Kyiv, 28 April 2015
When Ukraine decided to join
the Energy Community in 2010, it was a clear sign of its intention to become
part of the European energy market and to build a competitive market with
strong interconnections with all its neighbours. It was at the same time a
commitment to undertake fundamental reforms in the energy sector, overhauling
the inherited Soviet model of energy markets.
We all know that until last year not much happened in this direction. On
the contrary, transparency decreased and business empires, closely linked to
the country's leadership, made colossal gains. This was among the main reasons
why people took to the streets – to the Maidan – in November 2013.
The consequences are well known: rent seeking, super profits, increasingly
expensive subsidies and an acute lack of investments threaten not only energy
supply, but also the entire Ukrainian economy.
In the aftermath of the "Maidan" events, the political conditions
were put in place to seriously tackle energy sector reforms; Minister
Demchyshyn has already outlined the achievements so far and the main directions
and challenges ahead.
Let me briefly stress here what has been achieved in very practical terms
towards integrating the Ukrainian energy sector into that of the EU:
·
As recently as in
2013, Ukraine received less than 10% of its imported gas from the EU, in 2014
it rose to 26%, and in 2015 gas imports from the EU
could be far more, even up to 50%. This has already saved Ukraine a
great amount of money and has increased its energy security significantly –
including during the critical winter period. This was only possible through the
close cooperation between the governments and companies of Ukraine, Slovakia,
Poland and Hungary and other EU countries – facilitated by the European
Commission. It is an excellent example of what our partnership can achieve!
·
The new gas law, adopted by the Rada on 9
April, will now bring Ukraine's gas sector legislation in full compliance with
the EU energy market. The Government has now six months to fully implement this
decision by adopting the relevant secondary legislation. This will open up new
ways of cooperation and new avenues for investment. I have already spoken with
several European companies on this and they concur that the new legal framework
will vastly improve the investment climate, if fully implemented. And we should
specifically look at fully utilising Ukraine's gas storage and transport system
for the energy security of the wider Central-Eastern European region.
·
Also on energy efficiency and renewables, our
cooperation is already starting to bear fruit. Over the past year, the
participation of Ukrainian towns and cities in the Covenant of Mayors, an EU network to share best
practices on energy efficiency, has more than doubled. Currently 73
municipalities have signed up, representing some 10% of Ukraine's population.
Cities representing an additional 9% of the population are planning to join the
Covenant of Mayors. They all have already or will develop Sustainable Energy
Action Plans, which will lead to energy savings of at least 20%. Many cities
have already received support from the European Commission in the last couple
of years to develop these plans and implement pilot programmes. Among the
frontrunners are 11 cities which have been selected for their priority
investment projects which will be supported by the EBRD.
Much more is in the pipeline, and we will discuss it here in our energy
panel. I am particularly glad to see the presence of national Ministers here
with us, and that a number of EU Member States are actively pursuing energy
cooperation projects to enable Ukraine to play an active role in the European
energy market.
But many will still ask how Ukraine can play an active role in the European
energy market. Or how can Ukraine be a partner for the Energy Union?
In our Energy Union package we have made clear that the Commission,
together with the High Representative, should develop an active agenda to
strengthen the EU's external policy. Ukraine is one of the cornerstones of such
a policy, and we would therefor like to upgrade our Strategic Energy
Partnership with Ukraine.
Looking at Ukraine's energy sector, there are at least three critical
elements to answer this question:
·
Establish an open
and competitive Ukrainian market;
·
Increase interconnections;
·
Expand international partnerships.
Everybody agrees
that without a competitive Ukrainian energy market,
energy costs will remain prohibitively high. The service quality would also
deteriorate as the necessary investments for the modernisation of the energy
sector will not be forthcoming. A number of fundamental pieces of legislation
along these lines are therefore being prepared with the close support and
involvement of experts from the Energy Community, the European Commission, EU
Member States, and International Financial Institutions. I would just like to
mention the functioning of a truly independent energy regulator, an electricity
market with separation of and equal and fair access to transmission
infrastructure, and the reform of Naftogaz. Perhaps somewhat less obvious to
some energy market players but of equal importance are clear rules for the
metering and billing of energy consumption at all levels.
So let me come to interconnectors as a key condition to allow a
European energy market to function. The existing gas interconnectors have
already been upgraded to allow for the increased EU gas supplies to Ukraine,
which I have already mentioned. More can and will be done in the future.
Just as a reminder, the EBRD and the EIB already provide funding for
modernising Ukraine's gas transmission system with so far €300 million and the
planning of new interconnectors has already started. The most advanced plans at
the moment are the plans to build a new gas interconnector which will bring LNG
from Poland to Ukraine. This would increase Ukraine's energy security even
further.
Interconnectors will also play a crucial role in allowing the full use of
Ukraine's gas storage and transport system. The latter play an important role
in ensuring the energy security of the wider Central-Eastern European region.
This brings me to
my third element: International cooperation and partnerships.
Playing an active role in the European energy market, would allow Ukraine to
benefit will profit from international partnerships; be it in the most
effective use of its very powerful gas storage system, from its advantages as a
transit country, but also to realise its huge potential for energy efficiency.
A precondition to this is of course Ukraine's continuation on its path of
energy sector reform. Transparency has to be improved, the necessary legal
changes have to be adopted and implemented. Insider privatisations and double
pricing regimes should be relicts of the past. Only with a stable business
environment will Ukraine become attractive for international investors.
Partnerships and investments in the gas sector will be greatly facilitated
by the Naftogaz reform, which will be pursued in full compliance with the EU's
energy market rules, including the unbundling of transmission assets. Whereas
we have started with the gas sector, the European Commission is very much
willing to support such international partnerships also in other sectors.
Attracting new investments is particularly important for the generation
sector. Ukrainian power plants are very old and inefficient; in fact, only one
thermal power plant has been built after Ukraine's independence. Clearly, such
an investment challenge can only be mastered if clear rules and investor
confidence exist. Any non-transparent or corrupt schemes would be poisonous.
If Ukraine were to increase energy efficiency to the EU's average
levels, annual energy savings would be about 34 billion cubic metres of natural
gas. This is more than the entire consumption of Spain! It is equal to the
projected levels of imports of gas for Ukraine. Hence, in combination with
expanding its domestic gas production, Ukraine could actually export gas!
The potential for energy savings in Ukraine is huge across all sectors.
This is also true for its renewable energies, such as biomass, which is largely
unexploited. However, the biggest room for savings is probably in the buildings
and district heating sectors. In order to attain this potential, Ukraine will
need to introduce and implement clear and demanding
legislation and supporting policy measures, which also include funding.
The EU has already gained a lot of experience in the practical
implementation of the EU energy efficiency legislation, which we would be happy
to share. Ukraine has the skills, expertise and capacity to operate its energy
system effectively, to build and use innovative energy and energy savings
technologies, and to create economic growth and a large number of jobs in the
process.
Rest assured that you can count on my full support to realise this huge
potential and to finally dig up all these "hidden treasures". As
mentioned, the potential and the synergies for both Ukraine and the EU have
been clearly illustrated by the joint 2014 gas "stress tests". It is
now crystal clear that the more we cooperate, coordinate and integrate, the
better our all energy security becomes.
Thank you very much.
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