IEA review of Ukraine’s energy policies highlights country’s potential for an energy revolution

By tapping its own natural gas deposits and improving energy efficiency, Ukraine could end its import dependency. But to truly revolutionise its energy sector, the country also must improve its infrastructure and pricing systems, the International Energy Agency (IEA) says in its in-depth review of Ukraine's energy policies, released today in Kiev.

“Ukraine has already taken important steps towards energy sector reforms, but achieving the full potential for an energy revolution will require a greater policy focus on developing energy efficiency in the building and industry sectors and modernising district heating systems,” IEA Executive Director Maria van der Hoeven said in Kiev at the launch of Energy Policies beyond IEA Countries - Ukraine 2012. “The country must make deep regulatory reforms to foster effective competition, alongside a progressive move towards market prices to attract investment to develop the sector.”

Ukraine can further expand conventional and unconventional gas extraction to achieve import independence on the longer term, according to the report, benefitting from its large gas transmission system. The country also has untapped biomass and waste-to-energy opportunities and the scope to reduce gas consumption in the residential sector.

The review highlights Ukraine's ongoing efforts to liberalise its gas and electricity markets in line with Energy Community Treaty commitments. It encourages the country to offset higher costs for residential customers resulting from the move towards market prices by combining support measures with increased investments in energy efficiency, including greater use of meters and consumption-reduction incentives.

The review calls for a lead ministry to develop an energy strategy and monitor its progress. That strategy should allow Ukraine to:

• Improve data and statistics collection to monitor progress towards targets and benchmark Ukraine’s results internationally.
• Strengthen energy-efficiency policies and lower gas consumption in the district heating sector to ensure heat supply and lower energy bills.

• Increase oil and natural gas production, upgrade the gas transmission system and diversify supplies via interconnections with Central European markets.
• Make full use of the country’s potential for renewable energy development, particularly biogas and municipal waste for heat and power generation, and maintain a nuclear electricity capability.

The IEA prepared this in-depth review on the request of Ukraine, one of its important partner countries. The review was supported by the European Union.

The review is available for free download here.