Shift from subsidies to investments in due time

The Organisation for Economic Co-operation and Development (OECD) has presented a review of our energy sector and related policy

The Organisation for Economic Co-operation and Development (OECD) has presented a review of our energy sector and related policy
We’re accustomed to the idea of utility bills rising gradually, knowing the goal for the next two and a half years. Meanwhile, organisations are working to use energy more efficiently, to save costs, and there are schemes to continue subsidising vulnerable popular groups. International experts suggest looking at the situation from another angle: this move leads to reduction of cross-subsidisation, fund saving, raising our productivity and our goods’ competitiveness on world markets. Standards of living of our population are supposed to increase.

Rassvet agricultural-industrial farm, in Kirovsk District, monthly generates around Br3bn from electricity sales

The Organisation for Economic Co-operation and Development (OECD) has presented a review of our energy sector and related policy, in line with Greening Economies in the Eastern Neighbourhood (EaP GREEN). The EU supported project involves the UN Economic Commission for Europe, UNEP and UNIDO. A large segment of the review is dedicated to energy subsidies, which rose from $1bn in 2010 to $1.7bn in 2014 (about 2.2 percent of GDP). VAT was lifted from gas, heat and electricity in 2014, resulting in a loss to the Republican budget of $199m.

“Relying on National Statistical Committee of Belarus data, we can assess the real impact of energy subsidy reform for Belarusians. To completely move away from subsidising energy, public tariffs will need to rise 2.5-fold (against 2016). At current price levels and exchange rates, this means a rise from $60 to $150 per capita annually, and from $180 to $450 for a family of three. On average, the monthly payment for a family will total $38. During winter, this may bring a bill for the average family of $57.70 per month: $43 for heating, $7.30 for electricity and $7.40 for natural gas. The move is less painful for gas and electricity,” notes OCED project manager Nelly Petkova.

The Director of the Economy Ministry’s Pricing Policy Department, Igor Fomin, underlines, “We’re now considering introducing a differential system of heating payments.”

Measurements from bio-gas facility

Belarus’ Deputy Economy Minister, Dmitry Krutoy, adds that energy efficiency and renewable power are getting even more important. He tells us, “Our country is already implementing ‘eco’ energy projects, based on renewable energy sources. Over the past four years, work has occurred independently and haphazardly, leading to a surplus of capacity in particular regions. However, over the last two years, legislation in the sphere of green energy has improved considerably, making the work of investors in this area, including those from abroad, more transparent and competitive.”

Elena Rakova, a representative of the EU delegation, notes that around 20m Euros may be donated annually for the development of renewable power. Adding regional projects to this figure, it may reach 30m Euros. Mayors are focusing on initiatives to improve energy efficiency, with more than a dozen cities, including Polotsk, Chausy, Braslav and Novogrudok, receiving 0.5m Euros each for this purpose.

“Money can and should be used not only for modernisation but for feasibility studies of promising projects. A window of opportunity is opening up for us to take part in major Eastern Partnership programmes, where financing begins at 5m Euros,” asserts Ms. Rakova.

By Yelena Dronova
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