Public utilities the American way

CALIFORNIA — We started living in the United States by settling in what I can only describe as a communal cluster (I’m not sure about the word combination). Naturally, it was private property consisting of 12 three-story buildings, each with two doorways, totaling some 300 two- and single-room apartments, each facing outside the cluster, with all modern amenities, including a swimming pool, a sports complex, a centralized laundry, a large parking lot, and ornamental greenery that looks like a huge orchard. The whole area was kept tidy, with all repairs and other jobs (including gas, water, electricity, Internet) done by firms selected by open tenders. Imagine: just four people at the office — the manager and three staff members — taking care of twelve apartment buildings. The manager’s computer registered every building’s consumption of electricity, gas, water, central heating, using special technical/commercial software, so that any failure, anywhere, immediately sent the red lights flashing and repair would made as soon as possible (I might as well point out that, according to 2007 statistics, the average electricity losses in the States constitute 6.5 percent; those in water management, 8 percent). Also, the 300 apartments produced heaps of garbage every week (waste disposal is subject to strict legal control, so garbage is carefully sorted out and placed in separate containers, with the waste-treatment proceeds being sent to the public utility’s bank account).

Above all, the US public utilities never buy central heating. They prefer to use their own capacities supplying central heating and hot water because using someone else’s services is too expensive. Each apartment building has a boiler (in the basement or on top of the roof). There are several central heating options:

* each apartment is complete with a compact gas- or electricity-operated fan heater (another option being an air-conditioning unit placed in the basement or on the roof, with tubes leading to every apartment);

* heating wire within the walls and/or floor/ceiling, which means electricity, so there is no gas;

* a compact gas boiler (not popular, because no one wants to bother about the pipelines and additional gas bills), but where and when, this is a compact combined-cycle plant operating on what is known as a cogeneration basis and with an efficiency rate twice that of the conventional boiler; add here solar panels on the roofs, especially in the southern states;

* heat pumps, popular in the northern states (each such system keeps your apartment warm while keeping the ground or pool cool); hundreds of thousands of such pumps in America, unlike Ukraine.

These public utilities aren’t too expensive: 1 kW costs between 10 and 15 cents, depending on the state; 1 cubic meter of water, between 35 and 55 cents (considering that 70 percent of water is consumed by agribusiness, 25 percent by the industries, and a mere 5 percent by the populated areas); 1,000 cubic meters of gas costs between 150 and 200 dollars (compared to 1 dollar per liter of gasoline). And there are no set central heating and hot water costs because every public utility establishes them proceeding from the circumstances. Rent is high. In Palo Alto, where my family lives, a two-room apartment (50-55 square meters floor space; 2.5 meter ceiling; combined toilet-bathroom, with a bar-stand separating the kitchen from the guestroom) costs 1,000-1,200 dollars a month.

US public utilities, like all the industries, are innovation-minded: Bloom Energy has started selling compact Bloom Box solid oxide fuel cells, with kW cost down eightfold, so that each such power plant can supply electricity, heating, air conditioning to a hundred private homes or to a medium-size office building.

Advantages of such public utilities:

1. These are big businesses that can afford research managers (not when your business involves 30 apartments, when your tenants won’t let any such manager cross their threshold, with a dozen firms going through the motions of taking care of their gas, electricity, and central heating);

2. Here you can do without using expensive central heating and hot water supplies by installing a heat pump in your basement (the condos in Ukraine will remain in the red by paying for such centralized supplies, spending central budget subsidies, if and when, on obsolete centralized supplies rather than upgrading the post-Soviet OSBD housing associations);

3. US utilities spell lots of money (what with real estate), so here one can get a long-term bank loan at a comparatively low interest;

4. US utilities spell lots of heating, gas, electricity, and wastes: vast room for energy saving, unlike the OSBD with its obsolete technologies;

5. Sorting out of household waste, making it a profitable business;

6. An opportunity to organize recreational areas for the inhabitants of each such “communal cluster.”

In Ukraine, such “communal clusters” could be made using OSBD housing associations with district/raion boilers servicing 20-40 apartment houses, keeping the apartments warm and supplied with hot water, along with the municipal amenities. These “communal clusters” in lieu of the accursed ZhKG Soviet housing, heating, electricity, and water-management authorities, will emerge as a healthy market competitor prepared to provide professional services at lower costs.

Finally, I can only wish Ukraine good luck, considering that reforms go wrong because the wrong kind of people are in power.

n COMMENTARIES

Olena RYBAK, director, Europe-Ukraine Energy Agency:

“Ukraine’s DH companies are often prepared and willing to pay 100,000 hryvnias for a boiler that will recoup its cost in four to five years and will save 5-10 percent energy, instead of upgrading the whole system. This is like patching up holes. If you want to have a modern housing project, you have to start by winterizing it, making it complete with modern insulated tubing and boiler. Such a project, involving 30 homes and two kilometers of pipelines, will cost between two and three million euros. It will recoup its cost in about three years, with the energy-saving ratio reaching 50 percent. The initial investment is large, but it is economically substantiated. Each such project must be long-range and energy-saving. Ukraine needs an effective energy market, with a 50 percent energy-saving ratio. This means winterization and individual heating facilities that will save between 15 and 25 percent energy costs. Also, an upgrading of the tubing, replacing the old 4-pipe by the modern 2-pipe pattern, saving 10-15 percent of energy. And, of course, the right kind of boiler that will save 5-10 percent of your gas/electricity bills. The customer should come first, of course. People must know what they’re paying for. Too bad, a great many projects are now on a supply-driven- rather than demand-driven-development-oriented. This mentality of the technology suppliers must be upgraded. The amendments to the Budget Code of Ukraine (ratified in August 2011) allow the municipal authorities to receive loans from international financial organizations, yet it is necessary to reduce the risks of change in government to a minimum to carry out such projects on a systemic basis. There are also risks involved in the preparation of such projects in accordance with the European standard. Debts and the absence of credit/loan history are the biggest obstacles in receiving such loans, particularly if and when a town or oblast cannot act as a guarantor. There are alternatives: concessions or energy supplies, with the inland foreign investor making a contract with a DH company or a housing association. It is necessary to make every such transaction transparent, especially in terms of such contracts made between Ukraine and other countries. Ukraine must have a transparent energy market, with equal conditions for every operator, so as to have an attractive international image.”

Andrii MITSKAN, deputy coordinator, USAID Municipal Heating Reform Project:

“The American experience of public utilities, particularly in terms of municipal heating, is contrary to what we have in Ukraine, considering that we have central heating only in several cities (owing to historical circumstances). Our report makes it perfectly clear how this municipal heating system should be created and function in Ukraine. Among other things, the Ukrainian public utilities should pay special attention to legislation, specifically the clauses dealing with the organization, making it clear who is responsible and for what in providing municipal heating; what central/local budget appropriations are to be expected; what municipal heating costs are to be firmly established by local and/or central authorities. These costs must reflect the actual energy costs sustained by these authorities and the amount of energy actually consumed. The Ukrainian public utilities must resolve the issue of municipal and/or local heating, so as to save as much energy as is absolutely possible, and to use alternative energy sources (bioenergy and renewable sources). Condos make up the basis of the American and European energy-saving policy (they have tough laws concerning winterization and loss of heat). Sharing this experience in Ukraine will make a lot of people happier, even with the existing gas prices.”

Ivan NADIEIN, chairman, Ukrainian Energy Independence Committee:

“Ukraine ranks with the world’s biggest energy consumers. Our public utilities are among the most energy-consuming ones. Ukraine consumes four times the amount of natural gas consumed by Poland (14 billion cubic meters in Poland and some 60 billion in Ukraine). This amount of natural gas indicates Ukraine’s energy-saving potential. Our estimates show that a public utility reform in Ukraine would take a sum equal to two yearly central budgets. Needless to say, the Ukrainian government can’t afford this. Foreign inland investment is the only option — provided the government legally secures each such investment, but the current situation is the exact opposite.

Ukraine’s public utilities rank with this country’s largest businesses, employing 10 percent of the able-bodied populace, making up almost 30 percent of the Ukrainian economy. And the losses are mind-boggling: 22 percent in terms of municipal heating; 24 percent going up in the atmosphere while being transported; another 26 percent lost by the end user. All this being due to our poor roofing, unwinterized windows, walls, and doors. Without solving this problem, Ukraine’s energy sovereignty is threatened; the gaps in the public utilities keep being patched up by the central/local budget, but this process won’t last long. Last but not least, I would like to point out the lack of energy culture in Ukraine. The European energy crisis in the 1970s taught the Europeans to be energy-saving, so much so it has become part of their mentality. In Ukraine you won’t be likely to find anyone who knows how much it costs to take a shower. A European will tell you that it costs 10 euros. Of course, this costs five, maybe ten times less in Ukraine. There is also the exchange rate to consider. Still, the Ukrainian in the street appears unaware of the energy-saving policy.”