How The Energy System Is Structured
Ukraine is the fourth largest coal producer in Europe (after Russia, Germany, and Poland), contributing 4% of global output; until now, however, all the fuel consumed in the Ukrainian power industry has come from domestic production. As a result of the conflict in the Donbas, Ukraine will be forced to import large quantities of coal, especially the high-grade coal consumed in thermal power plants.
Due to the growing coal deficit, Ukraine has increased electricity production in its nuclear power plants to the maximum possible, significantly reduced energy exports, and significantly reduced supplies to Crimea. However, these measures cannot compensate for the declining energy production in heating plants. Therefore, as there is no chance that supplies from mines in the Donbas will be resumed in the following months, the deficit in the Ukrainian coal power plants will be a minimum of 4 million tons by the end of this year and about 2.8 million tons per month in 2015.
Ukraine is currently in a renewable energy crisis, with the country’s energy sector dominated by large, mostly state-owned, non-renewable power producing companies. Currently only 13 of the 51 generators of electricity produce solar, hydro, or any other type of “green” energy, forming about 9% of Ukraine’s total power production. Unfortunately, the political crisis of the past couple of years had lead to a decrease in clean energy investments.
Currently, the government is heavily investing in “green” energy in order to both decrease the amount of greenhouse gases in the environment and Ukraine’s need for Russian gas imports. In addition to feed-in- tariffs, the Ukrainian government also offers clean energy investors VAT exemptions and import duties that expire in 2019. All these measures are meant to increase the share of renewable energy to 11% of the total energy balance by 2020.
Unlike non-renewable power, the “green” energy market is largely dominated by local producers with separate rates for companies and households. The price also depends on the type of clean energy produced. For example, the rate for solar energy (the most popular renewable energy option in Ukraine) is 0.16€ KWh for business consumers.
The solar energy sector especially is struggling to recover its pre-2014 rates of energy production. The political crisis resulted in the feed-in-tariff being reduced by almost eight times and also lead to the abandonment of many of the country’s solar energy projects. One of the companies that went out of business was Active Solar — the biggest producer of solar energy in Ukraine, which filed for insolvency after Crimea, when several of its massive power plants were annexed by Russia in 2014. The government has implemented numerous measures such as feed-in premium rules for domestic producers and FIT compensation rules that are designed to fight this ongoing decrease in renewable power production rates, but none of the recent clean energy projects are comparable in scope to Active Solar’s over-100-MW-large solar farms.
The political crisis has also influenced the country’s coal production companies. Most of the Ukraine’s coal resources are located in the Donbass region, where all the energy production was halted due to the destruction of transport links during the conflict.
Political turmoil is definitely of the main reasons why non-renewable energy imports play a very important part in the Ukraine’s power sector. Ironically, most of the energy imports come from Russia. Natural gas imports from Russia contribute about 57.2% of all energy imports to Ukraine. Nuclear fuel is also mostly imported. About 92% of these imports also used to come from Russia, but since 2015, over 30% of nuclear energy is imported from Westinghouse.
In 2016, Ukraine decreased the amount of natural gas imports by 2.4 times to 2.892 billion cubic meters. Nuclear power production, on the other hand, seems to be steadily rising. In 2015 alone, the share of thermal energy in Ukraine’s total power production fell from 41% to 35%, whereas nuclear energy share increased from 49% to 56%.
Profiles of Leading Energy Companies
Ukrenergo: Most of the domestic thermal energy is produced by the state-owned company Ukrenergo, which since May 1, 2016, offers the same rate for business and private consumers — UAH 6,879 ($272.7) per 1,000 cubic meters of natural gas.
Ukrenergo also has a number of environmental projects underway that are meant to reduce the amount of greenhouse emissions in the environment. Most of them are implemented in order to reduce Ukraine’s energy intensity. The project aims to increase the efficiency of energy production and thus decrease the amount of greenhouse gases produced by replacing high-voltage equipment, upgrading existing transmission lines (so that less energy would be lost during transport) and improving the infrastructure for implementing energy regulations across the country.
These measures seem to be successful, as thermal energy production fell by 20% this year. However, there is still much to be done in order to decrease Ukraine’s dependence on non-renewable energy sources.
Energoatom: All four nuclear power generators in Ukraine also belong to a state-owned company, Energoatom, which since March 2016 has had all its assets and bank accounts frozen by the Ukrainian courts over allegedly unpaid debts. The timing is very unfortunate as in 2011 the company began a project with a target completion date of 2017 that was supposed to bring Ukrainian nuclear power production into line with international standards.
Submitted by Climate Scorecard Country Manager Diana Sentjurova