Swiss gov­ern­ment helps Ukraine to make homes more en­ergy ef­fi­cient

Kyiv Post - - Business - BY BERMET TALANT [email protected]

It’s Septem­ber, and 20 de­grees Cel­sius out­side, but res­i­dents of an old apart­ment build­ing at 34 Mira Street in Sumy, a city 330 kilo­me­ters north­east of Kyiv, are tak­ing mea­sures to im­prove the heat­ing of their homes.

They’re do­ing it with the help of Ukraine’s State Agency for En­ergy Ef­fi­ciency, which has launched a lend­ing pro­gram called “Warm Loans.” The In­ter­na­tional Fi­nance Cor­po­ra­tion (IFC) and the Swiss gov­ern­ment, in turn, helped de­sign the pro­gram.

Us­ing loans from the pro­gram, res­i­dents are cut­ting bills and sav­ing en­ergy by in­stalling in­di­vid­ual boil­ers, up­grad­ing elec­tric wiring, buy­ing low-en­ergy light­bulbs, and heat-in­su­lat­ing the build­ing walls.

“As an econ­o­mist, I think it is a great pro­gram, be­cause all of the state ben­e­fits go di­rectly to the peo­ple for real im­prove­ments,” said Sophia Lynn, the op­er­a­tions of­fi­cer at the IFC, which with the sup­port of the Swiss gov­ern­ment ad­vised on the de­vel­op­ment of the “Warm loans” pro­gram.

As part of the third and fi­nal phase of IFC’s res­i­den­tial en­ergy ef­fi­ciency pro­ject in Ukraine, which started in 2010, the Swiss pro­vided $1.8 mil­lion in June to IFC’s ad­vi­sory ser­vices to strengthen le­gal re­forms within the en­ergy ef­fi­ciency sec­tor and to col­lab­o­rate with Ukraine’s hous­ing man­age­ment com­pa­nies and home­own­ers’ as­so­ci­a­tions.

District heat­ing

The apart­ment block in Sumy is a typ­i­cal ex­am­ple of Soviet mass hous­ing built in 1963 in the era of Nikita Khrushchev. Un­til two years ago, the res­i­dents of this build­ing strug­gled to keep their flats warm in win­ter.

Although their apart­ment house was con­nected to the city’s heat­ing sys­tem, tem­per­a­tures in­side the poorly in­su­lated apart­ments were low, while their heat­ing bills were high.

Around Ukraine there are tens of thou­sands of sim­i­larly ag­ing multi-apart­ment build­ings erected be­fore the 1960s that cost the bud­get and cit­i­zens bil­lions of dol­lars an­nu­ally to heat.

Ex­perts say do­mes­tic heat­ing bills could be re­duced by up to 60 per­cent, and the coun­try could be­come less de­pen­dent on costly gas im­ports.

House­holds ac­count for half of all nat­u­ral gas con­sump­tion in Ukraine, us­ing more gas than the coun­try im­ports from Europe. About a third of this vol­ume is used for heat­ing.

Af­ter en­joy­ing years of sub­si­dized prices for their gas, con­sumers now

Prom­i­nent Swiss com­pa­nies in Ukraine

$310 mil­lion since 1994 In 2018, in­vest­ing up to $28 mil­lion into Miv­ina fac­tory re­con­struc­tion as al­most half of its pro­duc­tion is ex­ported to 17 Euro­pean Union coun­tries and other coun­tries (namely UK, Ger­many, Spain, Azer­bai­jan and Ro­ma­nia)

Source: Em­bassy of Switzer­land in Ukraine

pay closer to the real cost: util­i­ties tar­iffs were raised in 2014 af­ter the eco­nomic and po­lit­i­cal cri­sis hit Ukraine. For ex­am­ple, Ukraini­ans went from pay­ing Hr 725 ($88 as per the 2013 ex­change rate) for the first 2,500 cu­bic me­ters of gas in 2013, to Hr 7,188 ($268) in 2016.

Ukraine be­gan rais­ing its nat­u­ral gas prices for house­holds fol­low­ing de­mands of the In­ter­na­tional Mon­e­tary Fund and other in­ter­na­tional lenders. One of the main goals of the price in­crease is to re­duce the multi­bil­lion-dol­lar cor­rup­tion schemes in­volved in the re­sale of the sub­si­dized gas for house­holds.

In ad­di­tion, in 2015 Ukraine gave up buy­ing from its reg­u­lar gas sup­plier, Rus­sia’s Gazprom, in re­tal­i­a­tion for the war waged by the Krem­lin on Ukraine in the Don­bas and Rus­sia’s oc­cu­pa­tion of the Ukrainian ter­ri­tory of Crimea. Oth­ers in­clude: phar­ma­ceu­ti­cal com­pa­nies Roche and No­var­tis; to­bacco com­pa­nies Philip Mor­ris and Ja­pan To­bacco In­ter­na­tional; SGS, MSC, Edi­presse, Kuehne+Nagel.

In­stead, Ukraine started to buy gas from Slo­vakia, Poland, and Hun­gary. But be­cause none of those coun­tries pro­duce gas of their own and im­port it from Rus­sia, de-facto Ukraine is sim­ply pay­ing more for Rus­sian­pro­duced gas sup­plied in re­verse flow from its west­ern neigh­bors.

High util­i­ties bills have forced some cities, like Uzh­gorod, to phase out large, district-level cen­tral heat­ing sys­tem as too expensive and shift to al­ter­na­tive heat­ing op­tions, such as in­di­vid­ual elec­tri­cal and gas-fired boil­ers. Apart from that, the gov­ern­ment has had to sub­si­dize low-in­come con­sumers who couldn’t af­ford high util­i­ties bills.

But ac­cord­ing to Oras Tynkky­nen from the Fin­nish In­no­va­tion Fund Si­tra, there’s noth­ing bet­ter than a well-func­tion­ing district-level heat­ing sys­tem in high den­sity ur­ban ar­eas in cold coun­tries like Fin­land or Ukraine.

The prob­lems are to make the old sys­tem ef­fi­cient and re­duce en­ergy losses.

Warm loans

Since the win­ter of 2016, 84 per­cent of multi-apart­ment build­ings in Ukraine have been equipped with heat­ing me­ters, which al­lows house­holds to pay bills based on ac­tual con­sump­tion rather than by fixed tar­iffs.

But the real game changer is the ren­o­va­tion of old build­ings with en­ergy-sav­ing so­lu­tions, and this is what home­own­ers have to do them­selves, with some fi­nan­cial help from the Ukrainian gov­ern­ment and in­ter­na­tional or­ga­ni­za­tions.

A few years ago, Ukraine’s state agency for en­ergy ef­fi­ciency launched its “Warm Loans” pro­gram, un­der which it com­pen­sates for 30 to 70 per­cent of the cost of bank loans taken for en­ergy-sav­ing ma­te­ri­als and equip­ment.

The as­so­ci­a­tion of home­own­ers in the multi-apart­ment build­ing at 34 Mira Street in Sumy re­ceived its first “Warm Loan” of Hr 180,000 ($6,300) in mid-2016.

The home­own­ers re­placed win­dows and doors, fixed the build­ing’s elec­tri­cal wiring, switched to us­ing low-power LED lamps, and in­stalled an in­di­vid­ual heat­ing sub­sta­tion for the build­ing, which helped to dis­trib­ute heat evenly to all flats and keep the in­doors tem­per­a­ture at 22 de­grees Cel­sius even in the cold­est months.

How­ever, they weren’t sav­ing as much on heat­ing as they’d ex­pected. Us­ing a ther­mal view­ing cam­era, they saw that the heat was leak­ing out of cracks in the build­ing’s walls.

“We took an­other loan of Hr 1 mil­lion ($35,300) to in­su­late the walls this year,” said Ser­hiy Adamovych, the head of the home­own­ers’ as­so­ci­a­tion of house No. 34. “And this is only the be­gin­ning. We also need to mend the roof and fix leaky pipes.”

He added that they wouldn’t be able to af­ford the ma­te­ri­als if a large por­tion of their loans weren’t cov­ered by the state en­ergy ef­fi­ciency fund. “We couldn’t wait any­more. The build­ing was crum­bling. And to­mor­row might be too late.”

Col­lec­tive ef­fort

As sim­ple a so­lu­tion as en­ergy ef­fi­ciency may seem, it re­quires a col­lec­tive ef­fort and a set of en­ergy-sav­ing mea­sures to make a dif­fer­ence, Lynn of the IFC said. She said heat­ing and elec­tric­ity bills could be cut by 30 per­cent on av­er­age.

“In­stalling a patch of in­su­la­tion on an in­di­vid­ual apart­ment won’t work. The whole build­ing has to be in­su­lated. And any de­ci­sion about a shared prop­erty has to be made by home­own­ers to­gether.”

Since the Soviet era, most multi-apart­ment blocks in Ukraine have been ser­viced by mu­nic­i­pal hous­ing main­te­nance of­fices, which tend to be un­der­funded and un­der­staffed. So the gov­ern­ment has en­cour­aged home­own­ers to band to­gether and regis­ter as­so­ci­a­tions to take charge of their build­ings and to ap­ply for “Warm Loans.”

“The hard­est thing was per­suad­ing the neigh­bors,” said Adamovych. “Some peo­ple were scared of the un­known, of re­spon­si­bil­ity, but they quickly changed their minds when the first re­sults be­came vis­i­ble: clean stair­wells, a new play­ground for the kids, LED lamps, and in­su­la­tion.”

Two other build­ings nearby de­cided to fol­low suit, he said.

Ac­cord­ing to the state en­ergy ef­fi­ciency agency’s direc­tor, Ser­hiy Savchuk, some 2,500 home­own­ers as­so­ci­a­tions across Ukraine have used the “Warm Loans” since the pro­gram was launched in 2014.

But they have re­ceived only 10 per­cent of the to­tal Hr 7 bil­lion ($275 mil­lion) that the gov­ern­ment has al­lo­cated to res­i­den­tial en­ergy ef­fi­ciency pro­ject. The rest went to in­di­vid­ual home­own­ers and sin­gle-fam­ily houses.

“It is a drop in a bucket,” said Lynn of the IFC. “Peo­ple need to get to­gether as home­own­ers’ as­so­ci­a­tions and make de­ci­sion about their build­ings. It is more dif­fi­cult to do, and it takes time to catch on.”

Work­ers in­su­late a Soviet-era res­i­den­tial build­ing with foam plas­tic in the west­ern Ukrainian city of Uzh­horod. With the sup­port of the Swiss gov­ern­ment, the In­ter­na­tional Fi­nance Cor­po­ra­tion ad­vised the de­vel­op­ment of Ukraine‘s ”Warm loans“pro­gram aimed at mak­ing Ukraine's res­i­den­tial sec­tor more heat ef­fi­cient. (UNIAN)

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