The United States Agency for International Development (USAID) hired Tetra Tech to implement its Energy Security Project in Ukraine to transform the sector into a modern, market-oriented sector ready for integration with the European Union. Tetra Tech wanted to hire a consultant to assist the National Energy and Utilities Regulatory Commission (NEURC) to improve the tariff framework for thermal energy generation in Ukraine. Specifically, they wanted to help NEURC revise their current practices for cost allocation between thermal energy generation and power generation in co-generating facilities.
DHInfrastructure analyzed international practice and developed case studies describing cost allocation for all major cost categories (depreciation, maintenance, staffing, administrative, fuel, etc.) in six countries with gas-fueled co-generation and six countries with renewable-fueled co-generation. For gas-fueled co-generation, we also analyzed waste heat recovery practices. For each case study, we also assessed the legal and regulatory framework related to co-generation, including cost allocation, rules, regulations, and formulas. Finally, we developed recommendations for cost allocation for co-generation in Ukraine based on the case studies and the challenges facing Ukraine.