You're reading: Residential homes remain a black hole for energy

The increasing cost of natural gas imports from Russia has been a major thorn for consecutive Ukrainian governments, both draining the budget and causing geopolitical problems.

But there is little progress on cutting down on gas consumption in a nation that is notoriously energy inefficient in fueling its industry and heating homes.

While billionaire oligarchs have in recent years reduced gas use at their industrial factories, officials continue to drag their feet in economizing and attracting investment that would make heating apartments more efficient.

Central heating and tap water heating consumes nine billion cubic meters of gas each year, more than 15 percent of the country’s total gas use.

Heating stations receive de facto subsidized gas, partly from domestic sources, for a third of the $450 per 1,000 cubic meters that Ukrainian gas monopolist Naftogaz pays for Russian imports.

But this comes at big cost. Limited profit margins for domestic hydrocarbon producers reduce incentives for investments that could help wean the national economy off its dependency on Russia.

Experts claim Ukraine could take a big step in the right direction by boosting the efficiency of how gas is burned. The obvious steps are to modernize dilapidated Soviet household heating systems, better insulate houses and gradually replace gas with alternative energy sources.

A handful of solutions have long been discussed. Legal barriers and vested interests profiting from the status quo remain an obstacle, though.

The single largest financial investor in Ukraine, the EBRD, has for years monitored domestic energy efficiency problems. It set up the Ukraine Energy Efficiency Program (UKEEP) in 2007 and loans money to local companies for energy efficiency projects.

A handful of residential heating companies that adopted modernization programs financed by the EBRD reported savings of up to 85 percent. Such isolated success stories have shown the way to broader success, but remain marginal.

The EBRD has repeatedly pledged to help Ukraine finance broader upgrades and modernize centralized communal heating systems that date back to Soviet days.

But companies are not always interested. Serhiy Maslichenko, a senior manager for energy efficiency issues at the EBRD’s Ukraine office, said recently a city council from a regional city that he would not name inexplicably rejected a loan.

“At first, we were amazed with that decision,” Maslichenko said. “But later we heard that some of the city council deputies were supplying mazut to the heating company and would have lost their client because of the new equipment.”

Lack of proper strategy and political will is holding the country back, says Vasyl Stepanenko, president of Zaporizhia-based Ecological Systems company. “Ukraine’s current energy strategy defends the interests of energy companies, not citizens,” he said. “It protects electricity companies, which have a strong lobby. Citizens are not well represented on the government level and their interests are not properly taken into account.”

The expert is sure that energy efficiency improvements should start from homes, not heating companies.

Getting the heat from neighborhood gas or heating oil powered boilers to poorly insulated houses results in losses of up to 90 percent, he said.

He pointed to Poland, which began with an expensive modernization of heating stations. But after rebuilding apartment houses, some stations were no longer needed.

The EBRD also has a program to finance improvement of insulation at residential apartments. Its chances of success are limited because while citizens own their apartments, ownership of the building and its surroundings are fuzzy from a legal standpoint.

Only 17 percent of all apartment buildings legally belong to people who live in them. Their ownership is registered through a so-called Apartment House Co-owners Associations, or OSBB in Ukrainian.

The EBRD plans to cooperate with local banks in Ukraine to grant OSBBs  loans to improve insulation. Stepanenko said insulation could produce massive savings. The EBRD estimates that insulating all Ukrainian households would cost 60 billion euros.

A massive development plan like in the European Union, Stepanenko said, would allow Ukraine to wean itself off of natural gas-based heating. Ukraine, he says, could use alternative energy sources, like sewage and garbage energy.

The German city of Magdeburg, he said, covers 55 percent of its heating energy demand from garbage. It took Sweden 10 years for 68 percent of buildings’ heating to come from biomass.

Recently Stepanenko’s Ecological Systems took part in developing a municipal energy plan which is expected to be approved by the city council soon.

The five-year plan that could be prolonged is focused on modernizing 10,500 buildings in Kyiv. The estimated cost in just three Kyiv residential testing areas is Hr 2.5 billion.

A project to replace natural gas used for heating tap water with heat pumps in Kyiv buildings would cost another 1.5 billion euros, but would save 1.5 billion cubic meters of natural gas per year, which is worth of $675 million at current prices.

“The money needed is rather big, and in Ukraine we’re not good at attracting investors,” said Stepanenko.

Kyiv Post staff writer Olga Rudenko can be reached at [email protected].