Energy efficiency and legislative changes

Deloitte Ukraine jointly with the German Marshall Fund of the United States initiated an open panel discussion titled “Winning Ukraine’s Battle for Energy Independence” as part of the YES Night Cap program. Ability of Ukraine to become happy in the energy sector was discussed within the general topic of the forum titled “Happiness now. New Approaches for a World in Crisis”.

Gregory Fishman, Director, Head of International Donor Organizations Advisory Practice in Deloitte CIS, and Artur Ohadzhanyan, Corporate Finance Advisory Partner, Energy and Resources Group Leader at Deloitte Ukraine opened the panel discussion.

“Deloitte strongly advocates for achievement of energy independence. Now is a great opportunity for Ukraine, indeed necessity, to increase productivity in energy production, (which is very realistic due to massive untapped reserves and new technologies); as well as increase market efficiency by bringing in the best practices from international experience. Lastly, issues need to be addressed to improve energy efficiency, due to massive waste resulting from decades of bad practices. Deloitte has deep experience across the globe in cutting edge solutions to these challenges, and we are proud to bring them to Ukraine,” said Gregory Fishman in his opening speech.

The discussion was joined by Andrii Kobolev, General Director of NJSC “Naftogaz of Ukraine”; Illia Ponomarov, General Director of Trident Acquisitions, former member of the Russian State Duma; Alain Pilloux, Vice President, Banking, EBRD; Anders Fogh Rasmussen, NATO Secretary General (2009–2014), Prime Minister of Denmark (2001–2009), CEO of Rasmussen Global. Bruno Lete, Senior Fellow at the German Marshall Fund of the United States moderated the panel discussion.

During the discussion, all speakers agreed that increasing energy efficiency was a key step in achieving Ukraine's energy independence. In particular, Anders Fogh Rasmussen noted that the state would be able to reduce gas costs by about 60%.

Alain Pilloux noted that Ukraine produces three times more energy for consumer needs than in Western Europe due to inefficient energy use. According to Mr Pilloux, achievement of energy independence is based on the efficient use of gas and reduction of gas imports. “This will prove to be not only more beneficial for the population, but it will also cause much less damage to the environment,” said EBRD Vice President.

Andrii Kobolev, General Director of NJSC “Naftogaz of Ukraine” also expressed his position. “Drilling a new 7-kilometer well to provide heating for more homes is not the best option, as it will cost about US$25 million. To become energy independent, we need to decrease gas usage by harmonizing its production and consumption,” said Mr. Kobolev. According to him, Naftogaz is trying to address new challenges faced by Ukraine in the energy sector.

Anders Fogh Rasmussen focused on alternative energy sources. He cited the example of Denmark, where 14% of energy is generated by wind. However, Illia Ponomaryov made a counter argument noting that the use of renewable energy is not traditional for Ukrainian, since the state has large deposits of natural gas, coal, and other mineral resources. According to Mr. Ponomarev, energy independence can be achieved through a proper use of these resources and utilization of the latest technologies in the energy sector. This is the only way forward to boost Ukraine’ economy and overcome poverty.

The unbundling of Naftogaz was also at the center of panel discussion. According to Anders Fogh Rasmussen, unbundling of GTS operator will allow Ukraine to attract foreign investment and enter into new gas transit agreement.  

“Energy sector requires a well-thought, systematic approach and consistency. This is exactly what our country lacks. It is important to realize that we cannot succeed in solving internal problems without gaining an in-depth understanding of the global energy market trends,” said Artur Ohadzhanyan, Corporate Finance Advisory Partner, Energy and Resources Group Leader at Deloitte Ukraine.