1,5 year for the preparation of energy-efficient municipal projects: reality or invention?
On June 11, 2018, the European-Ukrainian Energy Agency held the annual Energy Day in Kyiv Premier Palace Hotel where most experts in the energy efficiency sector were present. The topic of this year’s event was the Policy Dialogue 2018: “Energy Efficiency from Idea to Implementation: How to Bridge the Time Gap?”
The experts discussed the biggest obstacle to the development of the sector – reasons for delaying the cycle of preparation and implementation of energy efficient projects and jointly looking for ways to overcome them.
The event was held with the support of the project “Reforms in the field of energy efficiency in Ukraine” implemented by GIZ on behalf of the German government. iC consulenten in Ukraine and Celynx AG were also partners to the event.
The League was the general media partner.
The expert group consisted of well-known energy efficiency market experts Sergiy Savchuk, Head of the State Agency of Energy Efficiency and Energy Saving of Ukraine, Elena Rybak, Board Member of European-Ukrainian Energy Agency, Managing Director of iC consulenten, Johannes Baur, Head of Operations Section 3 “Economic cooperation, energy, infrastructure and environment” of the Delegation of the European Union to Ukraine, Ima Khrenova-Shimkina, Deputy Director of the Project “Energy Efficiency Reforms in Ukraine”, carried out by GIZ on behalf of the German Government, Julia Shevchuk, Chief Investment Adviser, The Nordic Environment Finance Corporation (NEFCO), Sergiy Maslichenko, Associate Director at European Bank for Reconstruction and Development (EBRD), Maxim Vereshchak, Key Expert, The Covenant of Mayors Program Demonstration Projects Support Team, Svyatoslav Pavlyuk, Head of the Board of the Association of Energy Efficient Cities.
According to Sergiy Savchuk, Head of the State Agency for Energy Efficiency and Energy Saving, the speed of implementation of projects is a key factor in the country’s development and further reduction of energy consumption. He noted that Ukraine has already managed to reduce gas consumption – from 24 billion cubic meters of gas in 2014 to 18 billion cubic meters of gas in 2017. It is planned to reduce the use of gas by another 5 billion cubic meters. In general, the National Energy Efficiency Action Plan provides for a 9% reduction in energy consumption by 2020.
Under the current procedure, the term of energy-efficient projects in Ukraine takes 22 months. But in fact the procedure is much longer. “Currently, the authorization procedure takes 40-66 months. Most projects are hampered at the stage of harmonization in state institutions, – Elena Rybak, Board Member of European-Ukrainian Energy Agency, Managing Director of iC consulenten in Ukraine noted. According to her words, the formal, procedural and technical denial reasons and unlimited number of possible reviews and returns that can take up to 30 days (according to the procedure) result in the loss of time and make the actual implementation of the project impossible. The categorization of the reasons for non-approval or return of documents and reduction of the terms of repeated hearings could become one of the elements of the reduction of these procedures. The whole spectrum of obstacles was systematized for the first time directly at the event during experts brainstorming.
According to Johannes Baur, Head of Operations Section 3 “Economic cooperation, energy, infrastructure and environment” of the Delegation of the European Union to Ukraine, the process of energy efficiency in Ukraine is dragged on by the imperfection of tender procedures. He also advised to standardize the need for energy efficiency, in particular, one-hundred percent of the consumption measurement and training programs for construction companies and banks would positively contribute to this process.ndardize energy-efficient projects by category, which will significantly accelerate both their design and implementation. Mr. Baur noted that changes in mentality are critical for people to realize the need for energy efficiency, in particular, one-hundred percent of the consumption measurement and training programs for construction companies and banks would positively contribute to this process.
Julia Shevchuk, Chief Investment Adviser, The Nordic Environment Finance Corporation (NEFCO), based on her experience in implementation of more than 100 energy efficient municipal projects in Ukraine, systematized the largest “stoppers”. According to her, first of all, it is necessary to eliminate regulatory obstacles, often illogical, that take time to resolve the situation. “Every year there is a new, unpredictable norm that stretches the process of project implementation to infinity,” – explains Julia Shevchuk. “Our projects are held in on average, six conciliation stages, each can take from 3 to 6 months. Absolutely new challenge is the need for approval by the Antimonopoly Committee of guarantees. The official term is 3 months, but the actual term is much longer due to the overload of the Antimonopoly Committee, which has to issue thousands of confirmations. “
Among other obstacles, Ms. Shevchuk named the lack of administrative staff in municipalities, which is considerably reduced through administrative reform and its low training, imperfect taxation and unwarranted attention from law enforcement agencies. Yulia Shevchuk reminded that the level of implementation of Ukraine’s most important international energy efficiency projects is negligible. In particular, the E5R Fund has awarded grants for only 9% of the approved amounts over the last nine years. E5P has the opportunity to grant financing for energy efficiency projects at 110 million euros, however, the energy market of Ukraine has been unable to accept investment resources and, unfortunately, retains this disappointing tendency.
“The work is complicated by the fact that Ukraine has no single coordinator for working with international financial organizations. Some functions are entrusted to the Ministry of Finance, another to the Ministry of Economy. But this is not enough, in fact, we are forced to solve too many tasks, often urgent and for the first time “, – stresses Ms. Shevchuk.
“To meet all the requirements for projects, there is not enough human resources,” – added Julia. – To sign all memoranda, to collect all contracts within the framework of the project can easily go to 500 pages and half a year of work. Such a procedure begins after the announcement of the results of the tender and immediately delays its implementation. “
In addition, for many energy-efficient projects, new requirements of state expertise have recently been applied. The objects over which NEFCO works have been transferred to a comprehensive examination (previously simplified), which will take from three to six months.
A significant problem that NEFCO faces is the actual inadequacy of facilities for modernization. Due to the lack of any investment in infrastructure, the objects have become unfit, 50% of feasibility studies can not be performed.
Ima Khrenova-Shimkina, deputy director of the project “Reforms in the field of energy efficiency in Ukraine”, carried out by the GIZ on behalf of the German government, insists that the only way to changes is the sectoral reform that can organize the work of “the whole mechanism in a single direction.” Ms. Khrenova-Shimkina also shared positive results and accumulated over the years examples of overcoming obstacles to project implementation. She noted that GIZ actually created an entire energy cluster. “We currently have six projects in the energy sector and several projects will be under implementation next year. “Energy Efficiency in Buildings” and “Energy Efficiency in Communities” remain the largest projects of GIZ.
As an example, Ima Khrenova-Shimkina provided GIZ system of energy-efficient monitoring on the ground, which aims to reduce abuse at all levels. This allows investor to choose the kindergardens with the corresponding energy efficiency index, and not the one where the mayor kid studies.
GIZ’s priority is also training on energy management and facility management. The purpose is to promote, firstly, competent decisions, and secondly, adequate operation of objects. “The logic is simple,” said Ima Khrenova-Shimkina: “No matter what the latest technology was provided, if the head of the facility does not know how to use the switches, the effect of the investment will be zero.”
“Currently, skilled personnel is more valuable than money. Ukraine can not use financing of energy efficient projects due to the low level of training, both at the level of experts of municipalities and at the level of contractors, which is very obvious during the design and implementation of projects, “- Ms. Khrenova-Shimkina is convinced. Therefore, GIZ insists on the most important – to transfer knowledge and continue its educational programs to improve the skills of personnel in the field of energy efficiency. In support of Ms. Khrenova-Shimkina gave some examples from her own experience: “After conducting training for the representatives of the Zhytomyr mayor’s office, the average lifetime of energy-efficient projects has been reduced for one year. “According to Ms. Khrenova-Shimkina, the level of training of project applicants themselves has also significantly increased. “There were exactly zero applications for the first tender in Ivano-Frankivsk. No one was ready, the demands of the German partners were horrific, despite the compensation of 40% of the cost of the project, – shared Ima Khrenova-Shimkina. – Now 100 projects is implementing with NEFCO only. “
Sergiy Maslichenko, Associate Director at European Bank for Reconstruction and Development (EBRD): “Our new program, aimed at financing energy efficiency in budget buildings, has a funding of 125 million euros. We are planning to approve several large projects in the near future for 10-20 million euros within the framework of this program. Realizing the complexity of the field, we are trying to participate in projects where a state guarantee is provided. We work with the private sector or with municipal guarantees. And even under such conditions we face enough problems. The most urgent ones are already mentioned by the Antimonopoly Committee, due to the delay in procedures which many of our projects have now stopped. Also, the “Soviet rudiments” – a price examination, which should be conducted after the tenders, is very delaying.” Mr. Maslichenko stressed that some of the problems also lie on the international financial institutions, who choose not optimal structure of the project for our realities at the stage of its preparation.
Maxim Vereshchak, Key Expert, The Covenant of Mayors Program Demonstration Projects Support Team, said that it is difficult for cities to rank projects in the absence of a clear ranking system. “There is no further understanding of which projects should be implemented first, it is also difficult to understand what kind of project will potentially be of interest to an investor in a particular city,” explains Mr. Vereshchak. It is in these areas that we are now going to teach the city teams. He also explained that such training was preceded by the creation of a strategy for energy efficiency in the cities.
Svyatoslav Pavlyuk, chairman of the Association “Energy-efficient cities of Ukraine” was categorical: “The issue of reducing the design cycle is a matter of the speed of money rotation in this sector. This is another line that emphasizes the strategic importance of this issue. “
Svyatoslav also noted the extraordinary sensitivity of energy efficiency projects to the political concentration of forces in cities. “Work at the level of municipalities over projects on heat, water, sewage system goes beyond one election cycle of the city council. There have been cases when the city council canceled the already initiated, partly funded projects by a foreign investor, “- said Mr. Pavlyuk. – We need to exclude such arbitrariness immediately. “
Among other steps needed to accelerate the implementation cycle of energy efficient projects experts also named: training of specialists (designers, energy auditors, employees of banks that provide loans for energy efficiency, etc.), the removal of obsolete legislation, the creation of a single window for all energy efficient projects or a focal point, providing targeted financial assistance for educational programs.