Ukrainian energy officials are nurturing plans to integrate Ukraine’s combined power grid into the European energy system. However, there are several significant factors that can hinder the unification process.
The Ukrainian electric power sector is facing radical changes that will affect almost everyone: both producers of electricity, and its suppliers, and, of course, consumers – both industrial and private. And for the latter, traditionally, the main result will be an increase in the figures in payments.
Why is Ukraine forced to import electricity from Russia and Belarus and what are the volumes
It is about the prospect of disconnecting the Ukrainian energy system from the Russian and Belarusian networks and integrating it into the European “grid”. Ukraine’s Minister of Energy Herman Galushchenko announced plans to carry out the resection literally next year, based on the results of negotiations with European colleagues in Brussels last week.
“Technical issues are being resolved now. There is absolute support of Ukraine in the fact that we plan to synchronize with the European power grids and, finally, cut off from the power grids of the Russian Federation and Belarus…. Our plan is for 2023, the official said. – Now we are at the final stage. This year, we plan to go through the so-called isolated mode twice. It should be winter and summer. After that, we are already approaching the question that we are ready, that we have shown the stability of the energy system and its readiness to join the European energy networks.”
According to the minister, Ukraine has already invested more than 600 million euros in the modernization of power grids so that they are suitable for synchronous operation with Europe. Moreover, Galushchenko even expresses restrained optimism that joining the European ENTSO-E can happen even earlier – they say, we are preparing for 2023, but “there are other ambitious thoughts.”
Currently, let’s remind, the unified power grid is integrated into the network created under the Soviet Union and is synchronized with the networks of neighboring Russia and Belarus. This allows networks to carry out mutual flow and opens up opportunities for prompt import of electricity into Ukraine.
The events of recent years have shown that such imports are necessary during certain peak periods of consumption, because own generation cannot satisfy all consumers at such times. Now, after the refusal of the Russian Federation to supply electricity to Ukraine, imports from Belarus help out, which, albeit with a creaking noise, provides a certain amount of electricity.
The structure of export-import e/e according to the results of last year is as follows. The total import, according to NEC “Ukrenergo”, amounted to 1.69 billion kWh. This is 1.1% of total energy consumption. The largest supplier was Belarus, which received 1.18 billion kWh, or 69.5% of all imports. The second largest importer is Slovakia with 308 million kWh (18.2%). For a short period, Ukraine also received energy from Russia – about 100 million kWh, which was about 6% of total imports.
Ukraine “absorbed” almost a third of all imports in February 2021.
At the same time, Ukraine exports part of the produced energy. And the flagship of exports here is the so-called “Island of Burshtynska TPP”, which consists of Burshtynska TPP, Kaluska CHPP and Tereblya-Rikska HPP. The island is located within Ivano-Frankivsk, Lviv and Transcarpathian regions and is part of Rinat Akhmetov’s energy empire. Due to the fact that this “island” is disconnected from the general Ukrainian system, but integrated into the European ENTSO-E, it can sell excess energy to Europe. What is actively used by its owner. So, last year, 3.49 billion kWh went to Slovakia, Romania and Hungary from Burshtynskyi Island.
From the “mainland” energy system connected to the Russian Federation and Belarus, exports were made only to Moldova.
Is it really possible to join Europe?
Ukraine’s desire to cut itself off from its “brotherly” countries is due to a completely rational desire to take away from the Russians an electric lever that the aggressor country uses for blackmail and twisting its arms. But not only Russia’s opposition is the reason why disconnection from the Soviet network and joining the European network has not yet taken place. The obstacle, to a large extent, is the technical inconsistency of our capacities. This requires large capital investments in adapting the system. Some of these measures have already been implemented, but a large amount of work and costs still need to be implemented
The ability of the Ukrainian system to work in full autonomy at peak times is also a requirement of the European energy circle. That is, a kind of stress test, when the energy system must demonstrate that it is able to produce and deliver energy to all consumers for a long time – without resorting to the involvement of imports and without applying such minimization measures as fan shutdowns or other methods of limiting consumption. And here there are many skeptics who point to the critical points of the Ukrainian system. In particular, the situation with coal supplies, where we are partially dependent on imports. This winter has shown that the sudden interruption of the supply of anthracite for heat generation (which, let us remind you, produces more than a third of Ukrainian electricity, and also plays a major role in capacity maneuvering at peak times), creates a deficit at TPPs and CHPs and forces partial shutdown of power units.
It is because of this that we have the number of power outages that Ukrainian cities are experiencing this winter. And although the authorities avoid calling them “fans”, they are actually aimed precisely at balancing generation and consumption during peak periods. The Ukrainian system operates in the mode of emergency search for coal, which they are trying to extract at a faster rate in Ukrainian mines by importing it from America, Africa and anywhere else. Therefore, the doubt that, for example, in January-February, Ukraine will be able to successfully pass the test “isolated mode”, which can last up to 5 days, is fully justified. Especially if it falls on a period of frost, which naturally causes increased consumption.
However, Minister Galushchenko insists that this is quite real and there will be enough coal. Answering a clarifying question from journalists, he emphasized that there is currently enough coal in Ukraine to undergo inspection by such “isolated regimes”, which, as a rule, last up to 5 days.
“We counted with a margin. The maximum reserves needed in warehouses for this period are about one million tons of coal. Today, we have about 800,000 (tons) in warehouses, and another 220 in the port, already unloaded coal in Ukraine. That is, everything will be fine with coal. Moreover, there will be a safety margin for April and May. We see how rhythmically the supply is taking place, we control the volumes and contracts,” said the Minister of Energy.
An additional burden may be the fact that during the current heating season there is an obvious tendency to increase the consumption of electricity instead of gas. If compared with the last heating season, consumption increased by about 6%. And this puts even more demands on stability for the power system.
New economic and energy reality
Experts do not share the optimism of energy officials regarding the successful disconnection of the unified system due to economic and social factors. After all, joining the European network will have quite tangible consequences.
Andrian Prokip, an expert of the Ukrainian Future Institute, believes that in case of accession, Ukrainian electricity producers will have to work in a slightly different model of pricing and competition and depend on European electricity price fluctuations. “During the pandemic, for example, prices there were lower than in Ukraine. Now, in the period of price shocks, they are higher. This will reduce Ukraine’s dependence on Russia, which, of course, does not want us to disconnect in order not to lose the possibility of political pressure,” the expert notes.
Also, unification with the Eurosystem will result in changes to the market structure. After all, it is now secured by several players: first of all, “Energoatom” and the structures of DTEK. And in the case when we enter the European market, the share of our companies becomes very small in the overall balance. And we are opening up to neighboring countries.
“Also in this context, it is necessary to understand the peculiarities of the market of these countries. If we are talking about Poland, 80% of the generation there is coal. Of course, it has good indicators, since these are new and effective blocks. And the cost of electricity production there can be lower than in Ukraine. But the lowest cost of electricity in the countries surrounding us is in Slovakia. This means that we will not become an export leader and a powerful player on the European market. But we will not become import-dependent. We will have flows: in some hours we will import, in others we will export”, Andrian Prokip notes.
Finally, the need for exclusively market pricing will become a significant factor. After all, such a practice is unacceptable for European countries, when the price for the population is understated due to state regulation. And for Ukraine, buying the loyalty of the electorate by the government through the establishment of preferential prices is a traditional “chip”. And to refuse it means to condemn yourself to rating losses. Perhaps a change in the paradigm of subsidizing preferential groups of consumers by refusing various kinds would help here PSO and other tariff differentiation mechanisms and the transition to direct subsidies to certain categories of consumers. But this can be quite a painful process for the budget and for a large part of Ukrainians who will not be among the recipients of state aid.
Therefore, there are several obvious obstacles in the process of cutting off the Soviet electric umbilical cord: Russia’s opposition, the technical aspect, possible economic losses for manufacturers and the fear of yet another social tension. Whether Minister Galushchenko’s optimism about 2023 will be realized will depend on how the government copes with these challenges.
