Oleksiy Shostak, the mayor of Malyn, a city located in north central Ukraine, smiled with satisfaction as he watched a group of third graders leaving Malyn School #1. This past winter, three schools in the city switched from natural gas to biofuel heating.
Shostak glanced at the boiler house, which provides heat for the schools’ 1,700 students. “I think the city will have no trouble meeting the new restrictions on imported natural gas,” he said. “This will also allow us to cut municipal heating costs.”
In 2012, Russian natural gas was increasing in price and supply was becoming vulnerable to political disagreements. That’s when the Zhytomyr Regional Council turned to the USAID Public-Private Partnership Development Program for help to convert municipal boiler houses from imported natural gas to locally produced biofuel. The council needed help to attract funds and expertise from the private sector.
Switching to locally available biofuel, such as wood or straw pellets, had the potential to reduce expenses while ensuring a reliable supply of heating fuel. USAID selected Malyn, which is located in Zhytomyr oblast, for a pilot project to test a newly developed business model known as a public-private partnership (PPP), which leverages the expertise and resources of the private sector.
“Zhytomyr oblast has a wealth of wood and agricultural byproducts, and it is shame to waste it by using natural gas for heating,” said Georgiy Geletukha, head of the Bioenergy Association of Ukraine. “With these resources, it shouldn’t take Ukraine long to substitute up to 18 percent of its natural gas use with local biofuel.”
– P3DP learned that draft law #2010 On Amendments to Specific Laws on Competitiveness Conditions for Electricity Producing from Alternative Resources of Energy was registered in the Verkhovna Rada. The draft law is based on proposed legislation developed with P3DP participation in April 2014, when P3DP submitted legal recommendations on green tariff mechanisms in solid waste management. The proposed legislation improves methods of energy payment calculations for companies. The law, if passed, will facilitate launching of PPP projects in solid waste management and will greatly support efforts of P3DP in the sector.
P3DP shared experiences of the Malyn Biofuel Heating PPP at a conference in
Poltava focused on using renewable energy sources through PPP approaches. USAID’s Local Alternative Energy Fuel: Myrhorod project hosted almost 50 representatives of municipalities and the private sector in identifying approaches to expand use of biofuel in Poltava oblast. As a result of the event, P3DP identified the first group of towns that are interested to replicate the Malyn PPP model in their own municipal heating facilities. P3DP has also identified a group of possible bidders (heating operators and boiler producers that are eager to expand to production of heat under PPP) and is thus considering how to support physical replication and expand direct investments into Ukrainian municipalities already in 2015 as a result of developed PPP models.
Malyn, a city of 27,000 in Zhytomyr Region, plans to use renewable biofuel to heat schools. Condensed straw pellets produced from agricultural waste can be used to replace non-renewable energy sources, thereby saving costs and reducing carbon emissions. Photo: Simone
A major milestone was achıeved on October 30 when the MOEDT’s PPP Unit approved its first PPP project, the Malyn Municipal Heating with Renewable Energy PPP. The decision clears the way for Malyn to proceed with the competıtıve tender, which it plans to announce in November.
The PPP Unit, which was established within the MOEDT with P3DP support, plays an important role in PPP development in Ukraine. In addition to defining Ukraine’s policy on PPPs, it mapped out a methodology that ensures that potential private sector partners will have key information necessary for participating in tenders. This includes technical, legislative and market reviews, environmental and social impact assessments, and a financial model. The PPP Unit also ensures that the proposed PPPs adhere to Ukrainian legislation and result ın brıngıng value to Ukraınıan cıtızens. The Unıt’s involvement in the PPP process increases confidence in the project’s transparency, viability, and bankabılıty.
The Malyn project is on track for becoming Ukraine’s first clean energy PPP. Malyn, a city of 27,000 in the Zhytomyr Region, plans to use renewable biofuel to heat schools, which will reduce energy costs by about 10 percent and reduce carbon emissions by 11,000 metric tons. Over 1,600 children will benefit from more reliable heating, while enabling the city to strengthen its environmental and financial resilience in the face of budget constraints. Local businesses will also benefit.
P3DP will continue its work with Malyn officials in preparing the stakeholder communıcatıon program and package of tender documents. It will also continue its work with the MOEDT to build the knowledge and skills it needs to assess and support future PPP projects.
P3DP’s work supports the USAID’s Climate Change and Development Strategy and President Obama’s Global Climate Change Initiative. We help Ukraine become climate resilient and encourage low-emission sustainable economic development through legislative reform, capacity building, and pilot PPP projects that reduce greenhouse gas emissions and encourage use of renewable energy.
P3DP’s success training in Energy Efficiency and Renewable Energy PPPs in Zhytomyr (see story on page 1) isn’t the only way P3DP is promoting investments in clean energy in Ukraine. We use a multi-pronged, complementary approach to dealing with climate issues. Our approaches include:
Promoting Clean Energy through Legislative Engagement. P3DP has included provisions promoting clean energy in Ukraine’s PPP policy and provided input to draft legislation. These inputs are expected to encourage use of ESCO contracts, improve solid waste management, and encourage PPPs for for improving the resource and energy efficiency of the housing and communal sector.
Building Environmental Knowledge and Capacity. In addition to teaching national, regional and municipals about the fundamentals of public-private partnerships, P3DP demonstrates how the private sector can contribute to low emission, sustainable economic development through financing, technology, and managerial know-how.
Clean Energy Pilot PPP Projects. P3DP’s pilot PPP projects have a positive impact on greenhouse gas emissions and greater energy efficiency. Pilots in Vinnytsia, Ivano-Frankivsk, Dnipropetrovsk and Malyn are expected to demonstrate how PPPs can mitigate climate change by generating electricity with landfill gas and biofuel and use of energy-efficient street lighting. Estimated reductions resulting from U.S. Government assistance delivered through P3DP will be equivalent to 998,159 metric tons of CO2.