From sav­ing to pros­per­ity

How en­ergy ef­fi­ciency helps en­ergy se­cu­rity and saves for the fu­ture

The Ukrainian Week - - ECONOMICS - Blerta Cela, UNDP Ukraine's Deputy Coun­try Di­rec­tor

HOW TO MAKE EN­ERGY EF­FI­CIENCY A RE­AL­ITY?

For this to change, a mod­ern leg­isla­tive frame­work is needed. The gov­ern­ment needs to ad­dress the leg­isla­tive and pro­ce­dural is­sues that slow or pre­vent in­vest­ments in en­ergy ef­fi­ciency. It has taken its first steps by pass­ing laws on the en­ergy ef­fi­ciency of build­ings, on com­mer­cial me­ter­ing, for the mar­ket de­vel­op­ment of pri­vate en­ergy ser­vice com­pa­nies (where pri­vate in­vestors pro­vide tech­ni­cal and fi­nan­cial so­lu­tions for en­er­gy­ef­fi­ciency in­vest­ments) and es­tab­lish­ment of the En­ergy Ef­fi­ciency fund. Planned leg­is­la­tion is ex­pected to strengthen the en­ergy ef­fi­ciency reg­u­la­tory en­vi­ron­ment, bring­ing it closer to Euro­pean stan­dards.

But as im­por­tant as th­ese steps are, much more needs to be done to make th­ese laws fully op­er­a­tional. A sig­nif­i­cant cul­tural shift is needed. Pol­icy and leg­isla­tive ef­forts must be com­bined with ini­tia­tives to raise aware­ness of cit­i­zens and pub­lic ser­vants on en­ergy con­sump­tion. House­holds and pub­lic build­ings (the most sub­stan­tial sources of en­ergy waste in the coun­try) will re­quire spe­cial sup­port and guid­ance, in­clud­ing clear ex­pla­na­tions of a range of fi­nanc­ing op­por­tu­ni­ties. The po­ten­tial of the pri­vate sec­tor to in­vest in en­ergy ef­fi­ciency should be tapped fur­ther and the right in­cen­tives need to be cre­ated through reg­u­la­tory frame­works. Pol­icy in­stru­ments are es­sen­tial to cre­ate such de­mand and re­duce the risks of in­vest­ments. Pol­icy mea­sures should fo­cus on re­mov­ing the bar­ri­ers to in­vest­ments in en­ergy ef­fi­ciency and sup­ple­ment­ing th­ese with di­rect fi­nan­cial in­cen­tives, such as tax breaks or price pre­mi­ums.

One of the least en­ergy ef­fi­cient coun­tries on the planet, Ukraine has adopted a pat­tern of high-en­ergy, car­bon­in­tense con­sump­tion. Its en­ergy in­ten­sity (cal­cu­lated as units of en­ergy per unit of GDP) is three times higher than the EU av­er­age. The coun­try is not even on track to meet its own na­tional tar­get of a 9 per­cent im­prove­ment in en­ergy ef­fi­ciency by 2020. De­spite hav­ing the 63rd largest GDP in the world, Ukraine is the 27th largest emit­ter of green­house gases.

Ukraine’s out­dated en­ergy in­fra­struc­ture is in dire need of ma­jor up­grades. Most of the coun­try’s ther­mal power sta­tions have never been re­fur­bished since their cre­ation, on av­er­age 40 years ago. Ukraine’s hous­ing and mu­nic­i­pal sec­tor is four times less en­ergy ef­fi­cient than in the av­er­age Western Euro­pean coun­try, and de­vours al­most 45 per­cent of the coun­try’s en­ergy. In­ef­fi­cient cen­tral heat­ing sys­tems waste an enor­mous amount of gas — with 22 per­cent of its en­ergy wasted dur­ing pro­duc­tion, 25 per­cent dur­ing trans­porta­tion and 30 per­cent dur­ing dis­tri­bu­tion (in­clud­ing by end users). Up­dat­ing and re­ha­bil­i­tat­ing Ukraine’s en­ergy in­fra­struc­ture will re­quire bil­lions of dol­lars of in­vest­ment.

Ef­fec­tive mar­ket mech­a­nisms will be es­sen­tial to im­prov­ing en­ergy ef­fi­ciency in Ukraine. Th­ese can in fact pro­vide the right sig­nals, en­able bet­ter in­vest­ment de­ci­sions and en­sure more cer­tain re­turns on in­vest­ments. To un­lock fi­nanc­ing for en­ergy ef­fi­ciency, the fi­nanc­ing and bank­ing sec­tor need to demon­strate their strong en­gage­ment, in­clud­ing low­er­ing in­ter­est rates and in­creas­ing long-term fi­nance op­por­tu­ni­ties.

The United Na­tion De­vel­op­ment Pro­gramme (UNDP) is build­ing on its co­op­er­a­tion with the In­ter­na­tional Fi­nance Cor­po­ra­tion to pro­vide sig­nif­i­cant sup­port and tech­ni­cal as­sis­tance to a new en­ergy ef­fi­ciency and re­new­able en­ergy fi­nanc­ing mech­a­nism. Launched in part­ner­ship with Oschad­bank, the mech­a­nism will pro­vide new com­mer­cial bank­ing prod­ucts and ser­vices for biomass projects and (in a sec­ond stage) en­ergy ef­fi­ciency projects. The mech­a­nism helps mu­nic­i­pal­i­ties re­spond to le­gal and pro­ce­dural chal­lenges, and will pro­vide vi­tal tech­ni­cal as­sis­tance and sup­port for busi­ness plan de­vel­op­ment, fea­si­bil­ity stud­ies and loan ap­pli­ca­tions. Its suc­cess will greatly en­hance and ex­pand in­vest­ments in

en­ergy ef­fi­ciency and re­new­able en­ergy in Ukraine. This mech­a­nism will be repli­cated and scaled up af­ter it suc­cess­fully fi­nances a num­ber of pi­lot ini­tia­tives.

An­other key to suc­cess is in­creas­ing the use of al­ter­na­tive en­ergy sources, such as biomass. Ev­ery year, up to 60-70 mil­lion tons of straw are left un­used in the fields of Ukraine, while they could be used to pro­duce biomass and gen­er­ate en­ergy. Agri­cul­tural biomass shows great po­ten­tial in Ukraine — it is rel­a­tively in­ex­pen­sive, easy to scale up and cre­ates an eco­log­i­cally friendly fuel. Re­plac­ing nat­u­ral gas with en­ergy from straw will save money while im­prov­ing Ukraine’s en­vi­ron­ment. Work­ing with lo­cal ad­min­is­tra­tions and NGOs, UNDP is pi­lot­ing the es­tab­lish­ment of en­ergy crop nurs­eries in Ivano-Frankivsk, Poltava and Zakarpat­tia oblasts. Th­ese plots of land are ded­i­cated to cul­ti­vat­ing crops purely for en­ergy pro­duc­tion, and are used as a proof of con­cept to pro­mote biomass as a vi­able busi­ness op­por­tu­nity for lo­cal farm­ers and land own­ers.

UNDP is also ex­pand­ing its work on en­ergy ef­fi­ciency in the con­flict-af­fected ar­eas of East­ern Ukraine. For ex­am­ple, in Donetsk Oblast, UNDP is help­ing in­stall straw­fired biomass boil­ers that pro­vide heat and hot wa­ter ser­vices to key pub­lic build­ings (in­clud­ing a sec­ondary school, fam­ily clin­ics and a cul­tural and recre­ation cen­tre). This fall, a bet­ter in­door en­vi­ron­ment is ex­pected for school chil­dren and teach­ers, as av­er­age class­room tem­per­a­tures will rise from an un­com­fort­able 15-18C to 20-22C. The new boil­ers are ex­pected to re­duce the lo­cal com­mu­ni­ties’ gas bill by 80 per­cent. Th­ese pi­lots have demon­strated that biomass plant­ing is a re­al­is­tic and fi­nan­cially fea­si­ble en­deav­our that can be com­mer­cially scaled up through­out the coun­try. Over time, biomass ini­tia­tives could play a sig­nif­i­cant role in help­ing Ukraine meet its en­ergy and heat­ing needs.

Ex­ces­sive en­ergy con­sump­tion brings great, un­nec­es­sary costs and poses un­war­ranted risks to en­ergy se­cu­rity, trade bal­ances, eco­nomic and so­cial ac­tiv­i­ties and health and en­vi­ron­men­tal qual­ity. There is vast po­ten­tial to im­prove and achieve an im­pact in th­ese ar­eas. En­ergy ef­fi­ciency af­fects ev­ery­one, from busi­nesses to fam­i­lies keep­ing their homes warm. Col­lec­tive ac­tions are ur­gently re­quired from the gov­ern­ment, the pri­vate sec­tor, civil so­ci­ety and com­mu­ni­ties alike to bring for­ward the en­ergy ef­fi­ciency agenda both na­tion­ally and in ev­ery sin­gle vil­lage, town and city of Ukraine.

COL­LEC­TIVE AC­TIONS ARE UR­GENTLY RE­QUIRED FROM THE GOV­ERN­MENT, PRI­VATE SEC­TOR, CIVIL SO­CI­ETY AND COM­MU­NI­TIES. A CUL­TURAL SHIFT NEEDS TO HAP­PEN THROUGH­OUT THE COUN­TRY TO SAVE EN­ERGY AND REACH ECO­NOMIC PROS­PER­ITY

Fields of fuel. Ev­ery year, up to 60-70 mil­lion tons of straw are left un­used in the fields of Ukraine, while they could be used to pro­duce biomass and gen­er­ate en­ergy

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