Mincho Benov, Habitat Bulgaria, to 3eNews: A more radical solution is one-time assistance for energy renovation of the home


These can be vulnerable households, for example large families, single mothers, people with disabilities, commented the director of Habitat Bulgaria.
Author and photo credit: Raya Lecheva

We talk about the new energy efficiency programs under the National Plan for Recovery and Sustainability with Mincho Benov, National Director of Habitat Bulgaria since January 2011. What are the alternative financial instruments to stimulate people to co-finance the energy renovation of the home. According to a more radical solution, it is one-time assistance for vulnerable households, for example large families, single mothers, disabled people. Then such households will become the engine of the process, knowing that they will receive this money, they themselves will demand that a decision be made and renovation measures be taken, he believes.

What are the highlights:

• Sanctions are being considered for owners who do not renovate their homes. The Directive on minimum energy standards for buildings is expected to be adopted very soon, and we will see how the renovation measures will go from being recommended to being mandatory.

• We cannot expect that out of 66,000 buildings by renovating 3,000 we will achieve huge savings.

• In fact, one-stop services will enable better coordination.

• Let’s make, as in Slovakia, a fan of different financial instruments from which a person can choose from the point of view of social status. Over 90% of multi-family buildings in Slovakia have been renovated, and in Bratislava over 97% with 30% self-contribution.

• A long-term renewal strategy and clear planning over the years is needed.

Mincho Benov has worked in the field of the capital market, financial sector and international development as deputy executive director of the Sofia Stock Exchange AD, director of “Financial Sector and Capital Market” in the American consortium FLAG, managing partner of investment and consulting companies. Mincho Benov has implemented projects in Bulgaria for the World Bank and the European Bank for Reconstruction and Development.

In the period 2005-2009, Mincho Benov worked on a project for crediting residential energy efficiency in Bulgaria, financed by an EBRD credit line in the amount of 50 million euros and secured by a grant component of 10 million euros from the International Fund ” Kozluduy” and implemented with the participation of six leading Bulgarian commercial banks. Mincho Benov has consulted and managed a number of investment projects and projects financed by EU pre-accession and structural funds. National Director of Habitat Bulgaria since 2011.

Mr. Benov, in a few days the admissions for the rehabilitation program under the Recovery Plan will begin, the funds will not reach everyone, is a working financial mechanism possible?

We now know that the funds will not be enough. In the previous national program, more than 2,200 buildings were renovated with BGN 2 billion. In 2017-2018, the prices of construction materials were significantly lower. Now, with BGN 1.4 billion, we can expect about 1,000-1,100 buildings to be renovated at most. Against the background of needs, this is a drop in the ocean. In multi-family buildings alone, there are more than 60,000 buildings in need of renovation. But not a single penny has been earmarked for the renovation of single-family buildings, which account for half of the country’s housing stock. The general estimate is that 93% of the building stock is energy inefficient. If we want to solve the problem completely, we are talking about a huge need that cannot be met with this approach to financing – 100% grants for everyone. It’s unrealistic, there’s nowhere that much money is going to come from.

And that’s not the only problem. This approach greatly distorts the market. Improving the energy performance of buildings across Europe, including Eastern Europe, is a sustainable business model involving different parties with different interests. These are the financial sector, which ensures the participation of the owners, offers products under various programs, the construction companies that are in a competitive environment with each other, companies that work on the save and pay model – ESCO model. While here, grant funding 100% a priori excludes the financial sector.

Would we have achieved any results if there was no grant funding, would people have taken advantage of these financial instruments?

I just want to clarify that these funds were not under a European program. They were a national resource that you and I paid for with our taxes. Given that this public resource is being used for private interest, because all rehabilitated housing is privately owned property, the approach should have been completely different.

A greater depth of remediation than Class C should have been required first, which we will now have to upgrade.

Second, self-participation had to be required so that owners would have a commitment, including to maintenance afterwards. It could be that the depth of remediation was tied to the amount of self-contribution if, for example, we took action to achieve Class A we would receive a larger grant, if we worked simply to reach Class C, which is already considered low in terms of building performance, we would receive lower grant.

The way in which the program was actually implemented demotivated the construction companies that participated, because the decisions about who would participate were centralized at the level of municipalities, where the procedures under the PPA were carried out. The owners of these homes were also excluded from the process, as the principle was that “the teeth of a gifted horse shouldn’t be looked at”. They were excluded from carrying out control, from the selection of contractors, including performance control.

The municipalities said on the condition that we pay for everything, we will make the control and supervision decisions. You just give us access to the housing – period. And could it have happened any other way? I will give you an example with Slovakia, with which we can easily compare.

Since joining the EU, Slovakia has developed various programs for renovation of the housing stock, for single-family and multi-family buildings, with a larger or smaller grant. Keep in mind that there the largest grant was 30%, let alone 50 or even 100%.

Along with this, they also developed the relevant financial instruments to support households that cannot secure their deductible because there were such. Here, the moment a co-payment is requested, it will become clear that in every building there are households that cannot provide even a 10% co-payment. Financial instruments were created in Slovakia, such as interest-free loans from banks, grants from a state fund that supported and continues to financially support all programs. Every five years, the performance of the various programs is evaluated, and new components are added. The result as of last year was that over 90% of multi-family buildings in Slovakia were renovated, and in Bratislava over 97%. This is happening in Poland, in the Czech Republic, everywhere where there were similar problems.

With us, 20% deductible is foreseen in the second stage of the program from 2023? What are the financial instruments to include to make it clear to people?

With us, the biggest problem is that these things, to the extent that they are done at all, are small in scale.

Since the energy efficiency of residential buildings began to be discussed at all in 2005, a UNDP demonstration project was launched, which had to demonstratively renovate 50 buildings with a 50% co-payment requirement.

Also in 2005, a program for residential energy efficiency was launched, which was based on a credit line of 50 million euros from the EBRD. Through loans from 6 commercial banks, he gave loans for the implementation of certain activities, returning 20% ​​of the loan in the form of a grant. They weren’t even interest free. I started and ran the program until 2009 and 33,000 homes were renovated to some extent. People have taken to replacing insulation, roofs, walls, buying heat pumps. It wasn’t a complete overhaul, and that was the problem with this program. The quality of the performed activities was strictly monitored, but the main goal was to absorb a resource. The activities were carried out individually by a household in their own dwelling and that is why there are these patches on the facades today. This was a vice of the program, since such activities are undertaken for the entire building, the effect is incomparably greater.

Apart from these two projects, nothing else happened before the national program started. There was an attempt with European funding and a 75% grant to do something, but very little was done. Then the national program happened. It was not a well-structured campaign without prioritizing buildings of people with lower incomes or buildings in worse condition. Nobody asked these questions. The centralization of all activities in the municipalities, and everyone else standing aside, crippled the program.

Resource 3eNews: Mincho Benov, Habitat Bulgaria, to 3eNews: A more radical solution is one-time assistance for energy renovation of the home