Ukraine is one of the most energy intensive countries in Europe due to an ageing building stock and energy-intensive local industries. Therefore, Ukraine has potential to achieve greater energy security through gains in energy efficiency. Energy security will be achieved by creating a business environment that combines financing dedicated to energy efficiency projects with technical expertise and standardised contracts required to complete efficiency improvement projects.
Recent trends show that Ukraine is taking steps to increase its energy security. In 2007 there were three active ESCOs in Ukraine, as of 2018 there were 15 active ESCOs. The proliferation of ESCOs within the country is a reflection of the success of several key policies.
Financial barriers, such as high interest rates, low energy prices, and lack of access to long term loans, remain primary issues for Ukrainian ESCO market growth.
The 2019 OECD report identified several additional key barriers:
- Bank protocol for assessing credit worthiness does not fit with an ESCO business model reliant upon Energy Performance Contracting. Payment based on future energy savings limits liquid assets disqualifying ESCOs from obtaining commercial loans
- Long payback periods associated with ESCOs
- Classification of ESCO and energy savings projects as risky investments
- Complexity of ESCO contracts requires special technical expertise to execute
The OECD report recommends the following actions to improve the policy framework for ESCOs in Ukraine
Supply - Access to finance:
Demand - Incentives for investment:
- Define specific public financing support porgrammes for ESCOs;
- Stimulate diversification of commercial bank financing for ESCOs;
- Include a budget line for energy efficiency projects into the budget code;
- Expand energy efficiency funding through the State Fund for Regional Development;
- Develop guarantees and support for collateral;
- Diversify the EPC model templates;
- Strengthen commercial banks' understanding of ESCOs.
Demand/supply matching - Coordination:
- Pursue energy pricing and market reforms;
- Improve legal basis for ESCO projects with private stakeholders;
- Create incentives to alleviate up-front costs for businesses;
- Support energy audits linked to execution of energy efficiency measures;
- Use building certification to speed up energy efficiency refurbishments.
Awareness - Promotion:
- Accelerate skill-building through knowledge transfer from abroad;
- Consider introducing a standardised measurement and verification protocol;
- Empower national market facilitators that offer services across Ukraine;
- Monitor and adjust EPC tendering through ProZorro;
- Further stimulate residential building association use of ESCOs.
- Uniform qualification standards requirements for ESCOs;
- Include information on how to work with ESCOs in technical trainngs;
- Spell out the energy and financial savings of concluded projects;
- Set up and launch the single ESCO database.