New Energy Strategy

By Wolodymyr Derzko

In Ukraine, energy has been the big pre-election issue. The crisis that ensued when Russia cut off gas supplies to Ukraine and the collapse of the central district heating system in the eastern city of Alchevsk highlighted the shortcomings of Ukraine’s energy policy.

Two rounds of legislation on energy and conservation were passed by the Kuchma regime, but not much was implemented.

The main problem is that Ukraine is an energy hog. For every unit of Gross  Domestic Product  (GDP) produced,  Ukraine used over 2.6 times more energy than the world average.

Two significant events addressing this strategic issue took place in March: an international energy forum was held in Kyiv and Ukraine’s Energy Strategy to 2030 received approval from the Cabinet of Ministers.

The forum, entitled, Energetics of Cities in the XXI Century–New Challenges, took place on March 14-16.  Kyiv’s mayor Oleksandr Omelchenko, the Kyiv City Administration, and Kyivenergo, the local electrical utility, and the Ministry of Fuels and Energy of Ukraine hosted the forum to which public and private institutions that work in the energy field in Ukraine were invited.

Representatives from European cities, including Vilnius, Krakow, Stockholm, Riga, Leipzig, Belgrad, Vienna, and Kishineu, as well as North American cities, including Chicago and Toronto, took part. Stephan Letwin, Group Vice President Gas Strategy & Corporate Development, Enbridge Incorporated, spoke on Enbridge’s experience in energy-saving gas technologies.

I spoke about the experiences of two Canadian power-management and energy-conservation firms, Encelium Technologies of Markham Ontario and PSD Technologies from Nova Scotia. Both have proprietary technology in the area of “power shedding,” or the elimination of unnecessary lighting and other electrical loads when they are not needed. For example, during the day energy can be saved if ambient sunlight is used rather than electrical lighting. The Toronto General Hospital, in one building, saved over $48,000 a year in energy costs after installing Encelium’s system.

European and Ukrainian experts presented similar energy-saving projects and ideas. But, will the Ukrainian government, the Ministry of Fuels and Energy and the Ministry of Buildings, Architecture and Utilities take all this to heart?

The second milestone event, the release of Ukraine’s  Energy Strategy to 2030, took place on March 23.

On first look, Ukraine seems to be heading in the right direction. Developed by Ukraine’s Energy Minister and supported by President Yushchenko, the new strategy has the following priorities: integrating Ukraine’s energy system with Europe; increasing Ukraine’s energy export; promoting Ukraine as an oil and gas transporter; meeting the increasing demand for energy without interruption; improving Ukraine’s energy security; reducing industrial energy consumption; and reducing pollution.

On closer look, the strategy largely maintains the status quo and is focused on Ukraine’s traditional energy sectors–natural gas, oil, nuclear and coal. Ukraine plans to add 18.5 MkW of new nuclear capacity by 2030, going opposite to the world trend.  As well, the document is short on implementation tactics, timetables, responsibilities and resource allocations.Alternative, renewable energies get only passing mention towards the end of the document, making them seem a trivial afterthought in the government’s long-term plans.

The strategy also ignores the possibility that new energy technologies,such as cogeneration, heat pumps, gas hydrates (frozen natural gas, found in the Black Sea) or Hydrogen gas or Helium 3 (a non-polluting fusion material, which China and Russia plan to mine on the moon and bring back to earth), which today seem science fictional, may be commonplace by 2030.

Solar power is expected to jump to a 50 per cent efficiency level by 2010, from today’s relatively poor levels of  18 to 20  per cent conversion rates. Both wind farms and wave power can form a significant alternative energy capability, especially in Crimea. Biomass is a natural alternate energy technology considering the size of Ukraine’s agricultural industry and its corn crops.

Is Ukraine now more serious about energy conservation?  Doubts remain. Within the current energy infrastructure there is little incentive for energy conservation, though the President is threatening the industrial sector with penalties for over-consumption of gas.

On the generation side, NaftoGas, Ukraine’s gas monopoly works on a year-to-year zero-based budget. If all of the allotted resources are not used in a budget year, it doesn’t get the same allotment next year. So what’s the real incentive to conserve energy? Zero.

One the user side, Ukrainian cities have a complex mix of central regional and district heating systems as well as buildings that use natural gas to heat water boilers, which in turn heat water-filled radiators in apartments. Officials claim that apartments that get heating from district heating systems can’t have meters and thermostat controls. Again, there is little incentive for individual families to conserve energy.

Anecdotal evidence confirms this. While in Kyiv for the forum, I found the apartment where I stayed was too warm.  I asked the landlady where the thermostat was to turn down the heat. She laughed and said: “Open up your window or turn up the air conditioner.” 

Wolodymyr Derzko works in strategic planning and business development in Toronto and is an associate at CERES,  MUNK Center for International Studies, University of Toronto.