On July 28, as a symbol of Statehood Day, the European-Ukrainian Energy Agency held an expert discussion on energy efficiency on the topic “Post-war challenges in the energy efficiency sector.”

Among the speakers of the discussion were: 

  • Denys Shemyakin, Director of the Reform Support Team at the Ministry of Economic Development and Trade of Ukraine;
  • Serhiy Porovskyy, Principal Energy Efficiency Financing and Policy Expert, UNIDO/GEF UKR IEE Project;
  • Vadym Matkovsky, Energy Efficiency Coordinator of Reform Support Team at the Ministry of Regional Development;
  • Rostyslav Maraikin Regional Coordinator, Eastern Europe & Central Asia, PFAN.

Dmytro Prinus, acting director of the EUEA, opened the discussion with a welcome speech and noted: “Today, Ukraine is facing many challenges and problems that have been put before us by our neighbours, who have decided that we need freedom, bringing war, destruction and sacrifice. But we are in Ukraine, and Ukrainians even today have an optimistic view of the future, because we believe in the Armed Forces of Ukraine, but most of all we believe in ourselves. As difficult as these current societal and economic changes are, we know that inaction will put us in an even more difficult situation.

The European-Ukrainian Energy Agency (EUEA) has been operating since 2009. We focus mainly on 4 sectors: renewable energy, energy efficiency, green finance and green hydrogen, and for 13 years we have helped our country build, modernize and develop these sectors.

We call on governments, development banks, and international financial aid organizations to join forces to ensure post-war reconstruction!”

 

Denis Shemyakin, Director of the Reform Support Team of the Ministry of Economy of Ukraine

“Regarding the impact of the war on the economy of Ukraine, the following figures can be recorded according to the survey: 18.7% – enterprises were stopped; 28.1% – almost stopped; projected fall in GDP in the range of 30-35%; losses of state and private sector enterprises – at least 9.6 billion dollars; business activity is reduced; exports restricted due to port blockades.

The key challenges currently expected are: a possible wave of bankruptcies and the shutdown of many enterprises, disrupted supply chains, problems with customers, low diversification of energy supply, and port blockades.

The main objective of the recovery and development plan is economic recovery and rapid economic growth to jump from a transition economy to a developing economy in 10 years. The key tasks of the economic block of the recovery and development plan can be divided into:

  • short-term: expansion of business support programs, focus on SMEs, grant programs (up to UAH 8 million for a processing enterprise, for orchards and the agricultural sector; there are also grants from UAH 50-250 thousand);
  • medium-term: focus on the implementation of guarantee instruments from partner governments to attract investment, reduce regulatory and tax burden on business, reduce labour taxes, privatize all state non-strategic assets;
  • strategic: in addition to the focus on the export of processed products with a higher share of added value, we are adding the trend towards innovation, moving away from the resource-based economy, and adapting the Ukrainian economy to the criteria necessary for integration into the EU.

 

Enterprise relocation issues: how many enterprises were successfully relocated, and where are they moving?

“According to the program of relocation of enterprises, which has been in operation since the beginning of the war as of July 29, 1766 applications were received, of which 39.4% (692) were successfully relocated, mostly micro and small enterprises. The main part of the applications from Kharkiv, Donetsk, Luhansk regions and the city of Kyiv were mainly relocated to the Lviv region. If you are near the frontline, it is better to relocate and not hesitate. The program is still working now, an application submitted on the portal will allow you to receive compensation for transportation or free transportation through Ukrposhta/ Ukrzaliznytsia.

As for the “Your Own Business” program, these are grants from UAH 50,000 to UAH 250,000. The program works through the “Diia” portal, the funds can be used for purchasing or leasing equipment, renting premises and purchasing raw materials.

Grant applications:  https://diia.gov.ua/](https://diia.gov.ua/ . Grant for processing industry: https://diia.gov.ua/services/grant-na-pererobne-pidpriyemstvo

More details in the presentation Відновлення_та_розвиток_економіка , Релокація та відеозаписі дискусії: https://cutt.ly/bZgD9YR [07:00-24:00]

 

During his speech,  Serhiy Porovskyy, Principal Energy Efficiency Financing and Policy Expert, UNIDO/GEF UKR IEE Project, noted:

Increasing energy efficiency should be at the core of the post-war recovery strategy of Ukraine’s economy! About this, we (UNIDO) formally noted in working groups under the National Recovery Council. Of course, the main tasks that need to be solved now are: support of operational business processes, provision of energy resources and stabilization of the financial sector/reduction of the cost of capital. However, it is important to have a correct “perception” of energy efficiency and the economic effect of the implementation of energy efficiency measures, which primarily concerns industry and energy industry, and not thermal modernization of buildings.

In the UNIDO/GEF UKR IEE Project “Introduction of Energy Management System Standard in Ukrainian Industry”, we work in 3 main areas:

  • development of the regulatory and legal framework for energy efficiency: where we provide technical support to central executive bodies for the nationalization of international standards and the development of relevant laws and by-laws;
  • creation of an expert database: we had a powerful training program for training experts, and for improving the qualifications of specialists and certification institutions;
  • creation of a financial mechanism and other support tools: together with UKRGASBANK, we launched the Loan Guarantee Fund – this Fund is working; together with the EUEA, we launched the All-Ukrainian Award: Pacesetters for Energy Management – currently, due to martial law, the selection and awarding of participants is suspended, but we will definitely resume the process after our victory! I also hope that it will be possible to develop and implement a scheme of “Voluntary Agreements” on energy efficiency.

We conducted a survey of enterprises regarding the impact of the war on their activities and the possibility of implementing energy efficiency measures. At the moment, the following things are happening with enterprises: 1 – transfer of production from zones of active hostilities; 2 – the problem of providing energy resources; 3 – financial problems and lack of desire/ability to invest – business is focused on survival and covering basic operational needs, the recently high cost of capital, caused by the increase of the NBU key rate to 25%, only significantly complicates the situation.

Therefore, it is extremely important to create special (guarantee) financial instruments to support business, and directly increase energy efficiency in the industrial and energy sectors of the economy. It is also important to correctly structure the work of such financial instruments / Funds in order to create opportunities not only for attracting international donor aid but also private foreign capital (which, by volume, is the largest). In the pre-war period, state guarantees were enough, now it may not be enough.

However, investment in improving energy efficiency in industrial sectors should be a priority, because it is a constant reduction of operating costs and reduction of energy resource shortages. The implementation of the energy management system will not only allow for correctly predicting and evaluating the results of energy efficiency measures but will also provide an opportunity to implement so-called “zero-cost” measures: changing the behaviour of workers and optimizing operational processes, controlling defects, forecasting energy consumption, increasing the value of the brand – the financial result from which is estimated at (additional) 40% of capital investments in energy efficiency measures.

“In addition to the Loan Guarantee Fund, which is currently operating, and under which enterprises can obtain preferential loans for the implementation of the energy management system and energy efficiency measures, we can help with the involvement of highly professional national and international experts. There was information that state-owned enterprises were instructed to implement an energy management system, but they do not know how to do it (correctly). Contact us, we can help!” – said Serhiy Porovskyy.

 

In addition, Serhiy Porovskyy commented on the energy intensity index of GDP, which is often considered to be 2-3 times higher in Ukraine than in neighbouring EU countries:

“I consider this to be a false statement because we have two indicators of energy intensity of GDP: 1) energy intensity of GDP in purchasing power parity and 2) simply energy intensity of GDP. If we take into account the energy intensity of GDP without purchasing power parity, our indicators are 8-10 times higher than in the EU countries. Our low purchasing power evens out this figure. However, this points to another social problem and the issue of energy poverty.

In my opinion, it is the Ministry of Economy of Ukraine that should be engaged in the activities of the energy efficiency sector, because this is precisely what affects the energy efficiency of our GDP. If measures are not implemented in all sectors of the economy, the energy intensity of GDP will not change.”

 

Regarding the question mentioned in the chat before Mr. Porovskyy’s speech in the chat: “what is the importance of energy efficiency for the economy of Ukraine?” – he commented:

“If we ask what energy efficiency has to do with our economy, it applies to all sectors of the economy; energy efficiency is not (only) about thermal modernization of buildings, but primarily about increasing energy efficiency in industry and PEK! That is why it is so important to develop tools to encourage businesses to energy efficiency. Moreover, it is not SMEs that have a special influence on our economy, but the top 10 percent of large industries. Their influence on consumption, pricing and availability of energy resources is the most significant, and in terms of economic effect, the implementation of energy efficiency measures in them will have a more significant result than in housing and communal services.

In my opinion, it is the Ministry of Economy of Ukraine that should be engaged in the activities of the energy efficiency sector, because this is precisely what affects the energy efficiency of our GDP. If measures are not implemented in all sectors of the economy, the energy intensity of GDP will not change.”

More details in the video recording of the discussion: https://cutt.ly/bZgD9YR [27:00-47:00]

 

Vadym Matkovsky, Energy Efficiency Coordinator of Reform Support Team at the Ministry of Regional Development

At the beginning of the speech, Vadym Matkovsky mentioned the measures proposed in Lugano regarding energy efficiency and decarbonization in communities:

“Three stages are considered:

  • “Wartime Economy” (until the end of the war in 2022, 2023): as much as possible to carry out low-cost quick-accumulation measures in buildings: massive insulation of pipelines in basements, installation of autonomous gas boilers in public buildings, the establishment of individual heating points, for which EUR 500 million are calculated.
  • «Post-war recovery” (until 2025): the initial step toward large-scale thermal modernization is being laid, rebuilding completely destroyed schools and kindergartens according to the NZEB principle, thermal modernization of the most energy-intensive buildings and residential buildings, gradual outgo from natural gas consumption at the expense of RES.
  • «Structural modernization of the country»: large-scale thermal modernization of buildings, which, according to the committee’s estimates, is approximately EUR 60 billion, which will cover a third of the construction fund in the country, a complete outgo from the consumption of imported gas, a complete transition to the construction of NZEB.

As talk about financing tools, official representatives of the European Commission constantly monitor the activities of the Energy Efficiency Fund and evaluate it as a fairly successful, reliable, systemic tool. Therefore, it is quite likely that part of the funding from the EU budget for the restoration of buildings will be directed through the Energy Efficiency Fund.

Regarding Law №6485, which concerns not only systems of energy management and energy certification, but is more directed to the issue of creating conditions for large-scale thermal modernization of buildings. The law stipulates three important things regarding financing by the Energy Efficiency Fund:

  • The Fund can now legislatively shape its program in such a way as to give grants in advance, not just after the fact.
  • The fund will be able to provide support for preparatory repairs, which will remove part of the financial burden from co-owners and have a positive effect on the quality of thermal modernization.
  • The Fund will also be able to provide grants for the restoration of buildings with an increase in their energy efficiency (replacement of broken windows and doors with highly energy-efficient ones, restoration of damaged thermal insulation on the walls).

In addition, a draft of the Thermal Modernization Strategy until 2050 is being prepared (requirement of EU directives), which aims to consolidate all policies and efforts of all stakeholders (Government, businesses, municipalities, citizens), to create a long-term systematic approach to the introduction of large-scale thermal modernization, including the localization of the production of energy-efficient materials and equipment, and the development of the competences of specialists in the construction industry.”

More details in the presentation: ЕЕ будівель and video recording of the discussion: https://cutt.ly/bZgD9YR [00:49:00-: 01:09:00]

 

Rostyslav Maraikin Regional Coordinator, Eastern Europe & Central Asia, PFAN

«We know there are some wishes from the grantors for grants, but even when we are able to attract them, what are the guarantees that the business will be implemented and constructed? Therefore, it is necessary to follow international practice. Our PFAN program can help with this professionally and for free. We work with project and business developers, financial organizations, experts, and government bodies. To get started, you need to submit an application, at the second stage, an assessment will be carried out, if the project is supported, we provide business consulting for the project regarding the preparation of documents for obtaining financing (grants, loans, investments). The ultimate goal is to close the project financially. Most of our projects are from renewable energy sources and climate adaptation. If we implement the international practice of project preparation and verification, most of the grants will be implemented.”

More details in the video recording of the discussion: https://cutt.ly/bZgD9YR [01:10:00-: 01:26:00]

PFAN Presentation 07.2022 ukr

 

Recording of the discussion

Post-release and presentations of the expert discussion “Post-war challenges in the energy efficiency sector” EUEA published on its website.