Ukraine looks for ‘propaganda’ on energy savings

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This article is part of our special report EU-Ukraine Relations.

Ukraine, one of the world's most energy-intensive countries, needs to push for greater savings, with one official saying Kyiv needed "propaganda and popularisation" of green technologies.

Energy is at the heart of EU-Ukraine cooperation, officials and business representatives repeated at the 2nd Ukrainian Energy Day, held in Kyiv under a media partnership with euractiv.com.

In Ukraine, Soviet-style district heating systems are based on the assumption that energy costs "nothing," various speakers underlined.

As Swedish Ambassador Stefan Gullgren put it, Ukraine is still a country where people open the window when a room becomes too hot.

"Every unit of energy saved is one less to pay for, one less to produce and transport, and one less to pollute the planet," declared José Manuel Pinto Teixeira, the EU's ambassador to Kyiv.

Speaking in Russian, Mykola Pashkevich, who heads Ukraine's State Agency for Energy Efficiency and Energy Savings, spoke of the need for "propaganda" and "popularisation" of energy savings in Ukraine.

Pashkevich insisted that there should be a wider differentiation in appraising the level of energy-intensiveness of the country's economy. Metallurgy was a sector in which the country was clearly lagging behind, he recognised. The gap was not so big in other sectors, such as transport or cement production, he said.

The stated ambition of the Ukrainian government is to increase the share of renewables in the country's energy mix from less than 3% today to 15% by 2015, Pashkevich said.

'Energy inefficiency lobby'

In the words of one business representative, an "energy inefficiency lobby" in Ukraine is preventing the country from introducing solar and wind energy, developing biomass production, refurbishing public buildings and modernising district heating.

Another businessman who asked not to be named said that the Ukrainian authorities were still production rather than demand-driven, meaning that the more the country consumed energy, the bigger the incentives.

Another participant said that Ukraine was developing an energy strategy, which in itself was positive. But he warned that the country had a long tradition of designing strategies in the interests of oligarchs and not ordinary Ukrainians.

In terms of ease of doing business, Ukraine was "among the worst worldwide," Dominique Menu, a representative of BNP Paribas in Ukraine, told the audience.

However, some participants said that the country's president, Viktor Yanukovich, was not necessarily on the side of the "enemies" of energy efficiency or introducing business-friendly reforms.

"I think President Yanukovich listens to our message that the country needs energy efficiency," Andy Kuzich, director of business development at PricewaterhouseCoopers told the forum.

'Heavy inheritance'

Yanukovich was not present at the conference. The government was represented by Vladimir Makuha, deputy minister for energy and the coal industry.

In his speech, Makuha hardly mentioned energy efficiency. He too referred to the "heavy inheritance" from Soviet times in terms of large-scale, energy-intensive heavy industry, but insisted that modernisation efforts were ongoing.

The privatisation of electricity distribution companies and coal production facilities would greatly help the process and improve management, he said. Another important issue was to stop cross-subsidising the energy sector, he added.

Makuha said boosting oil and gas production in Ukraine was a priority, as the price of imported energy from Russia was "excessively high". The official mirrored positions recently expressed by Ukrainian Prime Minister Mykola Azarov in an interview with EURACTIV.

Transparency and market stability are key factors for investors and the only way to implement energy efficiency and renewable energy projects in the country, various speakers insisted (see 'Positions').

A number of investors called for the country's legislation to be adapted to EU and OECD standards for upgrading infrastructure, as well as for cash-flow certainty to be provided, including by making the country's currency convertible.

Georgi Gotev

Positions

Elena Rybak, CEO of the Europe-Ukraine Energy Agency, a platform for promoting sustainable development, efficient use of energy and environmentally-friendly technology in Ukraine, insisted that international funding was available for such projects, but what was lacking was the government securing "the right framework".

The Europe-Ukraine Energy Agency organised the forum, which gathered some 200 stakeholders.

Eberhardt Nacke, head of product strategy and biomass technology at CLAAS Germany, said Ukraine had huge potential to develop biogas plants. However, he added that while there were 5,000 bioglas plants in Germany, there were only a few in Ukraine. According to his explanations, the Ukrainian plants were performing at better feed-in tariffs than in Germany and with shorter pay-back periods.

According to Marta Cagonova, sales manager at Vestas, Ukraine had the potential for a thriving wind industry, with a generation potential of 16,000 MW and possible sites mainly in the country's south.

However, there were problems related to the use of land, overlapping legislation between national and federal level and unclear approval procedures.

Brian Best, managing director of Dragon Capital, a capital investment firm, cited Poland as an example for Ukraine in terms of having become an investment hub for a wider region.

However, he lamented that Ukraine was "a long way" from Poland in terms of having a predictable government, strong and credible institutions and a competitive and wide investor base, which were still not present in Ukraine.

Viktor Savkiv, general manager of TIS Eco, lamented that political and economic instability in Ukraine was still keeping away investors, and that the country's tax policy was not providing a sufficient incentive for green projects.

He also complained of a scarcity of project specialists and managers, and criticised local authorities for "lacking loyalty" vis-à-vis the investors of renewable energy projects.

Dr. Johann Harter, COO of Activ Solar, said that the first solar project in Ukraine in Rodinkovoye, Crimea, which his company was implementing, was becoming a sucess and could help solve the problems of regions with rather distant sources of energy.

He stressed that the solar energy potential of Ukraine was much bigger than Germany's, but also cited some of the obstacles to which previous speakers also referred.

Background

Ukraine has one of the most energy-intensive economies in the industrialised world. While energy consumption has dropped since the country's independence, reliance on imports, particularly on gas from Russia, has not declined.

According to the International Energy Agency (IEA), Ukrainian energy policy remains primarily focused on energy production, so there is much opportunity to achieve greater gains through energy efficiency.

However, domestic energy prices have typically been well below international levels, thus limiting investment in infrastructure and incentives for efficiency.

In addition, the Ukrainian government maintains a strong role in owning and regulating energy assets. This this is often done in a way which minimises competition and hence reduces efficiency.

Timeline

Further Reading

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