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Renewable Energy May Help Ukraine Abandon Russian Gas

Despite political instability and economical problems, Ukraine is pursuing the development of renewable energy in order to reduce dependence on gas supplies and economic pressures from Russia.

Ukraine’s energy consumption consists of about 40 percent natural gas, which is mostly imported from Russia. Renewable energy accounts for only about 2 percent of its energy capacity, with solar at 0.3 percent (130 MW) and wind at 0.2 percent (86 MW).

However Ukraine’s renewable energy portfolio promises to grow tenfold by 2020, with total investments amounting to €15 billion. Its main emphasis will be put towards the development of solar and biomass.

Major Solar Plans

One of the largest projects in the pipeline is the €2 billion portfolio of solar assets to be constructed by Chinese developer China National Building Materials Group (CNBM) - New Energy Engineering Co., Ltd. Once completed, the combined capacity of the solar parks will amount to 1,000 MW. Several other projects are also in the works, which are expected to contribute to 1,200 MW of capacity by 2022.

"We must accept the fact that Ukraine has a huge shortage of energy which creates the dependence in this sector from Russia. Therefore, we hope that the Ukrainian government will support renewable energy, which will reduce this dependence,” said New Energy Engineering CEO Mr. Chen Youngzhi.

However, this will only be possible if the government of Ukraine maintains the “green tariff,” according to Youngzhi. Plans to reduce the tariff were announced in early April in order to compensate for serious budget shortages.

The Ukraine tariff currently stands at 34 cents/kWh, and experts believe that the renewable industry will not be sustainable if it is lowered too soon.

"Ukraine is not in position and does not have the market conditions to decrease the green tariff. If they reduce [it] to the level of Germany, Spain, Greece — about €12-13 cents/kWh — no one will invest in Ukraine,” said Youngzhi. “Most investors will go to Germany, Japan and USA. Why invest in Ukraine, if there are much more favorable conditions in other countries.”

Biomass Ambitions

Ukraine also intends develop its biomass market. According to the chairman of the Ukrainian Association of Bioenergy Mr. George Geletuha, Ukraine can replace the 3.5 billion cubic meters of gas with bioenergy by 2020.

"We would save a lot of money if we use biomass. According to the strategy of our association, we will replace 3.5 billion cubic meters by 2020 and 7.5 billion by 2030,” said Geletuha.

Ukraine has significant biomass resources, including agricultural stalks, husks and seeds, etc., said Geletuha. Experts believe the development of bioenergy infrastructure may require about €3 billion, but the return on investment will be large.

"If we count what part of biomass can be taken to produce energy without harming the environment and which part is not used by other sectors, the average figure is 25-30 million tons of fuel per year, and Ukraine as a whole consumes 90 million tons of fuel per year,” said Geletuha. “So we estimate that biomass has the potential to reach 18 percent of all energy consumption in Ukraine.”

However, government analysts say that these figures are unrealistic because creating infrastructure to extract energy from biomass will take about two to three years, delaying progress.

US Aid

U.S. authorities also announced plans to help Ukraine’s transition to renewable energy. The U.S. Agency for International Development (USAID) recently launched a program that aims to help 17 Ukrainian cities conduct energy reform and improve energy efficiency, with emphasis on developing a renewable energy sector.

USAID has promised US $13.5 million towards the program, called Municipal Energy Reform. Its goal is to help large Ukraine cities optimize their energy expenditures and educate local business and authorities about renewable energy and how they can make the transition.

Local authorities in such cities as Lvlv and Lutsk have already embraced the initiative, claiming that Ukraine has an extremely low-level understanding of renewable energy and the project will help bring it to the level of other European countries.

According to vice prime minister of regional development, construction, housing and communal services Vladimir Groisman, USAID assistance will improve the energy efficiency of the country and, consequently, reduce gas consumption.

"Today, the 17 municipalities involved in the reform process. We must do everything to ensure that we could produce energy from renewable sources, and to ensure efficient use of energy at all stages of consumption,” said Groisman, noting that such reform will seriously contribute to the reduction of Ukraine dependence on Russian gas.

Lead image: Oleg_Mit via Shutterstock

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