EBRD unleashes energy efficiency potential of Ukraine’s district heating sector

By Anton Usov

The EBRD is lending €10 million to a district heating company in the western Ukrainian city of Ternopil as part of its efforts to modernise the sector and unlock the country’s enormous energy efficiency potential.

The loan to the municipal district heating operator in Ternopil will support the utility’s investment programme, which aims to improve energy efficiency, reduce gas and electricity consumption and raise the quality of the heating and hot water services it provides to the population of the city.

This will be the first project under the EBRD’s new Integrated Approach to Reform in the Ukrainian District Heating Sector, which aims to boost Ukraine’s energy efficiency through increased energy and cost efficiency, improved financial sustainability and regulatory reform of municipal utilities.

The EBRD loan will be complemented by a grant of up to €5 million from the Eastern Europe Energy Efficiency and Environment Partnership (“E5P”), a grant fund established by international donors to co-finance investments in the Ukrainian municipal sector with a focus on demand-side efficiency improvements. The contributors to the E5P are Denmark, Estonia, the European Union, Finland, Iceland, Latvia, Lithuania, Norway, Poland, Sweden, Ukraine and the USA.

The investment programme supported by the Bank will finance the modernisation and upgrade of existing heat generation facilities; the installation of a biofuel boiler combined with a flue gas condensation plant; the introduction of individual heating substations; and the associated rehabilitation and modernisation of the heat distribution networks and existing boiler houses. It will also finance the installation of a dispatching and monitoring system and other crucial district heating system improvements.

Once the project is fully implemented, it is expected to reduce gas consumption by around 12.7 million cubic metres per year (including gas savings from conversion to biofuel). It will also achieve heat savings of 32,400 Gcal per year and electricity savings of 2,540 MWh per year and lead to a drop in CO2 emissions in excess of 27,000 tonnes per year.

Technical cooperation funds necessary for the project’s preparation and implementation were provided by the government of Sweden.

“District heating systems in Ukraine are plagued by inefficiency and excessive distribution losses and are also a significant source of greenhouse gas emissions. The sector is in need of major regulatory and institutional reforms and long-term investments. With a new EBRD district heating sector initiative in place, we are planning to address this issue across the country,” said EBRD Country Director for Ukraine André Küüsvek.

The EBRD is the largest financial investor in Ukraine. As of the end of August 2012, the Bank had committed over €8 billion (US$ 10 billion) through 320 projects.