You're reading: Ryabchyn says energy reforms have been all ‘shock’ and no ‘therapy’

Alex Ryabchyn, head of parliament's subcommittee on energy savings and efficiency, has Ukraine's coat of arms, the trident, pinned to the lapel of his navy jacket. But like his knee-hole blue jeans, the lawmaker says the nation’s energy strategy is still incomplete.

Ukraine is nearly four times more energy intensive than the European Union average when counting per unit output of gross domestic product. When Russia started waging war against Ukraine in February 2014, Ukraine turned away from its main energy supplier and started focusing on integration with the EU.

“That’s a great strategy but it is just one pillar,” Ryabchyn told the Kyiv Post at a hotel café in Kyiv on July 8.

Another no less important pillar is that Ukraine must consume less. And yet another one is to actually create an energy market to replace the “monopoly” in place now, he says.

One of the reasons why Ryabchyn entered parliament was to promote the creation of what he calls more “green collar” jobs in renewables and energy efficiency.

“It’s really hard to do with the current structure of the energy ministry and the people who work there who are not dedicated to this idea,” says the 32-year-old legislator.

That attitude isn’t stopping Ryabchyn from pushing his “green” agenda.

The Batkivshchyna Party member from war-torn Donetsk Oblast received his innovation and sustainability master’s degree from Sussex University in England. Before entering politics, Ryabchyn taught international economics at the Donetsk National University.

Like Ryabchyn, less than half of the near 20-member energy efficiency subcommittee consists of newcomers. The rest have energy business backgrounds. On one hand, “you can combine the expertise and experience with fresh ideas,” Ryabchyn says. On the other hand, bias exists towards specific businesses.

Ryabchyn’s overall view of the existing $17.5 billion agreement between the government and International Monetary Fund is positive yet he believes that tariff increases alone cannot solve the prevailing problems.

“The structure of gas tariffs right now is questionable,” Ryabchyn says.

He claims Naftogaz’s previous debts – the nation’s state-owned oil and gas company – account for 40 percent of the new gas tariffs. He considers it unfair for households to pay that price.

Naftogaz spokesperson Aliona Osmolovska told the Kyiv Post that tariffs for gas are not calculated to include past debts.

Another criticism of the Ukraine-IMF program agreement, according to Ryabchyn, is that it prioritizes macroeconomic stability ahead of investing in energy efficiency. “We are trying to stabilize the economy but there is no strategic planning,” says Ryabchyn.

He wants to see market prices for gas, but so far says he doesn’t see a market in Ukraine.

The Donetsk native is critical of current gas extraction royalties of up to 55 percent, which he says are causing investors to turn their backs on Ukraine. Over the past decade Ukraine has domestically been extracting more or less the same annual volumes of gas, about 20 billion cubic meters. Ryabchyn says that Ukraine can produce at least twice as much.

Ryabchyn says lower gas extraction royalties can be used to boost domestic production and thus lower gas bills.

Naftogaz’s Osmolovska countered, saying that the recently raised domestic gas prices do not fully cover the costs of local production and importing gas.

Today’s new energy tariffs are hard to afford, considering that the average Ukrainian’s salary decreased by more than 50 percent in U.S. dollar terms over the past year, says Ryabchyn.

He says rising household tariffs need to be done in tandem with energy efficiency programs so that people consume less. The lawmaker highlighted energy regulators such as meters and independent boilers as key mechanisms to reduce wastefulness.

Without meters, households do not know how much they consume.

“It should definitely be calculated and communicated to people,” Ryabchyn says. “When you personally know how much you consumed, it will change your behavior.”

Instead of spending money on gas subsidies, Ryabchyn wants to see it directed towards energy efficiency projects such as upgrading housing insulation. This will provide more jobs for the unemployed coming from the Donetsk and Luhansk oblasts and will also attract more international investors as well as homegrown small- and medium-sized businesses.

Overall, Ryabchyn said: “If it’s (a case of) ‘shock therapy’ then people need to know for what they are suffering … (but thus far I would say) it is a shock without any therapy.”

Kyiv Post staff writer Ilya Timtchenko can be reached at [email protected].