Harnessing Energy Demand Restraint in Ukraine: A Roadmap

Ukraine Roadmap Cover

About this report

The EU4Energy programme is a four-year initiative led and funded by the European Union. One of its key goals is to enable greater application of evidence based energy policy and decision-making in participating countries in Eastern Europe and Central Asia. Countries participating in the EU4Energy programme are: Armenia, Azerbaijan, Belarus, Georgia, Kazakhstan, Kyrgyzstan, Moldova, Tajikistan, Turkmenistan, Ukraine and Uzbekistan.

The International Energy Agency (IEA), the Energy Community and the Energy Charter support the project, with the IEA taking lead responsibility for the policy development dimensions. As part of this programme, the IEA has prepared this high level policy roadmap to help inform and guide policy practitioners as they seek to develop and implement policies to promote energy demand restraint in Ukraine.

The analysis and proposals advanced in this document form an adaptable and integrated strategic policy framework that reflects international experience and best practices. It avoids detailed prescription, recognising that Ukrainian policy practitioners are better placed to draw on their local knowledge and experience to address practical details as they emerge. Accordingly, the roadmap’s proposed pathways are intended to inform and guide the development of effective policies and programmes that would help realise the untapped potential of demand restraint, enhancing Ukraine’s energy security, economic competitiveness and environmental performance.

This paper begins by discussing demand restraint concepts and principles, focusing on the nature and scope of demand restraint, its potential benefits, and factors likely to affect development and implementation. A description of the policy context governing demand restraint development and implementation in Ukraine follows. It provides an overview of recent energy consumption trends, policies affecting demand restraint and the current roles and responsibilities of key institutions and stakeholders in developing and implementing demand restraint related policies and programmes. Finally, the integrated policy roadmap to advance demand restraint includes proposed strategic policy goals and a range of policy measures to pursue demand restraint in Ukraine over the next five years.
Summary brochure
Executive Summary

Energy demand restraint is broadly defined to include policies and practices that help increase energy efficiency, reduce energy imports and improve operational flexibility and resilience throughout a country’s energy sector, particularly in the short term.

Instituting demand restraint measures could considerably improve Ukraine’s energy system flexibility and resilience while also reducing energy imports, exerting downward pressure on energy prices and delivering a range of socioeconomic and environmental benefits. Ukraine’s energy policy framework recognises this potential and gives high priority to promoting energy demand restraint to help improve energy security. Analysis of recent trends in Ukrainian energy consumption suggests that the greatest opportunities for applying demand restraint are likely to be found in the residential, road transport, energy-intensive industry and energy utility sectors.

A comprehensive and integrated policy approach will be needed to help realise these benefits in a timely, efficient and cost-effective manner. This roadmap outlines a way forward, built on an integrated set of strategic goals and mutually reinforcing policy measures that could be deployed to increase demand restraint across the energy sector over an initial five-year period.

Forming the basis of this roadmap are three key strategic policy goals:

  • Improve energy efficiency, by broadening and deepening energy efficiency in a few key high-consumption areas for which the potential to quickly realise substantial and ongoing energy savings is greatest.
  • Reduce fuel imports, by rapidly diversifying energy consumption away from energy imports and towards domestic energy sources.
  • Harness emergency demand restraint, by using demand restraint measures more effectively to help improve energy sector resilience and flexibility during emergency events and tight supply-demand conditions, especially in the electricity sector.

This combination of goals provides a complementary and mutually reinforcing foundation to pursue demand restraint, consistent with Ukraine’s wider socioeconomic policy priorities. The goals are also compatible with the various energy policies Ukraine has committed to under its 2014 Association Agreement with the European Union and the related acquis communautaire.

The integrated set of policy measures to help achieve these goals focuses on improving energy efficiency in residential space heating, road transport, energy‑intensive industries, and power and district heating utilities. Measures to reduce fuel imports target the road transport, power and district heating sectors, while those to harness demand restraint during periods of scarcity or emergency events target the transport and power sectors. These measures were developed with reference to international best practices, in consultation with key stakeholders including representatives of the Ukrainian government, the Ukrainian energy industry, the European Commission, international financial institutions and the international donor community.

This roadmap provides a comprehensive approach to apply demand restraint across Ukraine’s energy sector. It incorporates all the major energy end-users and key intermediate consumers throughout the value chain and addresses the import-related dimensions of demand restraint, which are particularly relevant to Ukraine’s circumstances and energy security goals. At the same time, this roadmap addresses the emergency management aspect of demand restraint, proposing a range of practical measures for the consumption areas that pose the greatest future energy security risks.

This framework also offers an integrated approach to address demand restraint, recognising the interrelatedness of challenges across energy-consuming sectors and throughout the energy value chain. Given that this holistic approach could aid the development of complementary and mutually reinforcing policies that address cross‑sectoral issues more effectively, the roadmap is likely to be durable and adaptable to changing circumstances and policy priorities over time.