The new 5 MW biofuel wood chips boiler house as a part of the Lutsk DH project
Even with subsidies from local authorities, Ukraine’s DH com- panies cannot keep up with essential maintenance invest- ments in the DH network, pay salaries, and instead build up significant debt. The debt of the DH companies to Ukraine’s largest oil and gas company Naftogaz amounted to UAH 34 billion (EUR 1.1 bil- lion) in 2020. The Ministry of Territories and Communities Development as- sessment states that the DH sector requires at least EUR 5.2 billion in investments to modernize the networks without con- sidering the costs of new networks or more comprehensive renovations. Besides, there is a need for investment to cover the upgrades in the electrical grid to support the heat. Thus, the total costs are likely much higher. Due to the inefficiencies of Ukraine’s DH sector leading to non- cost recovery for heat supply, the DH tariffs for the residential sector have been held artificially low to match affordability. Therefore, DH companies base their tariffs on affordability rath- er than the actual costs of DH. The vast cash flow gap leaves them unable to invest in the modernization of the DH systems. Energy transition targets and potential Ukraine has taken significant policy steps on the energy transi- tion pathway to develop energy efficiency measures and phase out fossil fuels in recent years.
In 2017, the Ukrainian government adopted the Energy Strate- gy 2035 as a roadmap to improve the energy effectiveness, se- curity, competitiveness, and sustainability of Ukraine’s energy system. The goal is to reach 25% of renewables in the balance of primary energy and electricity in 2035. Recently, Ramboll has contributed to conducting a technical, environmental, and financial viability assessment of Kyiv’s DH system rehabilitation. Kyiv is the capital of Ukraine, with a population of approx. 3 million. The city consumes over 2 billion cubic meters of natu- ral gas per year. The municipal-owned company Kyivteploen- ergo (KTE) operates the 2,800 km long DH system, the third largest in Europe and one of the largest in the world, supplying 12.7 million MWh of heat per year. The rehabilitation project is evaluated at a capital value of EUR 140 million. It includes a new cogeneration unit with sizeable thermal storage, a new heat recovery system, network replace- ment, SCADA installation, boiler house closure, and recon- struction. Ukrainian-Danish energy cooperation supports the long-term energy planning A new collaboration between The Nordic Environmental Fi- nance Corporation (NEFCO) and Danish Danida Sustainable Infrastructure Finance (DSIF) will support the modernization of parts of the DH infrastructure in Kremenchuk city.
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