Vector Value Calculation: Ukraine energy consumption per $GDP was 67.97 in 1990 and 97.95 in 1995. Vector Value: 1990 = (67.97-1.06)/9.58 = 6.98 1995 = (97.95-1.06)/9.58 = 10.12 Ukraine is highly inefficient country in terms of energy use. The situation dates back to Soviet time. Planning economy of the USSR implied progress to be expressed in the number of products produced no matter what quality it is and whether it is needed. On another hand, there was no economic incentive to reduce production costs, use of raw materials and energy.
In nineties, production in Ukraine was falling down sharply. Energy use however did not go down as fast. In 1990 - 1995 GDP has reduced by 55%, final energy use dropped by 42% from 184 m toe in 1990 to 106 m toe in 1995. Thus energy intensity increased dramatically. The main reasons identified are: (i) the economic structure, with its emphasis on energy-intensive heavy industry; (ii) use of older, inefficient technologies given low historic energy prices; (iii) the use of electricity in industry which is high compared with the OECD; (iv) poor insulation standards in most buildings; (v) low appliance efficiencies; and (vi) energy management practices, metering and recording systems which are non-existent or poor. Other than low energy prices until recently, perhaps the major reason for the higher energy intensity is the capital stock created under the era of central planning. The industrial capital stock was geared heavily to the production of heavy industrial outputs such as steel and basic chemicals, and military hardware. Both its structure, and the technology embodied within it, reflected then-contemporary prices, costs and investment criteria which were very different from those of the OECD economies. Another explanation for increasing energy use per GDP is under-recording. A lot of business in Ukraine is not done officially to avoid taxes. Such activities are not reflected by GDP, while still consume energy accounted. If GDP data are corrected to reflect under-recording (perhaps of some 30-50 per cent), the energy intensity of the economy is lower, but still very much higher than in the OECD countries. Ukrainian government has declared the improvement
of Energy Efficiency to be a priority of the energy sector development.
However, the energy saving program is hardly implemented. Instead, the
President of Ukraine is pushing forward completion of the nuclear reactors.
Completion of the new facilities looks ungrounded in a view of unused installed
capacities.
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