Energy service contracts save billions

Ukraine’s parliament (Verkhovna Rada) is currently reviewing a number of bills proposing to establish a legislative base for a mechanism of energy service contracts in public sector.

Experts say the adoption of bills, namely, «On specifics of purchasing energy services», «On amendments to Budget Code of Ukraine concerning legal basis of energy service contracts,» and «On amendments to certain legislative acts of Ukraine concerning legal basis of energy service contracts» will let Ukraine bring its legislation in line with Directive 2006/32/EC of the European Parliament and the EU Council on energy efficiency of final consumption while establishing a legal framework for energy service companies and use of energy service contracts in Ukraine, the Information-analytical Bulletin of the Cabinet of Ministers of Ukraine informs.

«Introduction of mechanism for energy service contracts to improve the energy efficiency of public institution buildings will help reduce consumption of natural gas in Ukraine and save billions of budget funds,» said Gennady Temnyk, Minister of Regional Development, Construction and Housing-Communal Services. «Ukraine is still missing the legislation on legal basis of energy service contracts. It inhibits attraction of investment in energy-saving projects».

Experts say energy service contracts between public sector enterprises and energy service companies will promote reduction of costs in state and local budgets for utilities and energy resources.

Ukraine currently has about 98,000 public institutions. As a rule, costs of their heating are 2–3 times higher than costs of heating of the EU public institutions, and make the lion’s share of costs for budget organizations in Ukraine.

Energy service companies will implement energy efficiency projects at its own cost and would return the funds from resulting savings received by budgetary institution from savings on consumed fuel-energy resources and utilities for the duration of energy service contract.

Analysts say the annual rate of reducing consumption of utility and energy resources to be used for budget planning in the future will make 3–6% in kind in 2018 and should reach 20% by 2023.

Successful introduction and implementation of energy service system in Ukraine at public sector institutions only will help the budgets of at all levels to save over 11 billion UAH annually (without any additional costs) on payment for heating services during the next 10 years.