Ukraine and Germany Expanding Energy Cooperation in Five Areas

The 1st German-Ukrainian Energy Day took place in Kyiv. It was the first public event within the framework of the German-Ukrainian energy partnership, launched by both countries in Berlin this summer. The parties presented the main areas of future cooperation and discussed topical issues of energy and environmental protection with the participation of representatives of governments, ministries, business, experts and a wide audience from both countries.

Prime Minister of Ukraine Denys Shmyhal said in his opening remarks, “The launch of a new energy partnership between Ukraine and Germany in August 2020 marked the beginning of a new level of dialogue and cooperation in the energy sector.”

In his welcoming speech, Andreas Feicht, State Secretary at the German Federal Ministry for Economic Affairs and Energy, said: “We accepted Ukraine into the circle of bilateral energy partnerships we maintain with more than 20 world countries on all continents and with which we work more closely than within multilateral energy policy bodies.”

Five sectors have been identified as the main areas of the German-Ukrainian energy partnership: transformation of coal regions, hydrogen economy, energy efficiency, renewable energy sources and decarbonisation. First Deputy Minister of Energy of Ukraine Olha Buslavets presented these areas, recalling, “Ukraine has already made its choice in favour of a ‘green’ energy transition.” According to her, the preparation of the second Nationally Determined Contribution to the Paris Agreement is currently being completed, the Integrated National Climate and Energy Plan is being elaborated and the preparation of a new energy strategy until 2050, based on the low-carbon development model, has begun.

Transformation of coal regions

Ukraine aims to switch to a low-carbon development model, which requires radical changes in the coal sector – from the reduction of coal-fired power stations to the implementation of programmes to reorient staff workload. This issue is in the focus of attention of the Energy Ministry, which has already developed a concept for reforming the coal industry. Pursuant to the concept, all unprofitable mines in Ukraine will be closed within 10 years and the budget subsidies for coal companies will be minimised in the coming years. The concept also underpins a larger regional transformation programme being prepared by the Ministry of Communities and Territories Development of Ukraine.

In Germany, which has also been a coal-dependent country for a long time, a law was passed this summer to abandon the use of coal by 2035. To this end, the country has a plan to support and reform regions where fossil fuels are important to their economies. Ukraine will need Germany’s experience in the process of transforming the coal industry and implementing structural changes in the coal regions. In particular, the implementation of pilot projects will be launched in the towns of Chervonohrad and Myrnohrad and the creation of a multilateral donor fund to support Ukraine’s coal regions will be initiated within the framework of the energy partnership with Germany.

Advisory support for Ukraine will be provided by Stanislaw Tillich, the German Federal Government Commissioner for Structural Change in the Ukrainian Coal-Mining Regions. Delivering his speech at the Energy Day, Mr. Tillich underscored the need to “show people in the regions the future after coal, when mines will be closed, when power plants will stop working. A number of tasks need to be performed for such transformations, which will be aimed at new jobs so that young people have an opportunity to live and stay in the regions.”

Hydrogen economy

The concept of hydrogen economy is becoming increasingly relevant due to the fact that hydrogen will eventually be able to replace “dirty” fossil fuels and play a significant role in the development of a “clean” carbon-free economy.

This year, the European Union approved the Hydrogen Strategy for a climate neutral Europe until 2050, and Germany adopted its National Hydrogen Strategy. Given the potential of renewable energy sources and the availability of transport infrastructure linked with the EU, Ukraine has attractive opportunities to become a prospective hydrogen supplier. The Ministry of Energy of Ukraine is working to create a domestic hydrogen market. A roadmap for the development of hydrogen energy is currently being prepared, and the next step will be to develop the concept of hydrogen energy and relevant legislation.

The implementation of the German-Ukrainian energy partnership initiatives in the field of hydrogen cooperation will be aimed at creating favourable conditions for both the domestic hydrogen market in Ukraine and the development of export potential. Deputy Minister of Energy of Ukraine Yaroslav Demchenkov noted that a hydrogen expert council consisting of business people, scientists and civil society activists, similar to the National Hydrogen Council of Germany, had been set up at the Ministry for these purposes. According to him, “public and private companies have a portfolio of 10 real projects that can be implemented jointly with German business as pilot projects in Ukraine.”

Energy efficiency

Energy efficiency is seen as a way to increase the competitiveness of the Ukrainian economy and is an important component of Ukraine’s accession to the European Green Deal. The development of energy efficiency projects and the implementation of relevant legislation are aimed at improving energy efficiency. The National Energy Efficiency Action Plan up to 2030 takes into account the need to increase energy efficiency at the level of final energy consumption, develop electric transport network and introduce energy efficiency solutions into industry and energy transportation.

Germany is ready to continue to support Ukraine in both the elaboration of legal framework and the implementation of projects. Speaking about cooperation with Germany, First Deputy Minister of Communities and Territories Development of Ukraine Vasyl Lozynsky said that his agency has “a great understanding of lawmaking cooperation and step-by-step implementation of the EU Energy Efficiency Directive 2012/27.” Mr. Lozynsky noted that a number of documents, regulations and orders are currently being prepared to help introduce minimum energy efficiency requirements for buildings, as well as to create conditions for the construction of nearly zero-energy buildings.

Renewable energy sources

The development of renewable energy sources – primarily solar and wind energy sources – is a cross-cutting issue of Ukrainian energy policy being the basis for reaching the goals to reduce greenhouse gas emissions and integrate Ukraine’s united energy system into the pan-European ENTSO-E network. The projected share of renewable energy sources in Ukraine’s electricity generation is expected to reach 8.7% in 2021, and the target – 25% of total primary energy supply by 2035 – is enshrined in the Energy Strategy of Ukraine.

However, Ukraine needs to address a number of challenges that stand in the way of the rapid renewable energy development. In particular, Ambassador of the Federal Republic of Germany to Ukraine Anka Feldhusen drew attention to the importance of stable and predictable framework conditions for attracting foreign investment in Ukraine: “The main prerequisites for German-Ukrainian partnership are fair and attractive framework conditions for foreign companies in Ukraine. […] Without the development of renewable energy sources, there can be no effective cooperation, including in the hydrogen sector.”

Director of the European-Ukrainian Energy Agency Oleksandra Humeniuk agreed, noting that Ukraine must comply with its obligations under the memorandum with renewable energy producers and the law No. 810-IX, as well as to expand the range of funding sources. Investors are now observing how Ukraine solves the problem in the field of renewable energy. If the solution is fair and the sector’s solvency is restored, it will pave the way for new projects.

Natalia Tolub