Experts Urge Government to Continue "Warm Loans" Program and Grant Subsidies Only to People with Low Incomes

09 November 2016

What will be the state program for energy efficiency support in 2017? Will the Energy Efficiency Fund start working? And will the population have an opportunity to use the saved subsidies for heat insulation? On November 8, participants of the round table "How to stop burning money. Expert Cross Section of Governmental Policy in Energy Efficiency Sphere" discussed these and other issues.

 

Organizers:

 

Participants:

 

· Krzysztof Gierulski, Expert of the European Commission, the Support Group for Ukraine

· Sergiy Maslichenko, Associate Director, Department of Energy Efficiency, EBRD

· Yana Buhrimova, Head of Reforms Delivery Office at the Ministry of Finance of Ukraine

· Karel Hirman, a Slovak expert of the Strategic Advisory Group for Supporting Reforms

· Іhor Horovykh, Deputy Director of the Department for Strategic Development of the State Agency for Energy Efficiency and Energy Saving of Ukraine

· Denys Nazarenko, DiXi Group analyst

· Tetiana Boiko, Coordinator of Utility and Energy Programs of the Civil Network "Opora"

· Dmytro Naumenko, analyst of the Ukrainian Center for European Policy

· Anna Shumeiko, Energy Saving Expert of the National Ecological Center of Ukraine

· Oleksii Khabatiuk, Deputy Head of Department, National JSC Naftogaz Ukraine

· Julia Sabatiuk, Chair of the Board, Condominium Association Luchany

· Marianna Onufryk, Expert on Social Policy of Energy Efficiency of the Institute for Social and Economic Studies

 

Highlights:

 

1. The government does not plan to continue the "warm loans" program in 2017, and hence there is a risk that the Energy Efficiency Fund will begin its work not earlier than next autumn.

Tetiana Boiko, ОPORA:

"Not a single kopeck is allocated for the "warm loans" in the draft budget for FY 2017.  In the best case scenario, the Fund will begin its work in April, while in reality it may be in autumn"

 

 

2. Statistic data confirm the program efficiency. According to the information provided by the State Agency for Energy Efficiency and Energy Saving of Ukraine, as of today, condominiums have received 472 loans, while individuals – more than 156,000. A half of the received loans were used to install modern windows. 95% of the borrowers are individuals.

Julia Sabatiuk, Condominium Association Luchany:

"If you look at an example of weatherization of one house in Lutsk, you will see that we saved almost 300,000 of apartment owners' money. We repaid 200,000 to the bank per year, and 85,000 stayed in the pockets of the apartment owners… Lutsk is now drafting projects of complete thermal modernization of four more buildings for 2017 and expects more loans"

 

 

3. Taking into consideration the increasing trust and demand of the condominiums and population for the "warm loans" program, it would be unreasonable to stop it, while the Fund could focus on larger multi-year loan projects.

 

 

Karel Hirman, Strategic Advisory Group for Supporting Reforms:

"People see that it works, and the critical mass is being gradually formed. There is no need to "jump" from one program to another. It is necessary to systematically support the two levels of these programs – then people will get actively involved themselves"

 

 

It should be mentioned that every year, Slovakia provides (the equivalent of) about 5.5 billion hryvnias to support thermal modernization of houses (the population being about 5.5 million), while Ukraine plans to provide just 800 million hryvnias for this purpose in 2017 (the population being 45.5 million).

 

4. Next year will be difficult as the Energy Efficiency Fund will only start its work, and will not be able to implement large projects immediately as an investment bank. The first products will be standard thermal modernization projects (installation of individual heat supply stations, regulators on radiators, heating meters, etc.).

 

Sergiy Maslichenko, EBRD:

"Based on my experience, it takes two years to launch such a project, so it is impossible to do it in March. One should also consider that the work scope includes establishing a financial structure, signing grant agreements, creating departments… Let alone legislative delays"

 

5. Performance of the Ukrainian subsidy system is poor. According to the data provided by the Institute for Social and Economic Studies, only 25% of the subsidy recipients are really disadvantaged and need assistance.

 

 

Marianna Onufryk, Institute for Social and Economic Studies:

"As a result of the minimal wage increase, some of the subsidy recipients automatically will no longer be eligible for subsidies by the beginning of the next heating season. Second, it is necessary to introduce clearer criteria than the income certificate and the fact of residence. To prevent concealment of incomes, the state should recognize the real minimum subsistence level".

 

 

6. The government is discussing two models of subsidy monetization. The first involves cash settlements by the state and district heating providers, unlike the system of reciprocal payments. The second model is focused on consumers and anticipates that people will receive their subsidy of remainder of the cost of housing and utility services in hryvnias. There is also an unresolved issue of whether to introduce a requirement of the targeted use of the monetized funds (only for paying the housing and utility services or for energy efficiency).

 

 

Yana Buhrimova, Reforms Delivery Office at the Ministry of Finance of Ukraine:

"Ultimately, there should be complete monetization of subsidies, but it has to be done step by step: first, from monetization at the district heating provider level, then – at the level of households… It would be good to be able to implement the first stage in 2017, at the level of a district heating provider, and be ready in 2018 for monetization at the level of households. Maybe by implementing pilot projects first"

 

Conclusions:

Based on the results of the event, the organizers are preparing a joint statement urging the governmental officials and MPs to react and negotiate. Below is a "teaser" from DiXi Group think tank:

 

"On November 8, experts and invited speakers discussed the lack of financing for the "warm loans" program in the draft budget for 2017, delays with the introduction of a long promised Energy Efficiency Fund in Ukraine, and the question why the officials are still talking about benefits monetization as a plan for the future.

 

Unfortunately, the invited government representatives did not find time to communicate with the expert community; therefore, based on the results of the discussion, the organizers are preparing an appeal to the Cabinet of Ministers. The main points and suggestions include the following:

 

1. To continue the "warm loans" program, and to secure the population trust in the state programs. At the end of the year, the State Earmarked Economic Program on Energy Efficiency and Development of the Sphere of Production of Energy Carriers Received from Renewable Energy Resources and Alternative Types of Fuel for 2010-2016 will expire. It has to be prolonged until 2020 securing verification of the Program results and allocation of the budget funds for its implementation.

 

2. The Energy Efficiency Fund has to commence its work as soon as possible; support of the Government and the Parliament is needed for adopting the respective law drafts. Without the Fund and the necessary legal framework in the area of housing and utility services and energy efficiency we cannot talk about the large-scale modernization of the housing sector.

 

3. The gradual subsidy monetization process has to move from the point of the "concept selection" at last. The deadline suggested by the Government, which is the end of the 2016-2017 heating season, is unacceptable as the implementation of even a partial monetization is a very complicated and long process, so for the changes to take place in the upcoming heating season, all administrative decisions must be made until the end of the current calendar year.

 

DiXi Group will keep you informed about the Government's respond if we receive any".

 

Find the video record of the round table by following the link in Ukrainian and in English .

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