Energy efficiency policy and legislation

Lecture content:

1. Introduction
2. International obligations and European integration
3. European integration dimension
4. Basic laws of Ukraine in the field of energy efficiency
5. Strategic documents in the field of energy efficiency
6. Law of Ukraine “On Energy Efficiency”
7. Law of Ukraine “On Energy Efficiency of Buildings”
8. National institutions that form and implement energy efficiency policy
9. Conclusion
10. Active links (NPAs, standards, resources)
11. Glossary
12. Questions for self-testing

1. Introduction

Over the past 10 years, Ukraine has taken several powerful steps towards the formation and implementation of a national energy efficiency policy. At the same time, most of the challenges remain relevant, and their importance does not decrease.

Energy efficiency policy and legislation are based on three key components:

1. International obligations and European integration.
2. National legislation in the field of energy efficiency.
3. National institutions that form and implement energy efficiency policy.

2. International obligations and European integration

Most issues related to the dynamics of the development of national law and policies in the field of energy and energy efficiency in Ukraine are determined not so much by internal aspirations or awareness of Ukrainians, but by external factors. A powerful system of international obligations and a course towards European integration have a more significant influence than domestic political factors.

System of international obligations of Ukraine:

• UN Sustainable Development Goals (2015)
• Paris Climate Agreement (2015)
• Accession to the Energy Community Treaty (2011)
• EU Association Agreement (2014)

In the 10 years since the adoption of the Sustainable Development Goals and the Paris Agreement, the importance of energy efficiency has increased significantly. Even then, it was realized that the energy efficiency reserve is an energy resource in itself.

In 2022, the International Energy Agency (IEA) formulated the thesis: “Energy Efficiency First”. This principle is now fundamental in shaping policies in the areas of economy, social development and energy: any decisions must first of all take into account the potential of energy efficiency.

3. European integration dimension

In parallel with internal reforms, steps were implemented that reflected Ukraine’s aspirations for European integration.

Key milestones:

• 2011 – Ukraine’s accession to the Energy Community Treaty.
• 2014 – signing of the Association Agreement with the European Union.

It is the energy efficiency policy that has become one of the main markers of Ukraine’s progress in the integration process.

In early 2023, the European Union published an interim assessment of Ukraine’s implementation of its European integration commitments. Thanks to the productive work of Ukrainian specialists in the field of energy efficiency, the energy sector received one of the highest ratings among all areas.

Contribution of national reforms

The development of national policy was carried out through the adoption of a number of strategic laws and technical regulations, including:

• Law of Ukraine “On the Electricity Market”
• Law of Ukraine “On Natural Gas”
• Dynamics in the certification of the system operator “Ukrenergo”, operators of the transport system and gas storage facilities
• Law of Ukraine “On Energy Efficiency”
• Technical regulations in the field of energy efficiency and energy resources

These documents, combined with international obligations, set the tone and dynamics of the formation of national policy in the field of energy efficiency.

Basic documents of national policy:

1. Law of Ukraine “On Energy Efficiency” (2022)
2. Law of Ukraine “On Energy Efficiency of Buildings” (2017)
3. Law of Ukraine “On NEURC” (2016)
4. Law of Ukraine “On Cogeneration and Use of Discharge Potential” (2005)
5. Law of Ukraine “On Introduction of Investment Opportunities for Large-Scale Energy Modernization” (2015)
6. Law of Ukraine “On the Energy Efficiency Fund” (2017)
7. Energy Strategy of Ukraine until 2050
8. National Energy and Climate Plan until 2030
9. National Energy Efficiency Action Plan until 2030

Basic laws:

• Law of Ukraine “On Energy Efficiency” (2022) – “Constitution” of energy efficiency policy
• Law of Ukraine “On Energy Efficiency of Buildings” (2017)
• Law of Ukraine “On NEURC” (2016)
• Law of Ukraine “On Cogeneration and Use of Discharge Potential” (2005, updated)
• Law of Ukraine “On ESCO” (2015)
• Law of Ukraine “On Energy Efficiency Fund” (2017)

Strategic documents:

• Energy Strategy of Ukraine until 2050.
• National Energy and Climate Plan until 2030.
• National Energy Efficiency Action Plan until 2030.

4. Basic laws of Ukraine in the field of energy efficiency

1. Law of Ukraine “On Energy Efficiency” (2022)

• A basic document, a kind of “Constitution” of the national policy in the field of energy efficiency.
• Implements the key European directive on energy efficiency.
• Aims at forming a coordinate system for management in the field of energy efficiency.
• Changes to it remain relevant due to the need to adapt to Ukrainian realities and international challenges.

2. Law of Ukraine “On Energy Efficiency of Buildings” (2017)

• It is of particular importance, because in the EU about 40% of final energy consumption is accounted for by buildings.
• It is focused on systemic thermal modernization and increasing energy efficiency in the construction sector.
• It implements the provisions of the Energy Performance of Buildings Directive (EPBD).

3. Law of Ukraine “On the National Commission for the Regulation of Energy and Utilities” (2016)

• Defines the status and powers of the National Commission for the Regulation of Energy and Utilities.
• The role of the National Commission for the Regulation of Energy and Utilities in the implementation of energy efficiency policy is often underestimated, but it is key.
• At the same time, Ukraine has not yet fully complied with international obligations regarding the independence of the regulator.

4. Law of Ukraine “On Cogeneration and Use of Discharge Potential” (2005, updated during the full-scale war)

• Adapted to the modern realities of war.
• Opens up opportunities for the development of energy efficiency in the production of thermal and electrical energy.
• Can be an incentive for the development of distributed generation and optimization of resource use.

5. Law of Ukraine “On the introduction of new investment opportunities, guaranteeing the rights and legitimate interests of business entities for large-scale energy modernization” (2015)

• Known as the law on ESCO (energy service).
• Introduced the mechanism of energy service contracts as a tool for modernization of facilities at the expense of future energy savings.
• Has great potential for expanding the practice of energy modernization, especially in the budget sector.

6. Law of Ukraine “On the Energy Efficiency Fund” (2017)

• A consequence of the implementation of the Energy Performance directive and European integration processes.
• Provided for co-financing by the EU.
• Created a state institution – the Energy Efficiency Fund, which became a key tool for supporting the thermal modernization of residential buildings and large-scale energy efficiency projects.

5. Strategic documents in the field of energy efficiency

Energy Strategy of Ukraine until 2050

• One of the key framework documents in the field of energy and energy efficiency.
• Adopted during the full-scale aggression of Russia against Ukraine.
• Has the stamp DSC (for official use), therefore the full text is not available to most specialists and interested parties.
• It is known that the strategy pays significant attention to energy efficiency measures.
• It is expected that after the end of the war the document will be declassified and it will become possible to familiarize yourself with the details: coordinate system, target indicators, implementation plan.

National Energy and Climate Plan until 2030

• One of the basic documents of the European integration process of Ukraine.
• Developed to implement the EU regulation on the principles of governance in the energy and climate sectors.
• Includes five key dimensions, including:

1. 1. Energy efficiency.
   2. Energy security.
   3. Market development.
   4. Innovation.
   5. Decarbonization.

• Provides a set of procedures and measures to achieve climate and energy goals.

National Energy Efficiency Action Plan until 2030

• Specifies the instruments for implementing energy efficiency policy.
• Is a practical complement to the strategy and National Energy and Climate Plan.

TThus, the Energy Strategy–2050, National Energy and Climate Plan–2030 and National Energy Efficiency Action Plan–2030 form a holistic system of strategic energy efficiency management in Ukraine.

6. Law of Ukraine “On Energy Efficiency”

This law formed a coordinate system of public management in the field of energy efficiency.

Key provisions:

Role of authorities:

• for the first time in the history of Ukrainian legislation, the subjectivity and significant role of local self-government bodies are clearly defined;
• the powers of state and local authorities are distributed.

Planning and financing:

• the law established mechanisms for planning and financing energy efficiency measures;
• the development of technical regulations is provided for, which allowed Ukraine to make a breakthrough and receive support from the European Commission.

Key areas of regulation:

• energy audit and energy management;
• energy efficiency in various sectors of the economy;
• design and energy labeling;
• information policy in the field energy efficiency.

Informing consumers:

• The law established requirements for informing consumers, including even in payment documents for energy products and services.

State target programs:

• The government is obliged to develop at least three programs:

1. 1. thermal modernization of buildings;
   2. energy modernization of water supply and wastewater enterprises;
   3. energy modernization of heat supply enterprises.

The principle of “Energy Efficiency First”

The law enshrines for the first time the principle of “Energy Efficiency First” above all”):

• Article 3 defines: state policy in the field of ensuring energy efficiency is an integral part of the policy in the fields of energy, economy, sustainable development and environmental protection.
• Basic approach: preference is given to measures that reduce energy demand if they are more economically feasible than the development of new capacities or infrastructure.

This principle requires:

• priority attention to energy efficiency measures when developing any regulatory legal acts, strategies and programs;
• taking into account the potential of energy efficiency in all decisions on financing, infrastructure and socio-economic development.

7. Law of Ukraine “On Energy Efficiency of Buildings”

This law is key to implementing energy efficiency standards in the construction sector, which consumes about 40% of energy resources in the EU. It implements the provisions of the Energy Performance of Buildings Directive (EPBD).

Main provisions:

• Definition of terms: the concept of energy efficiency of buildings is fixed.
• Minimum requirements: establishment of basic standards for energy efficiency of new and reconstructed buildings.
• Certification and audit: mandatory energy certification of buildings, energy audits and implementation of energy management.
• Thermal modernization: introduction of systematic measures to modernize buildings to reduce energy consumption.
• NZEB (Nearly Zero-Energy Buildings): adoption of a National Plan to increase the share of buildings with almost zero energy consumption; thermal modernization strategy until 2050.
• The role of the state: the exemplary role of state authorities in implementing the policy is defined.
• Control and supervision: mechanisms of state control and responsibility for non-compliance with requirements are established.

Important clarification

The text of the law uses the term “thermal modernization of buildings”, but in essence it refers to a broader concept – energy modernization of buildings. This is not only insulation, but also a set of measures that includes:

• updating engineering systems;
• using modern materials and technologies;
• integration of renewable energy sources;
• implementation of “smart” management systems.

8. National institutions that shape and implement energy efficiency policy

The main bodies responsible for developing and implementing energy efficiency policy in Ukraine include:

• The Verkhovna Rada of Ukraine is the legislative body that adopts basic laws in the field of energy and energy efficiency.
• The Cabinet of Ministers of Ukraine coordinates state policy andensures its implementation.
• The Ministry of Community and Territorial Development of Ukraine is responsible for energy efficiency in the construction sector and the housing and communal services sector.
• The Ministry of Energy of Ukraine determines priorities in the energy sector, in particular energy efficiency as part of energy policy.
• The Ministry of Economy, Environment and Agriculture of Ukraine
•  – integrates energy efficiency issues into economic strategies and development programs.
• The National Commission for State Regulation in the Spheres of Energy and Municipal Services (NCRES) – establishes rules and tariffs, forms economic incentives for increasing energy efficiency.
• The State Agency for Energy Efficiency and Energy Saving of Ukraine (State Energy Efficiency Agency) – a specialized central executive body that directly implements state policy in this area.

9. Conclusion

Energy efficiency is not a separate category, but an integral part of the state’s energy policy. The implementation of energy efficiency policy depends on more than 50% of managerial aspects – the organization of processes, coordination of institutions, and the effectiveness of management, and not only on the availability of a legislative framework.

Active links

• UN Sustainable Development Goals (SDGs): https://sdgs.un.org/goals
• Paris Climate Agreement (2015): https://unfccc.int/process-and-meetings/the-paris-agreement
• Energy Community – official website: https://www.energy-community.org/
• EU-Ukraine Association Agreement: https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A22014A0529%2801%29
• Law of Ukraine “On Energy Efficiency” (Vedomosti Verkhovna Rada of Ukraine (VVR), 2022, No. 2, Art. 8): https://zakon.rada.gov.ua/laws/show/1818-20#Text
• Law of Ukraine “On Energy Efficiency of Buildings” (Vedomosti Verkhovna Rada (VVR), 2017, No. 33, p. 359): https://zakon.rada.gov.ua/laws/show/2118-19#Text
• Law of Ukraine “On the National Commission for the Regulation of Energy and Utilities of Ukraine” (Vedomosti Verkhovna Rada (VVR), 2016, No. 51, p. 833): https://zakon.rada.gov.ua/laws/show/1540-19#Text
• Law of Ukraine “On the Energy Efficiency Fund” (Vedomosti Verkhovna Rada (VVR), 2017, No. 32, p. 344): https://zakon.rada.gov.ua/laws/show/2095-19#Text
• National Energy and Climate Plan until 2030 (NECP): https://me.gov.ua/Documents/Detail?lang=uk-UA&id=f7088035-142e-4912-9aa0-6fe2def80c1b&title=ProektNatsionalnogoPlanuZEnergetikiTaKlimatuUkraini2025-2030
• Energy strategy of Ukraine until 2050 (overview): https://www.mev.gov.ua/reforma/enerhetychna-stratehiya-0