Energy Saving Potential in Ukraine

Current Energy Efficiency Status of National Economy

High energy content of Ukraine's GDP is a result of significant technological lag in the majority of economy sectors compared to the developed countries, unsatisfactory sectoral structure of the national economy, negative impact of the shadow sector, specifically, import-export operations, which objectively limit the competitive power of national production and is burdensome for the economy, especially given its foreign energy dependence. In contrast to the industrially developed countries where energy saving is an element of economic and environmental expediency, in case of Ukraine it is an issue of survival under the market conditions and entrance to European and world market. This requires addressing the problem of well-balanced solvent demand both on the internal and external markets, as well as diversification of fuel and energy imports.

Low energy efficiency has become one of the key factors that have given rise to critical situations in the Ukrainian economy. The energy component in the cost structure of manufactured goods had an almost three-fold increase in the first half of '90s, reaching 42% of total material expenses associated with output of products. It was not until 1997-1999 that energy efficiency of the economy began to improve as a result of measures adopted at the state level and stopping the decline in industrial production, certain stabilization of economy and subsequent, beginning from 2000, GDP growth. While GDP energy content grew by 38.6% in 1990-1996, it had been decreasing significantly since 2000, and it was for the first time in the Ukrainian history that GDP growth was achieved at the same time with reduction in consumption of primary fuel and energy resources.

However, it should be noted that the GDP energy content reduction rates slowed down in 2002 due to negative changes in the energy content reduction trend with regard to the gross value added in the most energy-intensive sectors of the economy metallurgy, machine-building, chemical and petrochemical, as well as housing and communal services sector, these changes brought about by inadmissibly high depreciation (65-70%) of fixed assets and corresponding increase in per unit cost of fuel and energy resources for a number of important product types.

Energy saving is one of the crucial factors for the energy strategy of Ukraine. It determines the effective operation of the national economy.

The technical factor reflects the impact of the technical (technological) condition and the equipment level on the energy inputs in process of good (services) production.

The structural factor reflects the impact of structural changes in the sectoral or intersectoral activities on fuel and energy consumption.

At present, building an efficient energy-saving state regulation system is the main factor reducing the energy content of goods (services) in all sectors of economy. This will make possible, in the first place, improving the energy final consumption structure, specifically, by further extension and intensification of electrification in all economic sectors by replacing critical fuels and, at the same time, enhancing production efficiency.