The prices of utilities have been raised dramatically in Ukraine, which led to an increase of citizens’ bills several times over, provoking energy poverty and decreasing living standards. This reform was cited as a role model by many Western advisers and officials. However, the main condition for successful reform was the promise to reduce the energy bills of people and to ease the tariff burden. By voting in the Verhovna Rada, it looks like this is not yet a priority for the government and ruling coalition.
The program for energy independence and energy efficiency is included in the list of priority reforms, according to the Sustainable Development Strategy “Ukraine – 2020.” Unfortunately, the draft laws aimed at reducing energy consumption among the population have received no political support from the coalition.
It is estimated that the energy consumed for heating in Ukraine is 2-3 times higher than in European Union member states. It is necessary to attract $4.2 billion to $8.5 billion for their thermo-modernization to improve the energy efficiency class. There is a mechanism which makes it possible to attract such funds without additional cost to the budget, with the investments from individuals or loans. It is a mechanism of energy performance contracts or ESCO.
Indeed, last week the Ukrainian parliament finally adopted a law of my and many others authorship helping business to invest in thermal modernisation of a building by ESCO mechanism with the Prozorro public procurement system. Also in the first reading, the parliament supported the governmental draft law according to which an energy efficiency fund worth more than 100 million euros could be created. But is it really being supported by the ruling coalition?
For the adoption of the ESCO law the two coalition’s factions gave only 145 votes out of 222 officially registered as the members of Poroshenko Block and People`s Front factions! The law has hardly passed, receiving a total of 228 MPs’ votes from all the factions and non-affiliated deputies.
There is a similar situation regarding the voting for a draft law on the energy efficiency fund – in the first reading 227 MPs supported it which is only one vote above the threshold. And the coalition gave only 157 votes to support a key governmental draft law!
Meanwhile, the energy efficiency fund was named by Deputy Prime Minister Hennadii Zubko “a key start-up” aimed to reduce the energy consumption and utility bills for the population. Ukrainian energy-efficiency fund is a prototype of the “green banks” one could see in some US states. Establishing such an institution is one of Ukraine’s commitment to the EU finance. But somehow this governmental draft law is even more likely to be supported more by the opposition, severely criticizing the governmental tariff policy, than by the ruling coalition.
The situation is even worse if we look at other draft laws on energy efficiency – they are not even presented for consideration in the session hall. In particular, the draft law on buildings’ energy efficiency is at the bottom of the agenda week after week. The law on metering aimed to provide 100% heat metering instead of current 40 percent just passed the second reading in the committee and not yet in a Rada’s agenda. Metering is in not only a precondition for the EU investment for the energy-efficiency fund. It is a logical precondition for any tariff increase, because people should pay for what they have really consumed, not billed by monopolist based on their own assumptions or methodology!
Neither the ruling coalition nor the government understands the importance of reducing energy consumption. Only Hr 800 million are provided for energy needs in the 2017 budget, while at the same time subsidies amount to Hr 50 billion. So the figures in citizens’ bills have not decreased, and 60 percent of the population are in energy poverty and subsidized from the budget. Subsidies have not been monetised for the three years after the first tariff increase and even foreign experts are challenges of a task to draft an appropriate model of monetising the subsides for the 60 percent of the population.
And this is not even to mention the energy efficiency in other sectors of the country’s economy – industry, transport, agriculture etc.
Ukraine is one of the most energy inefficient countries in Europe. Foreign partners are trying to help us to implement the principles of energy efficiency and energy saving so that Ukrainians will consume less and thus pay less. However, it looks like the country’s authorities support a different model: they still want Ukrainians to consume more natural resources and hence to pay more to the gas oligarchs and energy monopolists.
Alex Ryabchyn is a member of the Verkhovna Rada, Ukraine’s parlaiment, and a native of Donetsk elected in 2014 from the party list of Batkivshchyna. He has a Ph.D. in economics at Donetsk National University and MSc in Innovation and Sustainability for International Development at SPRU, University of Sussex. Worked as the Washington Post stringer during the conflict at the Donbas in 2014. Currently the head of the subcommittee on energysaving and energyefficiency of the Energy Committee.
