06/13/14 :

Senator Markey to Boost Ukraine's Energy Efficiency

Last week, Senator Ed Markey (D-Mass.), Honorary Vice-Chair of the Alliance to Save Energy, introduced legislation that would provide Ukraine assistance to reduce its dependence on Russian energy.

The Ukraine Independence from Russian Energy Act offers a two pronged approach of increasing energy independence within the country. This legislation could help alleviate the financial and geo-political burdens Ukraine is currently facing by boosting energy efficiency programs and by providing technical assistance for domestic energy production.

According to the bill, Ukraine currently relies on Russia to meet roughly half of its energy demands, while domestic energy makes up only a small percent of domestic sources. With a long history of energy manipulation, Russia effectively has a stranglehold over the country’s energy supplies and has used that fact to pressure the Ukrainian government. Ukraine is also the second-least energy efficient country in the world, so there is a great opportunity for improvement.

Alliance Activities in Ukraine

The Alliance has long recognized these opportunities and has been working to improve the efficiency of how Ukrainians use energy. Prompted by a Russian gas disruption in 2006, the Alliance, in collaboration with a US Agency for International Development (USAID) program, implemented a number of key energy efficiency programs within Ukraine.

The Ukraine Industrial Energy Efficiency Initiative identified $80 million in efficiency investment projects that would save an estimated 100 million cubic meters of natural gas per year. By creating pioneering partnerships between Ukrainian businesses and western energy consulting companies, the Alliance was able to identify energy savings of upwards of 100 gWh per year.

The Alliance also helped implement the Ukraine Municipal Heating Reform Project, which assisted local Ukrainian governments in creating a financially viable and sustainable municipal heating sector. By providing expertise on heating systems and heat tariff regulation, reviewing regional best practices on financing residential energy efficiency, and developing low-income energy efficiency programs, the Alliance was able to help achieve substantial energy savings in Ukraine’s residential heating sector.

Ukraine Independence from Russian Energy Act

Senator Markey recognized the need for such energy efficiency actions as a means to reduce Ukraine’s dependence on Russian natural gas and to ease the conflict with Ukraine. “This bill will leverage the full resources and expertise of the US government to assist Ukraine in improving its energy efficiency, increasing its domestic energy production, and reforming its opaque and corrupt energy markets so that Ukrainians can tell Putin they don’t need Russia’s natural gas,” said Senator Markey. “This bill will give kilowatts to Kiev, not more profits to Putin’s pals.”

Specifically, Markey’s legislation authorizes USAID to provide up to $10 million annually (FY15 to FY17) of direct assistance to Ukraine to improve energy efficiency and domestic energy production. The legislation includes a host of applicable energy efficiency measures, including: replacing inefficient boilers, upgrading district heating systems, improving metering, upgrading natural gas infrastructure, and providing regulatory support for natural gas and electricity markets.

The bill also authorized $2.5 million annually for the US State Department to provide technical assistance to increase responsible production and transparency of the widely corrupt natural gas sector in Ukraine. Additionally, $1 million is authorized annually for the US Trade and Development Agency to boost private sector participation in energy efficiency and energy production within Ukraine. It is also important to note that the Markey bill includes language that would support and promote cooperation between non-government organizations (NGOs) and the Ukrainian government. This would open the door for the Alliance, and others, to provide assistance to Ukrainian NGOs and revive much needed energy efficiency policies and programs in the region.

Other agencies working in Ukraine, such as the US Export-Import Bank and the Overseas Private Investment Corporation, are directed to prioritize support for investments to help boost Ukraine’s energy independence.

Senator Markey, in his closing remarks, highlighted the need for Ukraine to loosen the grip Russia currently has over its energy supplies. “Have Ukraine say to Russia, ‘We don’t need your natural gas any more than we need your soldiers.’ That is a statement they should be able to make in the very near future if we help them to construct a plan.”

Policy Assistant Jordan Nichols contributed to this post