Serhiy Savchuk, who for the past five years has been heading Ukraine’s state energy efficiency agency, says that 2019 could be the revolutionary year for Ukraine’s renewable energy industry, if the proper steps will be taken.
And this is important for Ukraine, a country that in 2015 adopted the ambitious goal of producing 25 percent of its energy from renewable sources by 2035.
Savchuk, a veteran government official, was brought into Ukraine’s high cabinets by business tycoon Sergiy Tigipko in 1999, when Tigipko served as Ukraine’s deputy prime minister under then-Prime Minister Valeriy Pustovoitenko as well as economy minister under Pustovoitenko successor Viktor Yushchenko.
Savchuk has remained a government official ever since, briefly serving as a member of various supervisory boards such as state-owned monopoly Naftogaz and Tascombank, owned by Tihipko. Later on, in 2014 Savchuk was appointed as head of an agency responsible for promoting green energy.
The agency has seen substantial results, Savchuk says.
Fighting for efficiency
The main focus of Savchuk’s agency has been reducing the country’s dependence on fossil fuels, after the country lost most of its potential due to Russia’s war against Ukraine in Donbas, a region where much of Ukraine’s hydrocarbons are located.
“Last year we spent $5.5 billion on petroleum and $3.9 billion on gas,” Savchuk said in a recent interview with the Kyiv Post.
He points out that from 2014, Ukraine, excluding regions not controlled by the government, decreased the amount of gas used by households and government facilities from 24 to 18 billion cubic meters yearly, saving the state budget $6 billion over five years.
“We plan on further lowering (the amount of) gas spent by 5 billion cubic meters in the next five years,” Savchuk says.
The ambitious goal is part of the agency’s long-term energy efficiency plan. The plan includes providing loans for those willing to install gas meters, double-glazing windows and heating substations in residential buildings, with the agency having a Hr 400 million ($14.5 million) budget dedicated to such projects in 2019.
Yet, in 2015 with the introduction of energy service contracts, or ESCOs, in 2015, lobbied by the agency, Ukraine can attract $8 billion in investments from private companies, Savchuk estimates. The ESCO law ensured that private companies that renovate government facilities such as schools, kindergartens and hospitals, receive a fraction of the amount saved on electricity and heating. The current return rate for such companies is three to four years, says Savchuk.
In 2016, the agency saw its first 20 ESCO projects, followed by 200 similar projects in 2017 and 200 more in 2018. Most of the projects were sold through ProZorro, an online bidding platform. In 2018 alone, the projects were sold for Hr 218 million ($8 million). According to Savchuk, the market is open for investors, with over 100,000 government facilities spread across the country.
Savchuk, head of Ukraine’s energy efficiency agency, hopes to have a day in parliament to present a number of green laws, which he cites are “patriotic and nonpolitical.” (Kostyantyn Chernichkin)
Green law package
2019 is set to become an important year for the agency spearheaded by Savchuk. “I want to enter parliament with a package of green laws,” he says.
The laws currently in the process of passing final parliamentary hearings concern green auctions, biodiesel, electric cars and cogeneration.
If adopted, the much anticipated green auction law will substitute the current green tariffs and will allow companies to bid for the construction of solar and wind farms. The government is planning to launch projects that could produce up to 800 megawatts for online auctions each year. Solar, wind and bio energy companies that offer lower prices receive 20-year contracts, Savchuk says.
So far, Ukraine’s green tariffs have mainly been beneficial for large players such as oligarch Rinat Akhmetov’s DTEK Renewables, as only large players are able to take the risk. The benefits also are financially unsustainable for the country in the long run, as the price at which the government buys renewable energy is pegged to above-market prices.
But Savchuk hopes that the law on bioenergy will be adopted this year as well, making production of energy from organic sources, such as crop residues and manure, profitable.
“In Germany there are 14,000 plants producing energy from residue, but in Ukraine – 33,” says Savchuk.
“These are apolitical laws, which all factions (in parliament) will support,” states Savchuk, citing that since 2014 over 2 billion euros had rushed into Ukraine’s renewable projects from investors. “800 million euros just (in 2018).”
Recycling
But another undervalued renewables industry in Ukraine is recycling.
“We need to make (recycling) profitable,” Savchuk says, pointing out that he is against spending taxpayers’ money on a recycling plant, citing that it usually paves way for corruption.
In 2016, a waste scandal erupted in Lviv, after the city’s main landfill was closed due to a fire, which took the lives of four people. Garbage piled up on the streets of Lviv causing massive political upheaval. As of March 2019, no waste recycling plants were built in Ukraine, despite bold statements.
“If we had a couple of cities with recycling plants while others didn’t, we could have said that it’s because of bad mayors,” says Savchuk. “Yet, we have systematic problems.”
The agency is working on creating necessary legislation for the so-called Gate Fee, which will make dumping garbage at landfills unprofitable for waste managing companies.
According to Savchuk, after adopting the law, investors would be certain that they will receive fuel for their factories at a reasonable price.
Ukraine currently has a 15-euro-cent tax for a ton of garbage disposed at landfills, comparing that to 20 euros in France and 49 euros in Sweden.
“There are 10 billion tons of garbage in Ukraine, we can turn it into a billion cubic meters of energy,” Savchuk says, citing a number of potential investors waiting for the law to be adopted.
The Gate Fee law is expected to pass parliamentary hearings in 2019, as well.
