Ukraine adopts new energy efficiency legislation


On 13 November 2021, Law of Ukraine "On Energy Efficiency" No. 1818-IX came into force(“Law”). The Law sets a legal framework for implementing state energy efficiency policies according to European practices. The Law implements Directive 2012/27/EC on energy efficiency, Directive 2009/125/EC establishing a framework for the setting of ecodesign requirements for energy-related products, and Regulation (EU) 2017/1369 setting a framework for energy labelling.

The Law calls for the creation of a National Action Plan on Energy Efficiency (in fact, Ukraine has the approved National Action Plan on Energy Efficiency until 2020 and the draft National Action Plan on Energy Efficiency until 2030) (National Plan), which will set Ukraine's main energy efficiency goals. To enable achievement of these goals, the Law also calls for:

  • the basics for establishing energy management and energy audits;
  • requirements to purchase energy-efficient equipment and premises;
  • implementation of smart metering systems and smart grids;
  • liability for violation of legislation in the field of energy efficiency.

The following summary provides details on these requirements.

Energy efficiency plan

Energy efficiency plans will be adopted both at the national and local levels. Such systematic approach should allow to reduce energy costs and consolidate energy-saving measures.

The National Plan will contain:

  • measures to achieve the national goal of energy efficiency;
  • sources and amounts of funding;
  • the estimated amount of energy savings;
  • methodological approaches to the calculation of the achieved amount of energy savings;
  • other information required by EU legislation and Energy Community decisions.

The Cabinet of Ministers of Ukraine will revise and approve the National Plan every three years and submits it to the Energy Community's Secretariat.

The plans with the same scope will be approved in local communities. The goals and measures of these plans must be consistent with the national energy efficiency goal and the National Plan.

To ensure a sustainable rise in energy efficiency, a target indicator for the annual reduction of energy consumption will be established. The indicator is calculated by the State Agency for Energy Efficiency and Energy Saving and approved by the Cabinet of Ministers.

Achieving this target will be ensured by various organisational, economic and legal measures, including:

  • the development and implementation of state target programmes;
  • the adoption of standards, norms and rules for improving the energy efficiency of goods and services, the requirements of which exceed the requirements of European standards or norms and rules, which are mandatory in accordance with the requirements of EU legislation and the decisions of the Energy Community;
  • the introduction of requirements for energy labelling and ecodesign of energy consumer products, for which no requirements have been established in accordance with the norms set down by EU legislation and Energy Community decisions;
  • other measures resulting in annual reductions in energy consumption.

Energy management systems

Under the Law, an energy management system, defining energy policy and goals, energy objectives, action plans and processes to achieve goals and energy objectives, will be introduced.

Public authorities, enterprises, institutions, and organisations belonging to the sphere of their management shall implement and ensure the functioning of energy management systems in accordance with the procedure approved by the Cabinet of Ministers of Ukraine. Local authorities shall implement energy management systems taking into account the model regulations which will be approved by the Cabinet of Ministers of Ukraine.

These energy management systems can be certified on a voluntary basis. However, in the case of granting state aid for energy efficiency measures, the mandatory existence of a certified energy management system can be specified as one of the conditions of state aid.

The register of companies that receive certificates of energy management systems is published on the website of the State Agency for Energy Efficiency and Energy Saving.

Purchase of energy-efficient equipment and premises at the expanse of budget funds

With only a few exceptions, when public procurement of energy consumption equipment in the amount which equal to or more than UAH 200,000.00 (approximately EUR 6,250) the Law obliges state and local authorities to purchase only energy-efficient equipment that is within the energy efficiency class or energy performance indicators of such goods determined by the Cabinet of Ministers of Ukraine.

The same rule applies to acquisition or lease of buildings by public authorities and local authorities. This approach is expected to reduce the cost of the state budget for the maintenance of buildings. Therefore, the subject of the purchase or lease can only be buildings whose energy efficiency is not lower than the minimum requirements (the Law does not detail such requirements; however, we believe that at least the order of the Ministry for Communities and Territories Development of Ukraine On approval of the Minimum requirements for energy efficiency of buildings No. 260 dated 27 October 20220 should apply), with the following exceptions:

  • purchase of buildings for reconstruction or demolition;
  • purchase of buildings for further sale;
  • purchase and lease of buildings that are objects of cultural heritage;
  • economic and technical inexpediency of its application at the time of purchase or conclusion of lease of buildings.

Energy audits

The Law introduces internal energy audits, which must be conducted by independent experts. In addition, the Law provides the basis for the functioning of market of energy audit specialists and sets the criteria for these specialists while the State Agency for Energy Efficiency and Energy Saving maintains and publishes a database of energy auditors and extracts from the energy audit report on its official website.

Any public or private large companies (companies with an average number of employees exceeding 250 people and annual income exceeding EUR 50 million) are obliged to conduct an energy audit every four years. In contrast, the first energy audit should be conducted within three years from the date of entry into force of the Law.

Large companies are exempted from the obligation to conduct energy audits if they implement an energy management system that is duly certified.

Energy companies to assess their energy efficiency

Gas and electricity transmission system operators and distribution system operators must assess the energy efficiency potential of the gas transmission system, electricity transmission system, gas distribution system, and electricity distribution system in Ukraine every five years by 1 March of the fifth year.
In particular, such an assessment will cover energy efficiency indicators for electricity transmission and distribution, natural gas transportation and distribution (in particular, energy losses and costs in networks), load management and interoperability, access to networks for electricity consumers, including the number of energy cooperatives, private households, and plants producing electricity from renewable (i.e. alternative) energy sources.

Smart metering systems and smart grids

The Law introduces concepts of smart meters and smart grids.
A smart metering system is defined as an automated system that integrates intelligent metres and provides for the reception, processing and transmission of measured information and other data through communication channels for the purposes of commercial settlements, monitoring and control. Smart metres, in turn, are defined as multifunctional metres providing measurement and exchange of measured information with an intelligent accounting system through a communication channel.

To facilitate introduction of smart metering, the Law requires transmission system operators, distribution system operators to take measures to install intelligent accounting systems.

Under the Law, smart grids are electrical grids that unite electricity market participants and increase the reliability of electricity supplies and systems vis-à-vis energy transmission and consumption. The implementation of smart grids is carried out under the Concept of implementation of smart grids in Ukraine. The Cabinet of Ministers of Ukraine must approve the Medium-term action plan for the implementation of "smart grids" within 18 months from the date of entry into force of the Law, hence, by 13 May 2023.

Penalties for non-compliance

The Draft Law empowers the NEURC to impose fines on entities, which are obliged to achieve the target indicator of annual reduction of energy consumption following fines:

  • for non-compliance with the target of annual reduction of energy consumption below 50% of the established indicator – UAH 510,000;
  • for non-compliance with the target of annual reduction of energy consumption of 50% or over of the established indicator – UAH 1.02 million.

For more information on the developments in the Ukrainian energy sector, contact your regular CMS advisor or local CMS experts: Vitaliy Radchenko, Maria Orlyk.

Legislation: Law No. 1818-IX dated 21 October 2021 "On Energy Efficiency" (in Ukrainian).