Ukraine vitally needs decarbonization and development of renewable energy
Strengthening and competitiveness of our country in world markets directly depends on the fastest pace of decarbonization of the energy sector and other GDP-forming sectors of the Ukrainian economy. Instead, delays in solving problems in the energy sector are already one of the reasons for the slowdown, sometimes even the cessation of investment for energy efficiency projects and the production of clean electricity from renewable energy sources. We are talking about the key problems of the energy sector, such as debt, including the debt for the last year to RES producers in the amount of 16.5 billion UAH in 2020, and the growing debt in 2021, the need to reform the mechanism of special obligations for the supply of electricity to the population, and to increase the share of renewable energy sources, the threat of another retrospective change in legislation – the introduction of an excise tax on electricity produced from renewable sources, a transparent electricity market without manipulation, and more. This conclusion was made by the participants of the 12th European-Ukrainian Energy Day. The topic of the conference this year: “Climate Lockdown: Time to Act, until it is too late”. Every year, Energy Day raises key issues and challenges of the Ukrainian energy sector. The conference brought together more than 3,000 participants online from around the world and more than 100 offline participants in Kyiv, 35 speakers and moderators.
The speakers of the first thematic session “Ukrainian reforms vs international policy to avoid climate lockdown and move towards carbon neutrality” are unanimously convinced that Ukraine has to move forward to create more transparent environment and respond to climate threats. “I would like us to work on the development, and, for example, to start building hydrogen production in Ukraine, instead of defending achievements, – said Mats Lundin, Chairman of the Board of the European-Ukrainian Energy Agency. – Our task is to move forward together and build decarbonised energy sector in Ukraine». At the same time, Ukraine should move faster to clean electricity production than we do now, not only to preserve the environment, but also to preserve production, jobs and state budget revenues.
The head of the EU Delegation to Ukraine, Matti Maasikas, harshly criticized the state of affairs in the Ukrainian energy sector. According to his words, little has been done in Ukraine to protect national security, pricing and efficient spendings in Ukraine’s energy sector. He also noted that the EU offers available tools, but there are questions whether there is scientific capacity and human resources to use them skillfully. His concerns were supported by the Director of the Energy Community Secretariat, Janez Kopac, who drew attention to the debts of NPC “Ukrenergo”, which may interfere with the company’s certification of compliance with the requirements of the Energy Community. However, Minister of Energy of Ukraine Herman Galushchenko spoke about plans aimed to cover debt of Ukrenergo. He said that it is planned to issue Eurobonds in the autumn of 2021. The intentions of the issue were also confirmed by the Chairman of the Board of NPC “Ukrenergo” Volodymyr Kudrytskyi: “We are considering to issue of 5-year Eurobonds for a total amount of EUR 500 million”.
The second thematic session was dedicated to the topic «What are the donors silent about and what it has to do with Ukraine wasting time in energy saving», which raised a number of systemic issues in the industry, but left space for optimistic expectations. Thus, Julia Shevchuk, Chief Investment Adviser of NEFCO, said that over the past three years, HEFCO projects in 18 cities of Ukraine have been canceled due to political inconsistency of local authorities, unwillingness to organize transparent procurement according to international standards, lack of a high-level project team that will coordinate the implementation of financial agreements of Ukraine, and the lack of sufficient qualified staff at the workplaces. As a result, about EUR 35 million of investment and a significant amount of technical assistance were lost. The implementation of these projects could save UAH 160 million on energy, water and other natural resources. In addition, Ukraine pays a commission of tens of thousands of euros for non-selection of the budget provided by financial agreements.
“Energy-efficient projects in Ukraine are like a Pandora’s box: as soon as you open them, the problems that put projects at risk of implementation start to fall apart. Very few cities can proudly say that they have implemented a modernization project, – said Olena Rybak, Executive Director of iC consulenten, Deputy Chairman of the EUEA Board. – Our statistics show that about 25 Ukrainian cities have stopped energy-efficient projects at the stage of business plan or feasibility study for various reasons”.
Ima Khrenova-Shimkina, Project Director “Energy and Efficiency Reform in Ukraine”, Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ), also stressed the need to build institutional capacity, and noted the urgent need for “an army of experts in energy and all related fields”, which can meet current and future challenges.
Principal Expert on Energy Efficiency Financing and Policy, UNIDO Serhiy Porovskyy emphasized the need for industrial transformation and decarbonization. According to him, if we do not switch to energy-efficient technologies with lower greenhouse gas emissions, we can bury our entire industry: metallurgical, chemical and cement industries, etc. Serhiy Porovskyy noted that it is very profitable to deal with the energy efficiency of their enterprises. There are examples of companies in which the ROI for investment in modernization and energy efficiency reaches 250%. Plus, companies have recently had the opportunity to obtain unsecured loans for the implementation of the Energy Management System and energy efficiency measures under the Loan Guarantee Fund launched by UNIDO and Ukrgasbank.
The third thematic session was “Renewable energy innovations, energy storage and balancing technologies development, green hydrogen perspectives”. The participants stressed that the need to decarbonize Ukraine’s energy sector and the “green transition” makes the production of “green” hydrogen in Ukraine a promising area.
As Dirk Buschle, Deputy Director of Energy Community Secretariat noted, “green” hydrogen can be helpful and solve not only the problems of the fuel sector, but also the gas sector. Ukrainian business understands that “green” hydrogen has good prospects and opens new opportunities for Ukraine.
Head of Division, Division IIA2 Bilateral Energy Cooperation, German Federal Ministry for Economic Affairs and Energy, Dr. Falk Boemeke, implementing party of German-Ukrainian Energy Partnership, noted that Germany considers Ukraine a very important player in the energy market. Among the main priorities, he singled out hydrogen energy, noting the strategic importance of the mechanism to support hydrogen projects “H2Global”, which will allocate an additional EUR 200 million for international hydrogen projects. “To support the development of hydrogen technology and infrastructure, the German government has allocated public funding of EUR 8 billion”, – said Julia Rybak, Co-Head of German-Ukrainian Energy Partnership Secretariat. According to her, a total of 62 large-scale hydrogen projects were selected. “Germany will need international partners to cover its ambitious green hydrogen needs and Ukraine will be able to become such a partner”.
The fourth session, which was dedicated to the anniversary of the Memorandum of Understanding and the state’s strategy for renewable energy, grew into an open discussion with the participants. “The Memorandum has become a revolutionary document between the industry and the government”,- said Mats Lundin. – “EUEA together with member-companies worked with the government to ensure competitive electricity pricing for renewable energy producers”. According to him, EUEA has provided a basis for protecting investments in the production of electricity from renewable energy sources.
Dirk Buschle, Deputy Director of Energy Community Secretariat, noted that a year after the signing of the Memorandum with the government, it became even clearer, given the EU Green Agreement, that renewable energy should become a strategic priority for Ukraine. Ukraine, like other countries, faces the challenge of a “green” transition, decarbonisation, and geostrategic goals. In his opinion, it is important that such discussions result in concrete steps and recommendations for the development of the renewable energy sector.
Investors of the RES in Ukraine also had a speech. Thus, the CEO of DTEK RES Maris Kunitskis noted that the problem is in general in the energy system of Ukraine: at the the day-ahead market, at the balancing market, in cross-subsidies mechanism. Therefore, we must work together to stabilize the energy system, without which we will not be able to solve the problem that has arisen in the RES generation sector. In order to join the ENTSO-E, Ukraine must comply with European requirments and rules. Ukraine has a huge potential for the development of RES. A number of conventional power plants are due to close in the next decade, and this also requires a long-term vision from the government and parliament of where we are and where we need to go in 10 years.
Oleksandr Podprugin, Chief Operating Officer, Elementum Energy stressed the inadmissibility of constant changes in the regulatory field, because “it makes it impossible to work effectively and lead to a significant increase in the cost of projects.” We finally have a permanent Minister of Energy, so we hope to see the state strategy for the development of green energy very soon, – Mr. Podprugin hopes.
Magnus Johansen, VP/General Director in Ukraine, NBT AS stressed that Ukraine should build the future instead of living in the past. Ukraine should move and work in the direction of reducing the cost of capital for investment in Ukraine.
It took a record 12 years to launch the 500 MW EuroCape Ukraine project in the Zaporizhia region, said Mykhaylo Chulkov, Executive Director, EuroCape Ukraine. During this time, the leadership of the region has changed 11 times, so each time we had to justify our responsibility and social orientation.
“Renewable energy investors provide an example of extraordinary sustainability and systemic implementation of projects”, – said Alina Sviderska, CEO of Scatec in Ukraine. According to her words, investors in RES play an important but, at the moment, very underestimated role in the transition period for the Ukrainian energy system and are one of the factors that save the industry.
Mediation in 2020 was necessary to find a compromise between government and investors in RES projects. Now we see an urgent need to find such a compromise between public authorities and state-owned companies, which often have opposing views on the measures needed to overcome the crisis. Only a common vision of the development of the electricity market, overcoming the crisis of non-payment, solving the problem of accumulated debts will create a solid foundation and ensure sustainable development of the energy sector and RES as its important segment. – Yuriy Kubrushko, EUEA Board Member, Managing Partner of IMEPOWER.
In conclusion, the Director of the European-Ukrainian Energy Agency/EUEA Oleksandra Gumeniuk noted that as a non-governmental organization, EUEA is responsible for monitoring the formation and implementation of government energy policy and monitoring the transformation of words into the actions of politicians, “now we have a detailed work plan” in the most acute areas, considered during the Energy Day on June 10, 2021. We invite industry companies to join our Association to achieve a common goal.
Detailed comments of the speakers can be found at the link.
Reference. European-Ukrainian Energy Agency – is an independent non-profit organization open to all stakeholders in the Ukrainian Energy Efficiency (EE) and Renewable Energy (RE) sectors who want to work constructively with like-minded members to contribute to the gainful and transparent development of these markets in Ukraine, through the promotion of fair and sustainable business practice, raising of public awareness of energy issues, and by influencing government energy policy.
Our current focus sectors are Energy Efficiency (with sub-groups on Buildings, District Heating, Industries and Waste-to-Energy), Bio Energy (including Biomass and Biogas), Wind and Solar Energy, Smart Grids, Project Financing and Energy Community Treaty.
Since 2009 it has united national and world-famous international investors in RES from Austria, Belgium, China, Great Britain, Lithuania, Norway, Poland, South Korea, Spain, Switzerland, Turkey, USA and others. In Ukraine, they are implementing projects worth more than EUR 3.5 billion, building solar, wind and biomass / biogas power plants.
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