Sweden-Ukraine District Heating Programme is launched

The Sweden-Ukraine District Heating Programme (SUDH), which is managed by NEFCO, has been launched today in Kyiv. It is directed at financing and supporting environmentally sustainable, energy-efficient district heating investment projects all over Ukraine. Sweden supports the Programme with a provision of grants for co-financing investments and technical assistance.

Ukraine is among the largest district heating markets in the world, with annual volumes of about 100 TWh. Some 70% of buildings in Ukraine are supplied with heat from district heating networks.

Most of the district heating infrastructure in Ukraine was built during the Soviet times, when the engineering approaches led to lower resource and energy efficiency than modern ones. In most cases, those approaches remain in use today. The situation is worsened by deterioration of the assets due to inadequate maintenance over a long period of time. Consequently, the district heating systems in Ukraine have high losses and, as a result and due to an overwhelming share of fossil fuels in the generation mix, very high CO2 and other emissions. In some extreme cases, the poor condition of the infrastructure leads to incidents that risk the integrity of the heat supply to the residents. In an attempt to improve the comfort of living by assuring domestic hot water supply, and in some cases heating, a number of district heating customers choose to disconnect from district heating in favour of personal heating units, often fuelled by gas or electricity.

The presented current situation of the district heating in Ukraine, however, is not a representative description of district heating technology as such. Well-maintained modern district heating systems allow customers to enjoy a reliable heat supply and to become platforms for low-carbon heat generation. The technology-of-scale effect of district heating allows for the utilisation of energy sources which are not applicable to small-scale heat generation, such as forestry residuals and other renewable energy sources, municipal waste or waste heat. The utilisation of such sources makes a difference to emission reduction and sustainable development. A perfect example of this is the Swedish story in which district heating became a key to an almost full phase out of fossil fuels from heat generation.

From this perspective, Ukraine has a great opportunity to move towards low-carbon heating by using its existing district heating systems. In order to make this happen, an investment in rehabilitation of the district heating assets with implementation of modern district heating technology is required. This will also lead to improved energy efficiency and possibilities to reduce heating tariffs, as both heat losses and dependence on imported and expensive fossil fuels are reduced.

More information about the new Sweden-Ukraine District Heating Programme available beneath and on the new district heating website dh-ukraine.nefco.int

Vision and goals for the new Programme

The vision of the Sweden-Ukraine District Heating Programme is to support energy-efficient district heating in Ukraine that delivers qualitative services with low environmental impact to its customers. The overall goal of the Programme is to implement demonstration projects in municipal district heating assets in Ukrainian cities, leading to:

Long-term sustainable development of district heating systems in Ukraine
Increased share of renewable and waste heat sources
Decreased heat consumption and heat losses
Decreased environmental and climate impact
Improved quality of district heating services

Programme objectives

To achieve its goal and demonstrate how feasible investments in modern district heating technology can lead to carbon reductions while improving the condition of assets and the quality of services, the SUDH Programme has the following objectives:

Implement at least four demonstration projects in different Ukrainian municipalities
Bring Ukrainian district heating systems closer to the EU Energy Efficiency Directive, namely to secure at least 50% of renewable energy sources, 50% waste heat, 75% cogenerated heat or 50% of a combination of such energy and heat
Improve the quality of district heating services for about 300,000 Ukrainian citizens
Decrease CO2 emissions by 40-60,000 tonnes/year

Eligibility criteria

The eligibility criteria define the type of district heating companies that can participate in the SUDH Programme and thus receive financing for their modernisation projects.

100% municipally owned district heating company*
Municipal authorities strategically support district heating development
The municipality complies with NEFCO’s requirements on financial stability and is ready to provide a municipal guarantee for the full loan amount
The municipality and district heating company are both ready to borrow in a foreign currency
Only cities with district heating companies that fully meet these criteria may participate in the Programme.

The following will be considered an advantage:

A clear vision on district heating as a strategic tool to long-term sustainable development
Readiness to implement modern approaches to district heating
Experience of cooperation with international technical assistance projects
*Oblast ownership or municipality ownership

Project financing

Projects that can be financed under the Sweden-Ukraine District Heating Programme should, in the first place, ensure lower energy consumption, effective use of renewable energy sources and waste heat, as well as stimulate long-term sustainable development of district heating systems in Ukraine.

The following criteria have been defined for financing projects within the SUDH Programme:

NEFCO loan up to EUR 5 million
Investment grant up to 30% of the total external funding but not more than EUR 1.5 million
District heating company’s own contribution not less than 10% of total project budget

Financing: NEFCO and Sweden
Coordination Consultants: SWECO in cooperation with the Municipal Development Institute (MDI) and Teplotekhnika.

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