Financing of energy-efficiency (EE)projects in a country almost always commences with publicfunds. Examples are energy service company (ESCO) businessesin the United States and Canada that were able to takeadvantage of public funds for public buildings (World Bank1999), most of the EE funds worldwide as compiled in arecent Alliance to Save Energy report (ASE 2002), or variousEE projects funded by international financial institutions(IFIs). A sustainable EE business can, however, develop onlyif public funding is complemented by funding from theprivate sector. In the past few years, some equity fundswith IFI and private sector participation have sprung up,such as the Renewable Energy and Energy Efficiency Fund forEmerging Markets (REEF) and Dexia-FondElec, and severalIFI/GEF projects in transition and developing countries haveexperimented with various features that would reduce thebarriers for private sector involvement in financing EEprojects. The longest running of those financial schemes isthe Hungary IFC/GEF Guarantee Fund. In light of the lessonslearned from those projects, this report concentrates on theexample of Romania, where implementation of a World Bank GEFproject with a market-based EE financing mechanism has juststarted. Until recently, Romanian energy consumers wereenjoying energy prices well below world market prices. Withrestructuring of the energy sector, the energy price levelis now going up and subsidies are being phased out. Togetherwith restructuring and privatization in the industrialsector, there are now incentives for investments in energyefficiency that would reduce costs and improve thecompetitiveness of Romanian companies.
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