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'Gas war' forces Ukraine to clean up its act
2007-02-04
For years Western environmentalists tried in vain to convince Ukraine to shake an energy addiction that made it one of the world's least energy efficient economies. Then in one fell swoop Russia turned energy conservation into a Ukrainian national priority by doubling the price of gas exports to its Western neighbour at the start of last year -- before hiking them again this January. President Viktor Yushchenko quickly reacted by setting up a government agency to halve energy waste, while his prime minister of last May, Yury Ekhanurov, called energy efficiency "question number one" for Ukraine. Since then the country's heavy industry has made significant progress, with the metals sector reducing its gas consumption by 50-80 percent by introducing energy-saving technologies and switching to alternative fossil fuels, according to Renaissance Capital investment bank. "Hiking the gas price was a fantastic stimulus for energy-efficiency projects," said Vasyl Bogatyr, who heads a body that for almost ten years has been trying to convince Ukrainian companies to curb energy waste. Bogatyr's UkrESCO organization has spent 20 million dollars (15.4 million euros) from the European Bank of Reconstruction and Development installing energy-efficient equipment at Ukrainian factories to demonstrate to others how easily savings can be made. He no longer has to spend his time convincing people of the benefits of conservation as "practically all enterprises are feeling the increase in the gas price," he said. Like the rest of the former Soviet Union, Ukraine's economy was designed by communist planners whose top priority was maximising production rather than conserving plentiful resources like gas. Ukraine's economy is so inefficient that within two decades energy savings could come close to the United Kingdom's total energy consumption today, according to the International Energy Agency. "Ukraine is one of the most energy intensive economies in the world, so they need to do something, but in the past they haven't done much," said Petra Opitz, an expert at German energy agency DENA, who is involved in several carbon-reduction schemes in Ukraine and the former Soviet Union. "Energy efficiency, in practice, was not a political priority." So far the change in heart is most visible in the country's industrial heartland said Yekaterina Malofeyeva of investment bank Renaissance Capital. "The technology which Ukraine's metals companies use is extremely outdated, so to significantly improve efficiency the companies we are talking about do not need to buy brand-new technologies," she said. Big businesses proactive reaction to the gas price hike has allowed the economy to post impressive GDP growth of 7 percent in 2006, but the inefficiency of Ukraine's economy goes far beyond the industrial regions of the east. Industry uses just under half of total energy consumption, with the same amount used by households and government institutions, a recent World Bank report said. Unlike the country's top industrial firms, average Ukrainians have seen their utilities bills spiral -- charges for gas and heating shot up over 300 percent in Kiev in January -- and Soviet-designed apartments makes it extremely difficult for people to cut their bills. Heating for entire sections of the city are controlled directly from the city council, meaning if your apartment is too hot, you simply open a window. "We don't have meters, so there is no point in using less gas," said Galina Smeyan, a 78-year old, who was among 4,000 protesters picketing Kiev city council in late January to demand a cut in utility bills. Smeyan's bill for communal services, including heating and gas, now eats 150 UAH (30 dollars, 23 euros) of her 400 UAH (80 dollars, 62 euros) pension, up from 50 UAH before. Residential buildings can reduce energy wastage by up to 30 percent using relatively simple methods that will quickly pay for themselves like heating a building's facade, changing windows and replacing boilers, said UkrESCO's Vasyl Bogatyr. But in a city where the average wage is 340 dollars (263 euros) per month, many people lack the resources to invest in going green. "The government is looking at this problem very seriously, but the government does not have enough resources to solve all of the problems," he said. "Ukraine needs investment from abroad." "You can put the price of gas up quickly -- in a day or two. But to introduce rational heating systems, systems to reduce gas wastage. That does not happen quickly. For that you need time."
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