Reforming the Ukrainian District Heating Sector

New IKI project ReWarm launched in April 2023

District heating systems have gained significant attention and can be a sustainable solution for meeting a country's energy needs while simultaneously promoting energy efficiency and economic growth. As Ukraine strives to reduce its dependence on fossil fuels and enhance its energy security – especially in these times of war – district heating can emerge as a reliable and environmentally friendly option. District heating is a centralised system that supplies heat to multiple buildings or residential areas from a central heat source.

Typically, heat is generated in large-scale combined heat and power plants (CHP) or dedicated heat plants using various energy sources such as natural gas, biomass, or geothermal energy. The generated heat is then distributed to individual consumers, (including residential, commercial, and industrial buildings) through a network of insulated pipes.

Heating infrastructure requires modernisation

In Ukraine, the district heating (DH) supply is already an important pillar of the basic supply for private households, municipalities and industry. District heating has a long history in Ukraine, dating back to the Soviet era. However, the country's district heating infrastructure requires modernisation and optimisation to meet current energy and environmental challenges. Today, 254 DH-companies supply a total of 26 million people. Gas is used almost exclusively as the primary energy source for heat generation. In 2018, the DH sector, with 5.9 billion cubic meters, accounted for around 18% of Ukraine's total gas consumption. So it is clear that district heating is an important pillar of the basic energy supply in Ukraine. However, the long-distance heating infrastructure in Ukraine has been severely damaged by the Russian Federation's aggressive war on Ukraine and the existing, often out-dated infrastructure generates high CO₂ emissions. With around 11.8 million tons of CO₂ emissions from gas combustion, the district heating sector is one of the major causes of climate-damaging greenhouse gas emissions in the country. 

IKI project "ReWarm" addresses the challenges

Starting from April 2023, the German Federal Ministry for Economic Affairs and Climate Action (BMWK) commissioned the new IKI project “Reform of the Ukrainian District Heating Sector (ReWarm)” to tackle these challenges. It aims to provide significant support for the reconstruction of DH infrastructures destroyed by acts of war and set an important impetus for the reform of the Ukrainian DH sector. The project will support the development of a national DH strategy and the adjustment of the legal framework as well as the pilot implementation of adapted business models for municipal DH companies, including cost-covering, socially cushioned DH tariffs. 

The results of the project will lead to positive economic effects for the Ukrainian DH companies and for the municipalities, which previously had to cover the deficits of their uneconomical operation of the local DH-systems from tight budgets. The self-interest of the municipal decision-makers in the in using and continuing to develop the project results beyond the financing period is therefore very high.

Ultimately, the comprehensive modernisation of the municipal DH infrastructure has the potential to halve the energy losses from heat generation and distribution by 2035 and mitigate the harm caused by the aggressive war on Ukraine. This will not only lead to a reduction in CO₂ emissions of at least 2.8 million tonnes per year, but will additionally support millions of households with energy-efficient and stable heating as well aligning Ukraine’s energy supply with EU standards.

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