- Energy Efficiency Facts

Energy intensity in Ukraine is around three times higher than in the EU. This means that on average, Ukrainian companies use three times as much energy to produce the same output as companies in the European Union. Needless to say, the potential for energy efficiency in Ukrainian companies is huge, even with today’s Ukrainian energy prices, which are low compared to EU levels. However, the market for energy efficiency investments in Ukraine is still in its infancy. But with increasing energy prices and WTO accession, Ukrainian companies can only maintain their competitiveness on the world market through lowering their energy consumption by using every opportunity for profitable energy efficiency investments.

Benefits of Energy Efficiency Investments
The foremost argument for energy efficiency investments lies in decreased costs for electricity and natural gas – a direct effect which can be seen immediately on the company’s income statement. This improves the competitiveness of the company and assures competitiveness in the future with increasing energy prices.

Production capacity is often hampered by inefficient processes, something that is closely linked to energy inefficiency. The improvement of energy efficiency often automatically improves the output and increases revenues. Emissions trading can also increase revenues where a significant amount of energy is saved. The company risk is reduced through lower exposure to energy prices, which in turn increases the value of the company. Decreased energy usage leads to lower emissions, improving the environment and the company image. Numerous other positive effects can also arise from energy efficiency investments.

The Economics of Energy Efficiency Investments
The payback period for energy efficiency investments varies widely depending on the type of project, but typically lies between 1.5 and 6 years, which is a short time compared to traditional capital investments. Of course, higher energy prices and higher energy savings per invested dollar lead to a shorter payback-period. Generally, the internal rate of return on energy efficiency investments is higher than the interest rate on the debt financing required for the investments. This means that any additional debt that a company takes has a limited impact on the company’s balance sheet, and the ultimate financial effects of the investments are positive.

Energy efficiency investments are win-win solutions

• The investors/borrowers : The cost savings from energy efficiency investments are usually more than enough to pay for the cost of the loan obtained for these investments, while the investments increase the company’s competitiveness.
• The lenders: Banks can lend money for the investments with a low risk since the cost savings potential of energy efficiency investments are well-documented.
• The suppliers: Suppliers of energy efficiency equipment increase revenues, hire staff and contribute to the growth of the economy.
• The country : The country reduces its dependency on imported energy and increases its competitiveness and credibility as an efficient economy.
• The environment : Through energy efficiency investments, a significant reductions in pollutions can be achieved.
• The people : In the end, the people will gain trough a cleaner environment, improved health and a stronger economy.

Did you know?

• A saved kilowatt hour is more environmentally friendly than any energy production technology available, and often cheaper and easier to implement as well.
• It has been estimated that Ukraine could decrease its 70% import share of gas supply to 35% by implementing energy efficiency investments on a large scale.