A strategy to overcome energy poverty is needed

While presenting the draft budget for 2020, Yuliya Sokolovska, Minister of Social Policy, stated that the government did not change the criteria for the allocation of subsidies, nor did it intensify checks on applicants’ revenues. Similar statements are made by government officials certifying their inability to offer the public a long-term strategy to overcome energy poverty.

The need to allocate such a large amount of money for subsidies (UAH 48 billion) indicates that a considerable part of Ukrainian society is in the conditions of energy poverty, which is manifested in the inability to pay the amount of energy resources needed for a comfortable life. However, giving the money following the example of previous governments, the current ruling team does not help the poor Ukrainians, but only recreates a situation in which an enormous sum of money is spent from the budget every year and the number of subsidy recipients remains the same.

According to the DiXi Group Analytical Center, the framework of subsidies and their instruments are outdated and ineffective, even given the monetization of end-user-based payments.

First of all, there is no effective and transparent tool for verifying subsidy recipient data.

Secondly, by paying subsidies, the state does not encourage consumers to use energy economically, so the amount of aid does not have a linear tendency to reduce and is largely dependent on government-regulated gas prices.

Thirdly, the lack of transparency in the accrual of subsidies by gas market participants leads to inefficient spending from the state budget.

With a large number of subsidy recipients in Ukraine, there are difficulties with accurate accounting of consumers and the volume of gas used by citizens.

According to the NEURC, 1,278 million subscribers consuming gas for cooking only remained without commercial gas metering on 1 January 2019. The share of subscribers with commercial gas metering devices is 89%. At the same time, 5% of gas (0.7 billion cubic meters per annum) is supplied to consumers without gas metering devices.

In addition, in May 2019, the arrears of the population already after the heating season for payment for natural gas supply amounted to UAH 26.2 billion, for centralized heating and hot water supply – UAH 16.8 billion.

Special attention should be paid to the proportion of the state budget funds allocation for subsidies and energy efficiency measures. The priorities here are obvious. In 2020, they will not change significantly: against the background of UAH 48 billion used for subsidies, they envisage only UAH 2 billion for energy efficiency and energy saving programs. It will not cause large-scale and irreversible changes.

In a situation where almost half of the population is subsidized in a certain amount throughout a year, solutions that would allow in the near future to abandon the enormous spending to cover a comfortable level of resource consumption should be introduced.

Sergii BalanGeneral Manager for Energy Sector Development
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