Energy demand until 2010 in Ukraine

The economic development and environmental soundness of Ukraine is hampered and even threatened today by an outdated energy system, which delivers ene rgy to the customers at high (internal and external) costs. Painful changes are necessary to adapt this system to the requirements of a market economy and international competition. Realistic projections of future energy cons umption may help to clarify the amount of necessary changes and counter off icial projections which often belong to the realm of utopia. In this contex t the German Institute for Economic Research (DIW) has been commissioned by the "German Advisory Group on Economic Reform in Ukraine" with an evaluati on of energy projections for Ukraine in 1998. In this article I present an updated version of this study. To get a feeling for the growth potential of energy consumption in Ukraine an international comparison of specific ener gy consumption is made. Some rough scenarios of energy demand in Ukraine un til 2010 are also sketched. In Scenario I assumptions were made concerning GDP growth in each sector, income elasticity of energy consumption, price e lasticity of energy consumption and effects of technical progress. In Scena rio II we assumed the development of specific energy consumption in Eastern Germany may provide a suitable guideline for Ukraine. Each approach is app lied to a case with low and a case with high economic growth. The results o f international comparisons are ambiguous for Ukraine. Energy consumption p er GDP unit is extremely high in Ukraine, even in comparison to Russia and other transition countries. To this result contribute technical inefficienc ies but also structural factors (high share of basic industry) as well as t he persistent economic crisis. Energy consumption per capita in Ukraine is relatively high in relation to GDP per capita. Electricity consumption per capita in contrast nearly corresponds to the low average income in Ukraine. The results of our scenario calculations indicate that - in contrast to of ficial projections - energy consumption in 2010 will probably be lower than in 1995 - even with high economic growth. In view of the slow growth prosp ect of overall energy demand it will not be necessary to expand coal produc tion and electricity generation with nuclear energy in order to reduce ener gy imports. This conclusion would even be strengthened if the government st imulated energy-efficiency improvements by special programmes that are not taken into account in our scenarios. (C) 2000 Elsevier Science Ltd. All rig hts reserved.