EBRD paves the way for increased energy savings in Ukraine

By Volker Ahlemeyer

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EBRD-backed solar plant Porogi in Ukraine

Swedish-funded EBRD project is driver for legislative change

The private sector is now very much aware that energy savings are low-hanging fruit for businesses striving to become more competitive.

Many private households have also discovered the benefits of insulated windows, energy efficient washing machines, fridges and other cost (and carbon emission) cutters.

The EBRD has made a major contribution to this shift. Since 2006 it has invested €16.7 billion in sustainable energy projects. This has helped reduce carbon emissions equivalent to the annual electricity consumption of Romania.

Global Environment Facility are helping introduce renewable energy in Ukraine by supporting projects like this high-tech solar power plant in the village of Porogi.

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It is a different story for public buildings, though, a sector which, for a long time, the EBRD has avoided.

“The private sector can play a very important role in helping to reduce energy use in public buildings too,” explained Peter Hobson, Senior Banker in the EBRD’s Energy Efficiency and Climate Change team.

In Ukraine, as in many other countries, existing legislation made it difficult for the private sector to help kindergartens, schools, hospitals and other such buildings become more energy efficient.

“Local authorities were not allowed to get into a contractual agreement for longer than one year,” said Olena Borysova, Programme Manager in the EBRD’s Kiev Resident Office. “This was a timeframe that did not allow profitable investments for energy services companies (ESCOs) in the public sector.

“Also, procurement rules foresaw that the lowest bidder would obtain the contract, whereas for such energy efficiency investments you would want to choose the one guaranteeing most energy and cost savings.”

In ESCO projects, private sector companies help clients invest in energy efficiency. The aim is to cut expenditure on heating, lighting, ventilation and other elements.

The costs are no higher as the energy savings pay for the upgrade, while the ESCO in turn guarantees a specific level of service performance.

“Such investments usually save between 25 and 50 per cent of the energy consumption,” Mr Hobson added. “They are there to stay, which means that the investor has the full long-term benefit of both more efficient energy use immediately and the associated lower costs in five to ten years.”

The Swedish International Development Cooperation Agency (Sida) provided €500,000 to cover the operational and legal costs of establishing a model law for Ukraine.

This included a detailed analysis of the existing obstacles, an outline of the reforms needed and guidance on how to draft the new law so that it meets best international practice.

To achieve the most impact, the EBRD coordinated its efforts closely with USAID, who are working to advocate legal change in the same field – with success.

The Ukrainian parliament approved the bill for the new law in May this year. This will enable the private sector, and more specifically ESCOs, to turn public buildings into more energy efficient, more comfortable places for their users.

“It has been a long-time effort by many departments in the EBRD to make this important change happen,” said Mr Hobson.

 “It has helped to open the doors in Ukraine for much-needed energy efficiency investments. This will lead to cost savings for many public buildings, contribute to energy security and ultimately a greener future in the country.”

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