Green investment scheme for Latvian
industries
Līga Ozoliņa M.Sc.
Riga Technical University
Institute of Energy systems and Environment
Kronvalda blvd. 1
LV1010 Riga
Latvia
liga.ozolina@rtu.lv
Marika Rochas Dr.Sc.ing.
Riga Technical University
Institute of Energy systems and Environment
Kronvalda blvd. 1
LV1010 Riga
Latvia
marika.rosa@rtu.lv
Keywords
policy instruments, programme evaluation, energy efficiency
improvements, industrial energy saving, Green Investment
Scheme
Abstract
Over the last decade, energy efficiency in the Latvian indus-
trial sector has not been structurally addressed and only a few
activities have been implemented to promote energy efficien-
cy in the sector. The industrial sector is considered to be the
main driving force for economic growth in Latvia, especially
after the economic crisis that Latvia experienced in 2008 and
2009. Therefore, it is even more important to prepare a suit-
able environment for efficient production, by producing more
products and goods with less energy consumption. However,
different studies indicate that the energy intensity of Latvian
industries is still very high compared to the EU-15. In order
to sustain economic growth, there is a need for the Latvian
industrial sector to become more efficient and reduce its en-
ergy intensity.
The Green Investment Scheme (GIS) is a programme
that was developed in Latvia in 2007 to increase the use of
renewable energy sources and energy efficiency. Funding of
the programme is assured from public revenues by selling the
assigned amount units1 (AAUs) within the Kyoto protocol. In
2010, the first official programme to support energy efficiency
for industry was announced under the GIS. The first lessons
1. AAUs are units issued by Parties to the Kyoto Protocol into their national registry
up to their assigned amount, calculated by reference to their base year emissions
and their quantified emission limitation and reduction commitment (expressed
as a percentage).
ECEEE 2012 SUMMER STUDY on Energy efficiency in industry
Anna Beloborodko M.Sc.
Riga Technical University
Institute of Energy systems and Environment
Kronvalda blvd. 1
LV1010 Riga
Latvia
anna.beloborodko@rtu.lv
Anna Paturska B.Sc.
Riga Technical University
Institute of Energy systems and Environment
Kronvalda blvd. 1
LV1010 Riga
Latvia
anna.paturska@gmail.com
learnt show that there is a necessity for such a programme in
order to increase the energy efficiency in the Latvian industrial
sector.
Introduction
The industrial sector has always been seen as one of the
largest sectors for energy efficiency improvements [1]. As
such, a wide range of energy efficiency measures have been
especially developed and applied for this sector across the
world. However, there is no common methodology, how to
improve the energy efficiency in industry as no single measure
can be suitable for all countries, industries and situations [2].
Each country must therefore find the most appropriate way
for their particular situation. All energy efficiency policies
and measures can be divided into three general categories:
regulations, financial and fiscal measures, information and
awareness-raising, and cross-cutting or supportive measures
[2,3]. In order to achieve the highest possible energy savings,
different measures must be applied concurrently as suits each
individual energy economy.
The industrial sector is the third largest energy consumer in
Latvia. According to available data, annual energy consump-
tion for the industrial sector is around 32 PJ/a [4]. The results
of evaluation of energy efficiency performance in the industrial
sector show that manufacturing companies in Latvia, on aver-
age, consume more energy to produce the same output as other
companies in the European Union. That is, Latvian industry is
far more energy intensive than industry in the European Un-
ion. For instance, average energy consumption for the dairy
123
1-096-12 Ozoliņa et al
industry in Europe is 4.0 MJ/equivalent2, meanwhile in Latvia
4.83 MJ/equivalent. The benchmark for small breweries in Eu-
rope in 2005 was around 79 MJ/equivalent, but in Latvia it was
151.37 MJ/equivalent [5].
The First Latvian Energy Efficiency Action Plan (2008–2010)
was the first document to set goals for energy efficiency im-
provement in Latvian industries. Under the plan, the energy
savings target set for the industrial sector was 159 GWh (1.7 %
of total annual industrial energy consumption in Latvia) in
2016 [6]. This was one of the smallest energy saving targets
throughout the whole economy. Despite such a small target,
the results of the first implementation period showed that there
was no improvement in energy efficiency across the industrial
sector. Therefore, two energy efficiency measures for the indus-
trial sector were introduced in the Second Latvian National En-
ergy Efficiency Plan in order to achieve the energy savings goal
in 2016: Green Investment Scheme (GIS); and the promotion of
industrial energy audits and energy management systems in
companies [7].
Green Investment Scheme
GIS is a mechanism within the Kyoto protocol. It determines
that the country which sells the AAUs assures the buyer that
financial resources obtained from the AAUs will be used to fi-
nance environmental projects and programmes [8]. The GIS
programme in Latvia, the Climate Change Financial Instrument
(CCFI), was developed in 2007. The CCFI is a state budget pro-
gramme which aims to contribute to climate changes and to
reduce greenhouse gas emissions. The main idea of the CCFI
programme is to provide co-financing to increase the use of
renewable energy sources and improve energy efficiency in
Latvia.
Since 2009, CCFI has implemented 15 projects and one is still
ongoing. Total financial support allocated for all 16 projects is
€186.5m. The key metric used in evaluating CCFI in investment
efficiency is the ratio of kilograms of carbon dioxide abated per
year per euro of funding requested (kgCO2 y/€ in applications
for funding/€). Projects that improve energy efficiency in public
buildings and street lighting are the most prevalent with 46 %
of total resources distributed being allocated to those projects.
Projects that increase the use of renewable energy sources in
households account for 35 % of total funding distributed. In
2010 the first official project for industries was announced
under the CCFI.
Improving energy efficiency in the Latvian industry
sector
Within the framework of CCFI programme a call for proposals
for the project “Complex Solutions for Greenhouse Gas Emission
Reduction in Industrial Buildings” was announced. This is a
state budget financed tender that provides grants for invest-
ments in energy efficiency for Latvian industrial companies.
Currently this is the only project that has been implemented
to improve energy efficiency in the Latvian industrial sector.
2. In order to compare industrial companies with different outputs (milk, source
cream, cheese, ect.) and measurements the production correction factors have
been implemented.
124 ECEEE 2012 SUMMER STUDY on Energy efficiency in industry
1. PROGRAMMES TO PROMOTE INDUSTRIAL ENERGY EFFICIENCY
It was announced in July 2010, and was regulated by the
Cabinet of Ministers Regulation No. 521 (dated 8 June 2010).
Applicants were required to meet the following criteria in order
to be eligible to receive financing for their project:
• An enterprise registered within the Republic of Latvia.
• Micro, small or medium-size enterprise.
• Has carried out commercial activities for at least five years
and has carried out commercial activities within the indus-
trial buildings mentioned in the project application for at
least three years prior to the project application submission
day.
• Economic activities incorporate the codes 10 - 20.59, 21 -
23, 25 - 30, 30.2 - 33, 52.1 or 52.29 of the statistical classifica-
tion for economic activities (NACE ver. 2)3 [9].
The total financing of the tender was €12m. Financing for
eligible projects was available to a maximum of 50% of the
project cost, or a maximum of €714,000 in funding for an in-
dividual project. The minimum financing amount per project
was €28,600. The following project activities were supported in
order to achieve energy savings:
• From reconstruction to simple renovation of buildings.
• Additional investment for existing technical equipment
providing an increase in energy efficiency for manufactur-
ing and services in buildings.
• Installation of energy efficient lighting.
• Quality control inspections of building envelopes at the
construction stage (air permeability test and building ther-
mography) [9].
To be eligible for financing, projects must reach a minimum
emissions reduction to funding ratio, or investment efficiency,
of 1 kilogram of carbon dioxide emissions per euro of invest-
ment (1 kg CO2/€).
In total, 51 project applications for 71 industrial building
renovations were submitted. 48 projects were accepted and con-
tracts were signed by the February 18, 2011. The total financ-
ing granted in the framework of the programme was €11.6m
(95.6 % of total available financing for the tender). The co-fi-
nancing of industrial companies was estimated to be €12.1m.
The distribution of applicants across industries and their rate
of investment efficiency are shown in Figure 1. The majority of
project proposals were received from the basic metals, wood
and wood products, food and beverage, typography and print-
ing industries (26). The remaining 22 applications were spread
over a number of different manufacturing industries. The sec-
tor with the highest number of applications was the food and
beverage manufacturing industry (8 project proposals).
The highest annual investment efficiency indicator is esti-
mated to be in the food and beverage manufacturing indus-
try (2.96 kgCO2/€), but the lowest in typography and printing
(1.63 kgCO2/€). The average benchmark for all 48 project ap-
plications was set at 2.00 kgCO2/€.
3. NACE is the European standard classification of productive economic activities.
NACE presents the universe of economic activities partitioned in such a way that a
NACE code can be associated with a statistical unit carrying them out.
1. PROGRAMMES TO PROMOTE INDUSTRIAL ENERGY EFFICIENCY 1-096-12 Ozoliņa et al

Investment  e fficiency,   kg  CO2 /  Euro 3,50 25

2,96
3,00 22
20
2,50
1,87 1,82 15

Applicants
2,00 1,74 1,63
1,50 10
1,00 8
7
6
5 5
0,50
0,00 0
Other   Basic  metals   Wood  and  wood   Food  products   Typography  and  
manufacturing manufacturing products   and  beverages   Printing
manufacturing manufacturing

 
Figure 1. The distribution of the applicants by the industries and investment efficiency.

Expected results
The CCFI programme for industries required project applicants
to submit an energy audit of the production site and an applica-
tion outlining the existing situation, possible energy efficiency
measures, and the potential CO2 emission savings. The energy
efficiency measures were divided into two categories: measures
for the reduction of electricity use; and measures for heat ener-
gy savings. Based on the data from project applications, mainly
energy efficiency measures had to be implemented at the end
of 2011 and beginning of 2012. The average implementation
time was expected to be around 9.8 months, depending on the
complexity of the measures.
Figure 2 shows the total energy saving within the tender di-
vided by the type of energy. The expected total energy savings Figure 2. Total energy savings within the tender divided by the
after the implementation of energy efficiency measures will be type of energy.
33.9 GWh, 85 % of which will be reached with the heat en-
ergy measures, predominantly through insulating industrial
buildings. The remaining 15 % will be gained from electrical only 2 % of all energy efficiency measures are classified as elec-
efficiency measures through the installation of new equip- tricity use savings.
ment for technological processes. The expected energy sav- The largest reduction in electricity use is expected in the food
ings 33.9 GWh (29.1 GWh heat and 4.8 GWh electricity) are and beverage manufacturing sector: 40 % (3.51 GWh) of total
planned to be achieved by the end of 2012, when all industrial energy savings. This can be explained by the fact that to ensure
companies will complete the implementation of measures, and the production of food or beverage products, a great number of
will submit the monitoring report. equipment or technological processes use electricity. Therefore,
As it was mentioned above, the highest energy savings will more energy efficiency measures are needed in order to reduce
be reached by the reduction of heat energy consumption which the electricity consumption which will be implemented in food
is mainly related to industrial building heat insulation. One of and beverage manufacturing companies.
the reasons for this distribution between the energy savings
is the short time period for document preparation for the ap-
plication. The companies willing to participate in the tender Monitored results
had to prepare all the necessary documents in a three month A monitoring system for the industrial companies which re-
period, which is rather short for big energy efficiency invest- ceived the co-financing from the state budget programme
ment projects. CCFI was developed and implemented in order to control the
Also, many industrial companies reported that they did not investment efficiency of the project “Complex Solutions for
have enough time and human recourses to prepare a project Greenhouse Gas Emission Reduction in Industrial Buildings”.
application for improvements of industrial processes based on The responsible authority for the evaluation of the project is
electricity consumption. the Latvian Environmental Investment Fund (LEIF). Accord-
The annual energy savings by different industries are shown ing to the monitoring requirements of LEIF the monitoring
in Figure 3. In the wood processing industry and typography, period has been foreseen from September 2011 until December

ECEEE 2012 SUMMER STUDY on Energy efficiency in industry 125

1-096-12 Ozoliņa et al
Figure 3. Annual energy savings divided by the type of energy within different industries.
2016. Each year the companies have to submit the monitoring
report by the end of January. The first monitoring report had to
be submitted in January 2012 for the time period September–
December 2011.
Up until the end of March 2012 only four companies out
of 48 have submitted the first period monitoring reports. In
addition, with two industrial companies LEIF has discharged
the contract and three companies have refused to participate
in the tender and implement the energy efficiency measures.
Therefore, there are 43 industrial companies in total which are
continuing their participation in the project, and which had to
submit the first period monitoring reports.
According to the monitoring report the companies had to
indicate the energy efficiency measures which were carried out,
the actual (MWh) and specific energy consumption (kWh/m3
or tonnes’ of production) of the plant, the amount of saved en-
ergy (MWh), as well as saved tonnes of CO2 emissions. The
energy consumption was reported for each month. The results
of the first monitoring reports are shown in Table 1.
According to the monitoring reports, two of the companies
have not reached the energy saving for the three month period.
One company has reduced their energy consumption by only
2.1 MWh which is only 0.65 % of the planned energy savings
after implementation of the energy efficiency measures. This is
due to the fact that the implementation of measures was fin-
ished in November/December, and the actual energy savings
have not been reached yet.
One industrial company has reached the closest results per-
taining to the expected energy savings. It has implemented
energy efficiency measures related to the reduction of elec-
tricity consumption. So far, it has reached 18.2 % of the total
expected energy savings. If the first results (405 MWh) are
projected for a one-year period, then the reduction of elec-
tricity which will be reached by the end of the year is around
1,620 MWh. This would be 72.8 % of the total expected yearly
energy saving.
In addition, none of the industrial companies which submit-
ted the first monitoring results reached the expected energy
savings reported in the energy audits. Therefore, it is more
likely that none of the industrial companies will fulfil the ex-
pected yearly energy saving to 100 %.
126 ECEEE 2012 SUMMER STUDY on Energy efficiency in industry
1. PROGRAMMES TO PROMOTE INDUSTRIAL ENERGY EFFICIENCY
Comparison of the results
The CCFI project tender for industrial companies has been
used as one of the energy efficiency policy support instru-
ments for energy reduction in the Latvian industrial sector.
It has also been included in the Second Latvian National En-
ergy Efficiency Plan as a measure for achieving the state energy
savings for the industrial sector – 159 GWh – by 2016. The
planned yearly energy savings in the Latvian industrial sector
and results of the project tender for industrial companies are
shown in Figure 4.
Based on the project’s first period monitoring results, the
expected yearly energy savings within the CCFI project for
industrial companies will not reach the projected amount
of 33.9 GWh. The first obstacle is a result of five industrial
companies dropping out of the programme. This automatically
lowers the expected energy savings by 4.5 GWh which
corresponds now to 29.4 GWh yearly. Taking into account
the results of the first monitoring period it is assumed that the
overall expected energy savings will only reach around 75 % of
the total expected yearly energy savings. Thus, the actual yearly
energy savings within the CCFI project tender for industrial
companies will be around 22 GWh.
The planned accumulated energy savings in the Latvian in-
dustrial sector and actual yearly acymulated energy savings
within the CCFI project for industrial companies are pre-
sented in Figure 5. The Latvian state has defined that it would
reduce the energy consumption in Latvian industrial sector by
159 GWh by the end of year 2016. The results show that within
the CCFI project tender 29 GWh (efficiency factor 100 %) or
around 22 GWh (efficiency factor 75 %) will be reached. Ac-
cordingly, it is 18 % or 14 % of the total stated energy savings
for the Latvian industrial sector in 2016.
Discussions
Despite the fact that different energy efficiency measures for
industry have been developed in the National Energy Efficiency
Plans for Latvia, the project tender for industrial companies
within the CCFI programme for energy efficiency improve-
ments is the first state-supported measure to achieve real
energy savings in the Latvian industrial sector.
1. PROGRAMMES TO PROMOTE INDUSTRIAL ENERGY EFFICIENCY 1-096-12 Ozoliņa et al

Table 1. First period monitoring results.

Absolute energy savings, MWh

Type of energy
Industrial Total actual Total
efficiency
companies October November December (three month expected
measure
period) (yearly)
Beer brewing
heat, electricity - - -2,1 -2,1 -323
company

Dairy electricity -8 -210 -117 -405 -2223

Metal
manufacturing heat 47 49 52 149 -260
company
Other
manufacturing heat - 159 129 287 -411
company

Figure 4. Planned yearly energy savings in the Latvian industrial sector.

Figure 5. Planned accumulated energy savings in the Latvian industrial sector.

This project tender was very important for the manufacturing
companies interested in investing in energy efficiency. However,
some criticism regarding the tender was received from project
applicants. There were two main barriers to the application:
the process was too complex and bureaucratic (especially the
monitoring period), and companies were experiencing a lack
of access to their companies’ internal capital. Some companies
refused to participate in the tender due to the monitoring after
the project implementation, as they were concerned they would
not be able to fulfil the requirements and would therefore risk
non-payment of co-financing. Other companies did not find
enough of their own financial sources to support the project.
This was particularly so in cases where projects were to support
the installation of insulation or the purchase of new equipment,
both of which require a large amount of capital outlay.
Those factors also explain the rather low number of proj­ect
applicants for the project tender. According to the statis­tical
data there are 1,837 enterprises (SMS’s and large) in the manu-

ECEEE 2012 SUMMER STUDY on Energy efficiency in industry 127

1-096-12 Ozoliņa et al
facturing industry [10] which correspond to the requirements
of the project tender. Only 2.8 % of all enterprises submitted an
application for co-financing for the implementation on energy
efficiency measures in industrial buildings within the tender.
In addition, almost all project applications submitted for the
project tender were accepted.
The first period monitoring reports show that the industrial
companies are delayed with the submission of the reports.
This means that either the requirements by the project tender
monitoring authority (LEIF) are too weak or the companies
do not feel the responsibility to fulfil the project tender
requirements. One of the reasons for the situations is the lack
of fees or penalties for the companies which do not fulfil the
requirements. The delay in the monitoring reports can cause
a situation where the industrial companies will not reach the
expected energy savings reported in the energy audits. This will
also lead to the situation where the planned energy savings in
the National Energy Efficiency Action Plans will not be reached.
The project tender “Complex Solutions for Greenhouse Gas
Emission Reduction in Industrial Buildings” within the CCFI
programme is currently the only energy efficiency instrument
for the Latvian industrial sector in which the reduction of en-
ergy consumption has been achieved. However, based on the
first period monitoring results and, in general, the energy ef-
ficiency policy for Latvian industries, strong doubts exist that
the states’ defined energy efficiency target will be reached in
the year 2016.
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Acknowledgements
This work has been supported by the European Social Fund
within the project “Support for the implementation of doctoral
studies at Riga Technical University”.