing of thedemonstration subprojects. This opportunityturned out to be of decisive importance for theirimplementation in practice. The success of therestructuring of the banking system in the countryand its ever-growing orientation towards the legalentities, municipalities and the citizens gives usgrounds to anticipate that the demonstration proj-ect could be successfully replicated in othermunicipalities or district heating companies withthe help of bank loans. By the end of 2003 some ofthe typical issues related to the operation of thedistrict heating companies, like the mass introduc-tion of heat accounting, reconstruction andreplacement of substations, etc., have to a largeextent found their adequate solution, so that it maynot be expected that these problems will be pres-ent in any future replications of the project. What isimportant in this case is that the project possess-es a considerable potential for energy and moneysavings to be able to cover all additional costsrelated to commercial project financing (paymentson loan principal, interest and other costs).

Training of the personnelIn connection with the introduction of heataccounting Toplofikatsiya Gabrovo set up a teamfor installation, reading and maintenance of heatallocators. This was a form of joint activity betweenBrunata Bulgaria Ltd. and Toplofikatsiya Gabrovo,which permitted to retain four jobs. The membersof the team were trained at Brunata Bulgaria Ltd.on how to dimension and install the heat alloca-tors, how to read and maintain them. Training bymeans of specialized software on how to calculatethe annual balance bills, was also conducted.

All activities related to the delivery and installationof the equipment were accompanied by training ofemployees of the district heating company on thetechnical and performance characteristics of thenew equipment. This was explicitly mentioned inthe contracts with the subcontractors. The newequipment was coming from different manufactur-ers and for that reason it was important for theservice personnel to get properly familiar with thenew programmable controlling and monitoringdevices in the substations.

Meetings and instruction sessions were held alsowith the people responsible for the in-house spaceheating systems in the residential sites and theresponsible officers in the public buildings.

The installation of the new expansion joints wasperformed as a demonstration session by the sub-contractor Direct - Tsoko Nehrizov SP Co., with theaim to train the operating staff of ToplofikatsiyaGabrovo on the details of repair and maintenanceof the units. The trained personnel acquired therespective skills on installation and operation ofexpansion joints, which would be applied in thefuture in the course of reconstruction of other sec-tions of the water-based heat transportation net-work. All subscribers, covered by the targetedincentive programme for introduction of thermo-static valves, were provided with a User Guidewith easy-to-interpret instructions on correct oper-ation of the thermostatic valves.


Toplofikatsiya-Gabrovo SP JSCo., view from the West

The staff of Household Heating Division in service to district heating end-users

MonitoringEnEffect and Toplofikatsiya Gabrovo kept accuraterecord of the course of project implementation.Ample information was collected, processed andanalyzed about fuel consumption, consumables,heat and electricity output and sales, and thetechnical state and performance of the variouscomponents of the district heating system.

With the help of the automatic electronic recordingdevice hourly data about the temperature and rel-ative humidity of outdoor air in Gabrovo wererecorded. This has allowed calculation of the actu-al degreedays for the city of Gabrovo, for severalyears in a row.

By means of the terminals, heat consumption datawas collected from the heat meters in the substa-tions. Monthly reports were drawn about the num-ber of consumers, the heated space and heat con-sumption rates for each substation individually.

Once a year, after the end of the heating season,specialized teams of Toplofikatsiya Gabrovo con-ducted reading of the heat allocators. These read-ings were then processed by means of the soft-ware supplied by Brunata Bulgaria Ltd. for the pur-poses of calculating the balance bills of the endusers.

The technical and economic indicators of the dis-trict heating company were determined on thebasis of the company's annual "Balance Sheet"

and "Income and Expenses Statement" for theperiod 1998-2002 and the periodical reports of thecompany, worked out for the MEER.

The invoices about purchased and distributed asbonus TRVs served the purpose of monitoring thetargeted incentives for end users to introduce ther-mostatic valves. The valves installed in the demon-stration block, were accounted on the basis ofwritten declarations signed by the subscribers.

The availability of sufficient information in terms ofboth quality and reliability was a guarantee forobjective evaluation of the project results.

Project results

Forestall introduction of shared distribution ofand control on consumption in the residentialsector with the aim to set in place effectiveincentives for efficient heat consumption

Heat accounting for all subscribers in Gabrovowas introduced in 1999. According to evidenceprovided by the Ministry of Energy and EnergyResources (State Energy and Energy ResourcesAgency) by March 2001 the number of buildingscovered by the heat accounting system exceeded30%, and by July 2002 it had reached 60% [3, 9].In this way the subscribers of ToplofikatsiyaGabrovo obtained the opportunity to manage theirheat consumption and to pay for the really con-sumed quantities of heat prior to the elapse of thedeadline for mandatory introduction of heataccounting, laid down in the Energy and EnergyEfficiency Act [2]. Thermostatic valves wereinstalled on 45% of the radiators equipped withheat allocators.

Modernization of substations through applica-tion of precision control depending on themeteorological conditions and the occupants'behaviour

12 indirect substations were reconstructed, whichcomprised installation of control and monitoringdevices. 9 direct substations were replaced bynew indirect ones, equipped with devices for auto-matic control. The effect of this replacement, interms of avoided loss of primary heat carrier, is

estimated at 225 m3/year or approximately 14.6MWh/year. A comparison of the aggregate resultsfrom the modernization and replacement of 9 sub-stations in residential buildings is shown on Fig. 1.On the basis of the monthly energy consumptionreadings for two years, with the respective correc-tion for heated space and meteorological condi-tions, a comparison was made with 9 similar sub-stations in terms of size and capacity, installed inanalogous buildings in terms of building envelopeand capacity of the in-house space heating sys-tems.

The dynamics of the heated space during the firstyear had a strong influence on the effect of theenergy conservation measures, while during thesecond year a stable trend of maintaining of therate of savings had been observed in the recon-structed and replaced substations. The aggregat-ed savings of these substations, placed underidentical climatic conditions, amounted to 419MWh for a period of two years or an average of23.3 MWh/year for one substation. These savingshave been achieved at the end users as a resultfrom the measures applied in the buildings andsubstations alone1. The theoretical extrapolation ofthis result with respect to all the 160 substations inresidential buildings in Gabrovo under the sameassumptions would produce annual savings to theamount of 3728 MWh. The applying of an amend-ment of 20% transmission and distribution lossesand 40% losses during the fuel transformation atthe heat source (on the average), leads to savingsin fuel equivalent at the inlet of the combustiondevice, rated at 6263 MWh/year.

Replacement of compensators with the aim todiminish the losses of primary heat carrier andupgrading of the networking circulation pump.

Four of the existing gland compensators werereplaced by new expansion joints. A new network-ing circulation pump was commissioned into regu-

MONITORING ANDRESULTS

Monitoring. Project results. Dissemination of the project results


1 The data about the available TRVs are not sufficiently representative, since they are based only on the invoices issued by computer, however in all of the monitored substations there are TRVs, although they are not fully equipped as yet.

Gavril Georgiev, M.Sc. (Eng.), Manager of HouseholdHeating Division, reviewing the data from the monitoring

lar operation at the end of 2001. The electricitysavings for the year 2002 as a result of this changewere estimated at 388 MWh. Despite the so farachieved electricity savings, the full potential ofthe measure may be realized only upon the com-prehensive reconstruction and equipment with

control systems of all the existing indirect substa-tions and the replacement of all direct substations.

Environmental benefits from the point of viewof climate change

The long-term monitoring of the operating results

of the Household Heating Division in Gabrovo bythe end of 2002 shows that the achieved heat sav-ings in comparison with the baseline 1996 amountto 10% for 1999, 15% for 2002, 14% for 2001 and15% for 2002, which makes a total of (cumulativefor a period of 4 years) 37.9 GWh of heat, 388MWh of electricity, or, as a value, more than USD1482 thousand. (Only full calendar years are con-sidered). This comparison was performed with adue account of the set of influencing factors, forwhich the necessary correction was made -dynamics in the connected heated space, meteo-rological factors, including the length of the heat-ing season, efficiency of the system of heat gener-ation, transportation and distribution. The effectexpressed in terms of avoided GHG emissions(cumulative for four years) amounts to 14 887 tCO2 equivalent or a mean average of 3719 t/year.(Table 6.)

Impact of factors external to the project

Some of the above mentioned results are not dueto the energy conservation measures implementedin the system. The investment programme was notimplemented to its full scope mainly because ofthe failure to obtain the envisaged funding from theEnterprise for Management of EnvironmentalProtection Activities (the former NEPF). Otherexternalities also had specific influence on theproject. The implementation of the district heatingreconstruction project proceeded under condi-tions of regulated increase of the prices of heat forthe residential sector and of stepped cancellationof subsidies for district heating. At the nationallevel, the debate on transfer of ownership rights ondistrict heating companies from the state to themunicipalities or to the private sector and on thefuture vitality of the district heating companies inthe light of the rising prices and their impact on thelow-income strata of the population and industry isstill going on.

In recent years the number of connected sub-scribers of the system in Gabrovo showed nochange, there was rather a certain slight increase.For the 2002/2003 heating season, however, it hasdiminished by about 1000 subscribers. The entire-ly disconnected heated volume has diminished,while the partially disconnected volume has great-ly increased. The existence of thermostatic valvesallows part of the heated volume to shift "dynami-cally" to the category of the partially disconnectedvolume. (Fig. 2).

The drop of consumption in the residential sectoris above all the result of the drastic self-imposedrestrictions of consumers and the significant num-ber of subscribers, who have resigned from theservices of the company for inability to pay theirbills for space heating. This has a negative impacton both the volume of sales of ToplofikatsiyaGabrovo and the production cost of generatedheat. On the other hand, this reflects on the quali-


* Electricity savings were realized only in 2002.

** The investments were accounted only until September 2003,while the technical and economic results of the company referto the period ending 31 December 2002.

Fig. 1.Comparison of the specific heat consumption of 9 automated and replaced substations in residentialbuildings with that of another 9 existing substations in similar buildings.

Nov

embe

r 01

Janu

ary

02

Mar

ch 0

2

May

02

July

02

Sept

embe

r 02

Nov

embe

r 02

Janu

ary

03

Mar

ch 0

3

100908070605040302010

0

Reconstructed and replaced substationsNon-reconstructed and direct substations

Wh/

(mon

th.m

3 .deg

reed

ay)

Results

Annual savings

Energy savings

Project life cycle

Payback period

Investments total

Host-party financing

Emissions reduction:

SO2

Nox

CO2

CO

ïðàõ

CH4

N2O

NMVOC

CO2 equivalent

Price per 1 t avoided CO2 equivalentfor the project life cycle

Unit

USD/year

heat MWh/yearelectricityMWh/year

years

years

USD thousand

USD thousand

t/year

t/year

t/year

t/year

t/year

kg/year

kg/year

kg/year

t/year

USD/t CO2 equivalent.

Project estimate

367 400

24 300748.2

15

4.1

1 519

304

148

29

9797

2.7

9.6

1030

1895

1030

10 406

9.7

By 31 Dec. 2002

As compared to1996 as a baseline

370 543

9457388.8*

1.16

431.9**

229.8

63.8

10.9

3510.9

1.02

3.8

400

645

400

3719

7.7

Table 6. Summarized project results

ty of the service, since in many cases a compro-mise has to be made with the norm requirementsfor indoor temperature. The effect is very negativewhen the disconnected heated volume in theframework of one substation exceeds 40%. Thisleads to higher bills for the rest of the subscribersin the building and generates public discontent.

The results from the operation of the district heat-ing company during the recent years demonstratea drop in the heat production output to the amountof four times the 1996 figure. As far as heat salesby the Household Heating Division are concerned,the drop is twofold. The peak load for end users ofdomestic hot water has dropped by 6.6 MW. A sig-nificant change has been noted also in the struc-ture of heat sales - in 1996 heat for the water-based heat transportation network accounted for45% of the sales, while in 2002 it accounted for asmuch as 86%. The forced by the current circum-stances operation cycle for heat consumption

above all for the needs of district heating limits theopportunities for electricity generation under theco-generation method, which would have allowedimprovement of the efficiency of production andreduction of the production cost of heat.(Fig. 3.)

As a consequence from the implementation of therepair programs in the heat transportation networkand the replacement of the compensators areduction of more than 2.5 times of the losses ofheat carrier in the water-based heat transportationnetwork has been achieved. The losses in trans-portation for the Household Heating Division havediminished in absolute figures by 2.8 GWh/year,however in terms of proportion they show a relativeincrease from 16.6% in 1996 to 23.1% in 2002.(Table 7).

Under these circumstances, the effect from theapplication of energy conservation measures issomehow "diluted" and becomes negligible at the

background of the diminished heat load due toresignation from the services of the company andthe drop in heat output and sales.

Due to these grave changes in the volume andstructure of the heat load Toplofikatsiya Gabrovooperates inefficiently, at high loss, and therefore issupposed to possess potential for improvement ofits economic parameters and reduction of emis-sions. Preservation of the volume of heat produc-tion output was an important condition for curtail-ing of the trend towards constant increase of indi-rect costs in the production costs per unit of ener-gy output. Under the current minimum load forsteam consumers and the negligible probabilityfor its increase in the coming years, it is necessaryto review the energy balance of the plant and toidentify opportunities for changes in the configura-tion of the equipment and the plant's operationcycle. The current operation cycle is inefficientfrom both energy and economic point of view, itleads to high production cost of heat and highlevel of emissions. The opportunities for winningback resigned consumers and the eventual attrac-tion of new ones border above all to the ability toproduce heat at a competitive price.

It is also necessary to take account of the fact that,as of February 2001, the gas distribution compa-ny, Centralgas JSCo., has a license for distributionof natural gas on the area of the GabrovoMunicipality for a period of 10 years. In 2003, theactivities on construction of the gas transportationsystem manifested new development, and the dis-trict heating company was informed that by theend of 2003 (as an indicative timeframe) naturalgas might be available for use at the power plant.

Possible scenarios for the near future

With a view to the above circumstances and in thecontext of the project objectives, EnEffect,Toplofikatsiya Gabrovo and the Ministry of Energyand Energy Resources co-ordinated their activities- with the aim to complete the demonstration proj-ect. Therefore, it was agreed to review the study onthe district heating system in the framework of the1-year extension of the project with the objective torespond to the changed circumstances withrespect to heat demand, the access to natural gasas an alternative fuel and the consequences fromthe undertaken commitments to apply the EUDirectives, as well as to put at work the lessonslearned from the project in order to increase itseffect. The principal task of the study was to pro-pose a solution for optimization of the technologyscheme and operation cycle of the district heatingsystem. The selection of solution was based on atechnical and economic evaluation of differentscenarios with the aim to achieve minimum pro-duction cost for heat.

The results from the study [8] reveal that there aretwo options for successful future development ofToplofikatsiya Gabrovo:

1. Implementation of reconstruction, upgradingand fuel switch, Scenario 2:

- rehabilitation of one coal-fired boiler No 1 (typeCKD), including installation of an electric filter and

Fig. 2. Trends in the heated volume

Fig. 3.

Heat sales by Toplofikatsiya Gabrovo SP JSCo., Household Heating Division


160 000

140 000

120 000

100 000

80 000

60 000

40 000

20 000

0

m3

160 000

140 000

120 000

100 000

80 000

60 000

40 000

20 000

0

MW

h/ye

ar

1996 1997 1998 1999 2000 2001 2002

Heat sales total

Heat sales by the Household Heating Division

Janu

ary

98

May

98

Sept

embe

r 98

Janu

ary

99

May

99

Sept

embe

r 99

Janu

ary

00

May

00

Sept

embe

r 00

Janu

ary

01

May

01

Sept

embe

r 01

Janu

ary

02

May

02

Sept

embe

r 02

Janu

ary

03Connected subscribers volume

Åntirely disconnected heated

Heated volume

Partially disconnected heated

fuel switch to coal with sulphur content below 0.8%as of 2008;

- reconstruction of 3 auxiliary mazut-fired boilersNo 5, 6 and 7 (type KM, PKM and DE) for opera-tion with natural gas.

This scenario requires investments to the amountof BGL 4 997 thousand and ensures an opportuni-ty for payoff of the credits at the lowest sellingprice for heat - BGL 59.39/MWh.

2. The district heating company should, being thelargest consumer on the area of the municipality,try to negotiate with Centralgas a preferential pricefor natural gas. In the event the management suc-ceeds to negotiate a lower delivery price for natu-ral gas as compared to the price currently offeredby Centralgas (BGL 214.2/ housand Nm3 insteadof BGL 297.5/thousand Nm3 less VAT), takingadvantage of its privilege of wholesale buyer andbuying at a reduced distribution price rate,Scenario 4 should be implemented. This scenariowill ensure the best technical, economic and envi-ronmental indicators and the lowest price for theheat sold through the introduction of two gas-firedengines and reconstruction of auxiliary mazut-firedboilers No 5, 6 and 7 for operation with naturalgas. Although it requires the highest investments(BGL 8897 thousand) even at a reduced naturalgas price, this scenario would achieve the lowestheat price required for ensuring payoff of the cred-it quoted under Scenario 2 - BGL 57.79/MWh.

An additional advantage of Scenario 4 is the oppor-tunity to develop it as a project under the Kyoto JointImplementation mechanism. It has a potential forreduction of CO2 emissions at the rate of 32 thou-sand t/year for the period 2008-2012 at the price ofEUR 10/t CO2, which would allow to gain BGL 3137thousand as revenue against emissions saved.

Dissemination of the project resultsAn information campaign for popularization of heataccounting was conducted. It involved leaflets,publications in the local press and notices in theelectronic media.

A special video-film, devoted to heat accounting,was emitted on the local cable TV channels.

An information campaign was conducted also inconnection with the introduction of thermostaticvalves with the aim to stimulate subscribers toinstall them. Every TRV allocated free of charge

served as a catalyst for the purchase of 1.7 newvalves. The User Guide, disseminated by theDanfoss Company, encouraged additionally endusers to join the campaign through its simple andclear instructions about the operation of the valvesand the benefits from their use. The broad cover-age of the campaign in the press and on the localbroadcasting stations contributed greatly to itssuccess. In June 2001, a discussion forum washeld in Pleven in the framework of the project"Energy Efficiency at End Users of District Heatingin Bulgaria"2. At the forum the results from the proj-ect, and in particular the targeted incentives pro-gramme for thermostatic valves, were presented.In 2003 the procedure for heat accounting intro-duction and the targeted incentives programmewith respect to the introduction of TRVs were pre-sented as good practice in a study ordered by the

United States Agency for InternationalDevelopment and devoted to Energy Reform andSocial Protection3.

The broad public in Gabrovo received regular infor-mation about the project activities through the pub-lications in the local periodical press and the localbroadcasts and TV reports. In November 2002 thedemonstration projects in Gabrovo were presentedat a specially organized working meeting.

Brochures and other printed matter on the projectwere developed and disseminated among the

member-municipalities of the Municipal EnergyEfficiency Network EcoEnergy. Special materialswere published in the EcoEnergy Magazine andother specialized publications. The project waspresented at specialized forums on the issues ofenergy efficiency in the country and abroad.

The energy efficiency demonstration zone hasbeen evaluated as a good practice in mitigation ofGHG emissions on the basis of a set of criteria. Itwas presented also at a regional conference inHungary and at a working meeting, organized bythe Secretariat of the UN Framework Conventionon Climate Change, held in Copenhagen in 2001.

1996

55 536

3.6

80.9

13.4

16.6%

1998

57 070

3.7

64.5

11.3

17.5%

1999

43 582

2.8

61.2

11.2

18.3%

2000

33 101

2.2

53.7

10.0

18.7%

2001

22 264

1.4

52.5

10.6

20.2%

2002

20 877

1.4

46.0

10.6

23.1%

Table 7. Losses in heat transportation

Business meeting in Gabrovo for presentation ofthe results from the demonstration projects, 27 November 2002

Announcement in the local newspaper "100 Vesti(100 Notices)" - information about heat allocators


Indicator

Losses of heat carrier

Heat losses due to heat carrierlosses

Heat output total - hot water

Losses in transportation

Losses in heat transportation asa share of the heat output total

2 The PSO 99/BG/4/10 Project "Energy Efficiency at End-Usersof District Heating in Bulgaria" (2000-2001)was implemented inthe framework of The Netherlands PSO Programme for collabo-ration with the CEE countries, financed by The NetherlandsMinistry of Economic Affairs through the state agency SENTERInternationaal.3 Philips,M., A Regional Review of Social Safety Net

Approaches In Support of Energy Sector Reform. Appendix 3:Energy Reform and Social Protection in Bulgaria. The reportwas prepared for U.S. Agency for International Development(USAID), Europe & Eurasia/Economic Growth/Energy andInfrastructure Division

Unit

m3/year

GWh/year

GWh/year

GWh/year

%

The summary results of the energy efficiency proj-ect in Toplofikatsiya Gabrovo SP JSCo. permit for-mulation of several important lessons learned,which may be of use to other enterprises of thistype in Bulgaria.

The project scope and content compliedwith the priorities, which later were laiddown in the Strategy for Development ofDistrict Heating in the period 2000-2005[1]

The selection of the energy conservation meas-ures, envisaged in the project, was correct andtheir appropriateness was corroborated by virtueof the priorities laid down in the Strategy [1]:

- Introduction of individual metering and control ofheat consumption in the residential sector for thepurpose of creation of incentives for efficient heatconsumption;

- Upgrading of DH substations for the purpose ofapplication of accurate control depending on themeteorological conditions and the occupants'behaviour;

- Replacement of worn-out sections of the heattransportation network for the purposes of dimin-ishing of the losses in transportation.

The selection of the specific measures forimprovement of the energy efficiency ofthe district heating system complied withthe tasks, which were later formulated bythe Plan of Action on Restructuring of theDistrict Heating Companies [1].

Thanks to the implementation of these measuresthe project was able to forestall the events and turninto a pilot demonstration of the Plan of Action [1].Gabrovo became the first municipality, in whichheat accounting was introduced in support of thenational policy for restructuring of the district heat-ing companies. Toplofikatsiya Gabrovo SP JSCo.was the second company nationwide (afterLoznitsa), in which heat allocators had been gen-erally installed, and the first one, in which a projectfor heat accounting had been applied in the scaleof more than 20 thousand units. The "top-down"approach, used for introduction of the heat

accounting, under which the heat allocatorsremain property of the district heating company(not the individual subscriber) and are registeredas its long-term assets, was innovative for thiscountry. This had happened nearly three yearsbefore September 2002, which was the deadlinefor mandatory introduction of heat accountingaccording to the provisions of the Energy andEnergy Efficiency Act. [2]. (Fig. 4.)

A unique system was applied to motivatesubscribers to equip their radiators withthermostatic valves.

By the end of May 2003, the number of thermosta-tic valves installed in the system was 9021 off andthe saturation of end users with thermostaticvalves had reached 45%. End users took an activepart in the financing of this energy conservationmeasures - nearly 82% of the funding required.The achieved degree of penetration of thermosta-tic valves in the demonstration apartment block(71%) was close to the maximum possible rate formulti-family apartment blocks under the currently

prevailing conditions in the country, since all occu-pants, who had no overdue payments to the com-pany, took advantage of their right to obtainvalves. A higher penetration rate might be expect-ed only provided the building has one commonowner or manager, who would be interested inequipping all flats with thermostatic valves.

The competitiveness of ToplofikatsiyaGabrovo SP JSCo. improved under condi-tions of competition with forms of individualspace heating

The company succeeded in implementing certainelements of its financial rehabilitation programmeby attracting back part of the disconnected sub-scribers through the heat accounting system.Certain components of the district heating systemhave been upgraded and renewed. The system

CONCLUSION

Fig. 4.Penetration of heat accounting for the different district heating companies in the country.Source: Ministry of Energy and Energy Resources, September 2003


Sofia

Kaza

nlak

Razg

rad

Varn

a

Pern

ik

Sliv

en

Bour

gas

Rous

se

Plev

en

Gab

rovo

Plov

div

Shou

men

Vrat

za

V.Ta

rnov

o

Love

ch

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

Substantions with heat accounting 2001/2002 Substantions with heat accounting 2002/2003

became more flexible and more convenient for theend users. This newly acquired quality released itfrom its major shortcoming - the absence of oppor-tunities for individual control - and put it into a morecompetitive position with respect to the other alter-natives for space heating. Despite the significantdrop in heat output and sales and its negativeimpact on the efficiency, the company managed tostop the trend of accumulation of losses, minimizethem and even report profit in 1999 and 2002 withdue account of the allocated subsidy.

The advantages of tender-based selectionof subcontractors for implementation of theenergy conservation measures and thecare in the negotiation of the contractterms and conditions between the parties,on the basis of reliable preliminary infor-mation about the condition of the site andthe estimated results, have been con-firmed.

The practice has demonstrated that the bestmodality of signing a contract for engineeringservices related to reconstruction and replace-ment of substations, is the "turn-key" contract witha subcontractor selected through a tender proce-dure, including the incorporation in the contract ofa performance guarantee clause. One should spe-cially focus on letting the potential subcontractorsperform a preliminary inspection of the site, priorto submitting their bids. Technical problems andadditional unforeseen expenditures might emergein the cases when such an inspection has notbeen conducted.

The fruitful collaboration, establishedbetween the local authorities and the dis-trict heating companies in the course ofimplementation of such projects, shall pro-duce tangible benefits to the society.

Although the district heating company was notsubordinated to the local authority, the implemen-tation of the project had corroborated the fact thatthe local authority could play an important role inthe resolution of issues related to community serv-ices on its area. This applies to the functions of themunicipality in the energy sector as consumer,regulator and investor. Involvement of municipalexperts in the tender procedures on selection ofsubcontractors for implementation of the upgrad-ing of the district heating system ensured trans-parency of the process for the broad public. Thegood co-ordination between ToplofikatsiyaGabrovo, the Gabrovo Municipality and EnEffectpermitted priority reconstruction of the majority ofthe substations, which were municipal property (intwo schools, two kindergartens, one creche and aformer polyclinic). The experience accumulated inthe course of the tender procedures on supply ofthe equipment was successfully used in the train-ing courses on Municipal Energy Planning. The

municipality plays an important role in the gas dis-tribution company Centralgas, while ToplofikatsiyaGabrovo is the largest potential gas consumer onthe area of the municipality. This consideration is ofexclusive importance in the selection of the mostappropriate solution of the future operation of thedistrict heating company. Although the process ofrestructuring of the ownership rights on the districtheating company is not completed, the partner-ship between it and the local authority hasbecome possible thanks to the good co-ordinationof their efforts.

The messages emitted by the project havereached a broad audience, including theend users

The end users obtained free-of-charge devices forregistration of the real heat consumption and fordistribution of the costs for space heating. Theinstallation of TRVs provided them an opportunityto adjust their consumption depending on theirdemand at any specific point of time.

Heat savings were achieved, the communicationbetween the heat producer and the subscriberswas improved. The company became the conduc-tor of a successful scheme for promotion of theintroduction of TRVs, including thanks to theinvolvement of its own installation teams, whichhelped improve the quality of the service. Therewas a notable increase of public awareness onenergy efficiency issues among the population ofGabrovo and nationwide.


Scanned article in the "100 Vesti" newspaper,Gabrovo, 11 October 2000

Energy Efficiency Strategy for Mitigation of GHG Emissions.Energy Efficiency Demonstration Zone in the City of Gabrovo

Municipal Energy Efficiency Policy

Specialized Training on Energy Efficiency in Municipalities

Overcoming Financial Barriers to Energy EfficiencyImprovement in Municipalities

Demonstration Project to Improve Energy Efficiency in OtetsPaisii School

Energy efficiency demonstration project at the Dr. TotaVenkova Regional Hospital in the city of Gabrovo

Demonstration Project to Improve Energy Efficiency in a LargePanel Residential Building

Demonstration Project to Improve Energy Efficiency in theProduction Building of Mehatronika Works

Demonstration Project to Improve Energy Efficiency in theAdministrative Building of the Local Authority

Demonstration Project for Energy Efficiency Improvement ofthe Street Lighting in Gabrovo

In the series of publications on the Energy Efficiency Demonstration Zone in Gabrovo YOU WILL BE ABLE TO FIND ALSO:


1. Decision No 582 of 23 August 2000 of the Council of Ministers onapproval of the Strategy for Development of District Heating in the Period2000-2005 and a Plan of Action for restructuring of district heating compa-nies and setting up of a Working Group on implementation of the Plan ofAction.

2. Energy and Energy Efficiency Act, SG Vol. 64 of 16 July 1999, amendedSG Vol. 1/2000, Vol. 108/2001, Vol. 63 of 28 June 2002 and Vol. 9/2003,repealed, Vol. 107/2003

3. Information on Structural Reforms in the Energy Sector in the period from1997 till June 2001, State Energy and Energy Resources Agency, July 2001.

4. Order No. 173 of 4 December 2000 of the Ministry of Labour and SocialPolicy and the State Energy and Energy Resources Agency, SG Vol. 101, 12December 2000.

5. Order No. 30 of 7 March 2001 of the Ministry of Labour and Social Policyand the State Energy and Energy Resources Agency, SG Vol. 25, 16 March2001.

6. Plan of Action of Toplofikatsiya Gabrovo SP JSCo. until the year 2005,April 2000.

7. Program for Implementation of Directive 2001/80/ÅÑ on the restrictions ofsome air pollutants released from large combustion plants, Draft datedMarch 2003, Ministry of Energy and Energy Resources, March 2003,http://www.doe.bg/download/dokumenti/en_ekologia.pdf

8. Study of the Opportunities for Reconstruction of the District HeatingSystem in the city of Gabrovo, Energy Institute JSCo., developed for theCenter for Energy Efficiency EnEffect under Contract No. ÅÅ 03-07/10 April2003, Sofia, July 2003.

9. Sustainable development of the economy, improvement of the businessclimate, Ministry of Energy and Energy Resources, 24 July 2002.

references

EnEffect is a non-profit NGO, founded in 1992, with the aim to support the efforts of the central and local authori-ties for attainment of sustainable development of the country through more efficient energy use.

To contribute to the formulation of a policy for efficient use of energy resources at all management levels.

To support local institutional and human capacity building as a prerequisite for initiation, developmentand implementation of energy efficiency programs.

To promote the development of a local market for energy saving technologies, products, materials andservices.

To assist the exchange of experience and information aimed at improvement of energy efficiency.

Overcoming of all barriers to energy efficiency in Bulgarian municipalities and creation of incentivesfor energy conservation.

Development and management of investment and demonstration projects for energy conservation.

Development of municipal and regional energy efficiency programs.

Provision of education and training in the field of rational use of energy.

Collection, processing and distribution of information on energy efficiency.

EnEffect is acting as Secretariat of the Regional Network for Efficient Use of Energy and WaterResources in Southeast Europe (RENEUER). Members of RENEUER are municipalities, NGOs andcompanies from Albania, Bosnia and Herzegovina, Bulgaria, Macedonia, Moldova, Romania,Chroatia and Serbia and Montenegro.EnEffect is acting as Secretariat of the Municipal Energy Efficiency Network EcoEnergy, whose mem-bership by 2003 comprises 159 municipalities as member minicipalities or associated members.EnEffect is part of a network of similar energy efficiency centers in Poland (FEWE), the CzechRepublic (SEVEn), Russia (CENEf), China (BECon) and Ukraine (ArenaECO).

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PARTNERS AND DONORS

OBJECTIVES

PR IOR I T I ES

State bodies, local authorities, research and training centers, univerities, companies and NGOs inBulgaria. Consultancy companies, institutes and NGOs from Europe and the USA. The GlobalEnvironment Facility, the US Agency for International Development, the European Commission, theUN Economic Commission for Europe, the United Nations Development Programme, the RegionalEnvironmental Centre, West European governments.

NATIONAL AND INTERNATIONAL NETWORKS

For contactsCenter for Energy Efficiency EnEffect

www.eneffect.bg

Tel. (+359 2) 963 1714, 963 0723, 9632169; Fax (+359 2) 963 2574

E-mail:[email protected]

Mailing address:1606 Sofia, P.O.Box 85

Office: 1164 Sofia, 1, Hristo Smirnensky Blvd., fl. 3

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