You're reading: Rising bills spur need for household energy conservation programs

Investing in home energy efficency is not something the average Ukrainian has traditionally thought of doing. But gas bills will be incrementally rising to market levels, increasing almost four-fold by 2017.

The higher costs have prompted many to seek out state programs that support energy-efficiency renovations in homes.

Ukraine is one of the most energy inefficient countries in the world and its energy intensity is 3.8 times higher than the European Union average. Ukrainian households, particularly multi-storey apartment buildings, hog energy — encouraged by state-subsidized cheap prices and usage that was often not metered.

“In energy, people were isolated from price signals and decision-making,” leader of the Greencubator non-profit organization Roman Zinchenko told the Kyiv Post. “Paternalistic approaches by government became toxic hindrances for people’s own initiative. It’s the people’s duty to make their private premises comfortable for living.”

Investing in energy efficiency can reduce consumption by as much as 50 percent, with payback periods ranging from two to 10 years.

A state program for private homeowners to switch from gas to solid fuel boilers and renovate houses with energy-efficient materials started in October.

State-owned Oschadbank has since issued Hr 131 million ($5.6 million) in loans for the program. Program participants benefit from the government’s promise to absorb up to 30 percent of the loan.

High-rise apartment blocks represent the biggest challenge. State support has targeted such dwellings since May with Oschadbank and another lender, Ukrgazbank, issuing three loans each to upgrade apartment buildings. Around 120 applications are under consideration, according to Grzegorz Gajda, who manages a residential energy efficiency project financed by the International Finance Corporation.

“It’s a long way to go…but there is quite an improvement” in people’s perception, he said.

The government has allocated some $15.6 million for similar programs this year. Yet, people are still hesitant to change old habits and make investments with their own money.

To create incentives, “what is needed are successful pilot projects, maybe first by ‘freak communities,’ ready for complex, rapid modernization of their houses,” Zinchenko said. “When a Ukrainian enters his neighbor’s house and feels warmer, and then gets to know that for such comfort the neighbor is also paying less, this is where the motivation will come from.”

Gajda says five to seven years will be needed for Ukraine to reach $500 million in energy efficiency loans per year. Total investment needed in the sector is $15 billion, he said.

Some projects to date reflect narrow thinking, or “only in the borders of one’s flat,” which doesn’t work, Zinchenko adds. “What works is rehabilitation of the whole building’s energy system.”

International development banks are also active, lending through Ukrainian commercial banks or giving grants. These programs mostly target companies and municipalities. Although public buildings like schools or hospitals could vastly benefit from modernization programs, local authorities often lack information, awareness or the capacity to write a good project proposal. Existing corruption schemes tied to vested interests also impede progress, experts say.

“The money is there and there can be even more cash from international donors if there is demand,” said Arthur Denisenko, energy expert at the National Ecological Centre of Ukraine, a non-profit group. The problem, he says, is a lack of quality projects to invest in.

“There is initiative at the local level, but a systematic state policy is needed,” said Sergei Volkov, an expert at the U.N. Development Programme, in an interview. Grant organizations cannot replace government, people or private businesses. “Our task is to share knowledge, to show how it can be used and create partnerships,” Volkov said.

The government will still provide subsidies to needy households, although now this funding is more targeted. This year, government set aside Hr 24.5 billion ($1.1 billion) to subsidize household energy bills, 70 times more than is budgeted for energy efficiency programs.

“Such practices will bring only losses in the long term,” said Andriy Stetsevych, deputy chairman of Oschadbank. “Money spent on subsidies will not enhance the quality of services, nor will subsidies decrease overall energy consumption.”

Direct subsidies to people might spur private investment in energy efficiency.

“Poor people should receive some assistance from the state, but in Ukraine they are not receiving this help in cash,” Gajda of the International Finance Corporation said. He suggests that if people themselves had to decide whether to pay higher energy bills or invest in their own homes, they would make the right decisions.

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Kyiv Post staff writer Olena Gordiienko can be reached at [email protected].