Evaluation of the impact of the industrial energy component of the emergency energy project (180-0015)

Evaluation covers the period 11/90-6/94 and is based on site visits to activities of the International Resources Group (IRG) in Bulgaria, Resource Management Associates of Madison (RMA) in the Czech Republic and Romania, and RCG/Hagler, Bailly in Hungary. The project component has been extremely successful in producing high individual rates of return and a solid receptivity to energy efficiency measures. Although originally authorized and implemented with a short-term focus, the project has also had a long-term impact, as can be seen in the follow-up activities being implemented. The component quickly identified and implemented near-term, no-cost, or low-cost measures that improved, significantly in some cases, plant energy efficiency. Energy audits and recommendations produced positive benefits; some remarkable savings were had for little or no cost. Plants where process modifications were made showed particularly large savings for essentially no cost. For example, the Pannonglas Oroshazi Uveggyar glass plant in Hungary consolidated production from four to three lines, reducing annual gas costs by $2 million. In addition, the installation of energy efficiency equipment in the four countries showed very short paybacks (e.g., a couple of months). Attempts to save energy with building heating modifications and lighting improvements yielded longer payback periods, but did improve worker comfort, which may, in turn, increase productivity. U.S. monitoring and measuring equipment was introduced into the region, with several U.S. manufacturers initiating or increasing sales in the region. Without the project, the risk and expense of market penetration would have been too great. Plant staff quickly absorbed the technical aspects of energy efficiency measures but will need additional TA to assimilate the economic analysis associated with energy efficiency measures. The component also increased energy awareness in host countries. The interaction among the audit team, plant personnel, and local subcontractors focused attention on energy costs. Besides leading factories to purchase energy savings equipment, improved knowledge of energy costs enabled some plants to save money by renegotiating their gas and electricity contracts or shifting demand to lower rate periods. The presence of USAID and western contractors also enabled lower-level energy managers to obtain upper management attention for energy efficiency projects that would otherwise have been neglected. However, energy efficiency has not become a top priority in most plants; managers are preoccupied with survival and retain the old central planning idea that the only path to it is increased production. Information on energy efficiency is still not widely available, though some private firms have started offering energy efficiency seminars. Energy efficiency service capability is limited, although a strong technical base for it exists, and host country governments appear open to privatization of energy efficiency services. Most of the equipment supplied by USAID was well-accepted, correctly utilized, and yielded measurable savings. There were a few problems in commissioning equipment and obtaining service and spare parts; local consultants were used to implement these tasks since there were no funds to support U.S. consultants. The portable energy efficiency equipment left behind by the project for diagnostic use by local entities has not been used as intensively as planned, with efforts succeeding best in Hungary. Plant personnel were very appreciative of the TA and energy efficiency equipment provided them, and felt it multiplied the project's impact. Some equipment was used to improve quality as well as save fuel. In one case, infrared thermometers were used to determine the temperature of metal pieces about to be welded or rolled and to reduce overheating in electric furnaces. The following lessons were learned. (1) The prospect of privatization has created barriers to the exchange of information among plant owners and operators; some technical data formerly exchanged now is treated as proprietary information. (2) Low-cost/no-cost energy efficiency measures can be put in place quickly and can yield significant savings when introduced in a well-planned program directed by professionals. (3) Success in extending energy efficiency measures is a function of the receptivity and strength of plant management, the savings obtained from the initial measures, the economic situation of the firm, and the degree of market competition. (4) Provision of equipment stimulates the interest of program participants and multiplies project impact. Portable monitoring and measuring equipment is particularly effective since it can be used in many plants. (5) Programs that provide equipment must also establish an in-country equipment servicing capability to assure host country satisfaction and protect the reputation of U.S. equipment. (6) Effective dissemination and diffusion of project results requires a well-directed effort, including sufficient funding and personnel to continue the effort over a significant time period. Increased emphasis on record keeping should be part of future programs. (7) USAID's efforts to introduce private sector energy efficiency capacity are a welcome complement to government-oriented programs and will help to support the movement to privatization in the region. However, full acceptance and implementation will take time. (Author abstract, modified)