Tents have been erected outside Ukraine's Cabinet of Ministers by supporters of the Radical Party to protest the government's decision to raise energy prices to market rates. Dubbed the "Tariff Maidan", the demonstrators say they are angry that the poor have to pay unaffordable prices for utilities while many politicians continue to live luxurious lifestyles.
Roman Spivak, an energy conservationist expert, told the Kyiv Post that the government has yet to witness the full force of public anger about energy prices.
“People will get their bills on Nov. 10 and when they see their bills have gone up by 80 percent they will come out to protest…This is all happening because of a vacuum of information,” he said. “The ministers need to have dialogue with the people instead of placating people with subsidies.”
The International Monetary Fund’s bailout conditions require Ukraine to raise energy prices to market rates. But these rate hikes are necessary, with or without an IMF program.
“The government is blaming the hike in energy prices on the IMF,” Edward Chow, a senior fellow at the Center for Strategic and International Studies, told the Kyiv Post. “And this just exposes them to populist attacks…The space needs to be opened to the public for informed discussion, instead of blandly saying ‘we’re going to reform.”
In the past, the government subsidized the entire population, but now is trying to limit subsidies to just the poor.
“In fact, what has happened is a positive thing,” Grzegorz Gajda, operations officer at the World Bank, told the Kyiv Post.
But the amount the government is spending this year on energy subsidies, Hr 25.3 billion — or $1.1 billion — is still creating a continuous deficit in the state budget.
One third of Ukrainians are currently receiving energy subsidies, said Krzysztof Gierulski of the European Commission during the Energy Policy Talks conference on Nov. 3.
Inogate, an EU energy cooperation program, predicts that subsidy spending could reach Hr 50 billion next year as the number of vulnerable consumers continue to grow.
“We are investing in an ineffective system,” said Sergey Porovksiy, advisor to the minister of energy and coal industry of Ukraine.
The only solution is to make vulnerable consumers more energy efficient, according to energy experts. If they use less energy, their bills will become more manageable and this will allow the government to cut subsidies.
One proposed solution is the monetization of subsidies. This would allow the consumer to use any money not spent on bills to implement energy efficiency measures – instead of the subsidy going straight to utility companies.
Current government plans include introducing subsidies on the condition that consumers implement energy efficiency measures.
Hennadiy Zubko, minister of regional development, construction and housing, told journalists that monetization would be a slow process, as energy audits of buildings would need to take place.
What should be done first as top priority, according to energy experts, is to install meters in every household so energy consumption can be monitored by both sides.
Regional suppliers are obliged to install meters for free, but Gajda of the World Bank said, “demand at the moment is weak because the public is not informed about what is on offer.”
In the long run, the most effective solution is to insulate and renovate buildings. Proper insulation, for instance, would create a 40-percent saving but it could take five years, according to Spivak.
Loans are available and according to Mykola Ilinov, head of the energy efficiency center at state-owned Ukrgasbank, “one loan is issued by the bank every 35 seconds.”
However, the majority of those deemed vulnerable consumers are pensioners or people who live alone, and they would struggle to secure a loan from a bank, Svyatoslav Pavlyuk of Inogate said.
The battle to implement energy efficiency measures is as much about attitudes towards consumption as it is about money. People are used to the Soviet system, whereby when it’s minus 25 degrees Celsius outside, it will be plus 25 inside.
“There is no understanding that we should pay for our habits,” said Porovskiy of the Energy Ministry.
Distrust in society, particularly of the government, means “vulnerable consumers will always be a resistance group to energy efficiency programs,” Pavlyuk of Inogate said. For instance, they might be afraid that their subsidies will be removed and they will be left to live without sufficient heating.
A study carried out by the Kyiv Institute of Sociology and the National Ecological Center of Ukraine found that 9 out of 10 Ukrainians believe that energy efficiency measures are expensive or unaffordable.
According to Gierulski, there are several affordable measures, including installing thermostatic valves for radiators, which is important to avoid overheating. Another, even cheaper, measure could be pipe lagging, and insulating window seals, screens behind radiators, or anti-draught for doors.
“No-cost measures are related to behavior – that is the understanding of how heat wastage could be reduced,” Gierulski said.
This means using curtains at night to reduce heat loss via windows; not covering radiators with curtains or other things; and, closing thermostatic valves on radiators before opening the windows.
Gierulski said: “What is needed is a targeted information campaign to reach those people and tell them what can be done without necessarily a lot of money.”
Kyiv Post staff writer Isobel Koshiw can be reached at [email protected]
