The Energy Strategy of Ukraine: Advantages, Disadvantages, and Risks
Experts: the lack of a succession mechanism and the low quality of state control are the main risks in the implementation of the energy strategy.
Experts: the lack of a succession mechanism and the low quality of state control are the main risks in the implementation of the energy strategy.
On August 18, 2017, the Cabinet of Ministers approved the Energy Strategy of Ukraine through 2035: "Safety, Energy Efficiency, and Competitiveness" (NES).
The document defines the goals, tasks, and mechanisms for bringing the country's fuel and energy sector to a qualitatively new level of development.
The most important ones are diversification of resource and technology supplies; energy efficiency improvement; renewable energy development; implementation of a new model for coal industry operations; integration of the energy markets of Ukraine and the EU; and, finally, ensuring the reliable operation of the energy sector.
The fulfillment of the tasks set out in the Strategy is expected to reduce GDP energy intensity in Ukraine by more than half.
The NES will be implemented in three stages.
Stage 1 – reform of the energy sector (until 2020). The implementation of the Third Energy Package is to be completed within the established timeframe. Also planned for this stage is the completion of the institutional integration of Ukraine into the ENTSO-G and the performance of most of the measures aimed at integrating the Ukrainian Common Electric System into the ENTSO-Е.
The Strategy envisages the establishment of the coal market in this period. At the first stage, RES' share in end electricity consumption is expected to rise to 11%.
Stage 2 – optimization and innovative development of energy infrastructure (until 2025). One of the goals of this stage is to integrate the Common Electric System into the ENTSO-Е's continental European zone in operational mode and to fully integrate the Ukrainian GTS into the European gas transportation system the ENTSO-G. In the gas sector, coverage of internal needs for natural gas with internal resources is expected at this stage.
Stage 3 – Ensuring sustainable development (until 2035). This stage is aimed at the innovative development of the energy sector and the construction of new generation facilities. During this term, the coal sector is supposed to achieve competitive and transparent operating conditions.
What does the fact of the development and adoption of the Energy Strategy mean for the industry? What are the advantages and disadvantages of the document? What are the main risks for the government as the country moves toward achieving the goals set out in the Energy Strategy? Energoreforma asked industry experts these questions.
Gennady Ryabtsev, director for special projects of the research and development center Psyche
Advantage of the document – the priorities of the state energy policy are defined. Later on, they may be changed or adjusted, but for nor, they are defined in the NES. The goal tree is built on the basis of these priorities. So our general direction is defined, as well as what needs to be done to achieve these goals.
Also, in the approved document, for the first time, goals are set not for the industry, but for the government. The present Energy Strategy is a state document, not a document developed by industry representatives for the industry.
Also for the first time, policy goals in the Energy Strategy are not separated from its tasks and make up a "goal tree," however imperfect. And again for the first time, the target condition of the fuel and energy sector is defined using comprehensive indicators, not a set of performance indicators that aren't achievable with the available resources. The document's advantages include the fact that the Strategy offers mechanisms for implementing the planned changes rather than a random set of special-interest suggestions.
The last strategy was developed in 2001 and approved in 2006. In the early 2000s, mass privatization of energy facilities took place. Back then, the strategy focused on industry management, so the objectives set out in the document were unachievable. If energy facilities are privatized, you have to think about industry regulation, not management. The changes that took place in 2014 made it possible to make a new demand of the industry. This new demand is reflected in the NES.
Right now, the challenge for the energy community is to formulate precise tasks for the authorities, the fulfillment of which will enable the achievement of the strategic goals. It is important that this document obtain certain tangible and measurable parameters. All this will be set out in the road map of the reforms.
Yuriy Sakva, deputy chairman of the All-Ukrainian Energy Assembly
The main risk for the strategy in Ukraine is always the same: the extremely low quality of state governance. The current Energy Strategy was adopted by the Cabinet of Ministers, and this means that it can be canceled by the next Cabinet of Ministers. Tomorrow, the government may change, and the adopted NES will go straight into the bin. A strategy succession mechanism is lacking. In my view, it is necessary to legislatively bind the NES to documents that have long-term status – laws. The sole legislative authority in the country is the Verkhovna Rada. I support the idea of having the Energy Strategy approved by the supreme legislative authority of the country. If the document is approved by deputies, its status will change.
Alexander Selischev, DTEK's director of strategy and business development
The adoption of the new Energy Strategy was undeniable a positive step. This is a declaration of the state's intention to develop the energy sector in a systematic manner, taking global and domestic trends into account.
Thanks to the fact that all stakeholders were involved in the development of the document, it is rather well balanced and feasible. For one thing, there is a clear focus on active renewable energy development, the share of which increase dramatically – up to 25%.
For another, there is a clear understanding that in the long run, traditional energy sources will retain an important position in the energy balance. Thus, it is no less important to fully provide ourselves with Ukrainian gas and coal, to create opportunities for the modernization and construction of thermal and nuclear generation units.
And third, great vast attention is being paid to energy efficiency.
Now, the task for the state is to find tools to enable movement in the direction that's been identified. For renewable energy development, it's important to ensure the stability of the regulatory framework and tariff policy. For gas – to get undistributed plots offered at transparent auctions. As for the power sector, there need to be incentives to upgrade equipment and improve the efficiency and environmental friendliness of generation units.
We've seen many good plans go unimplemented before now. This risk is still with us. To prevent this, continuous monitoring by the relevant ministry and the national government is necessary.
Vadim Rasovsky, Ukrhydroenergo's head engineer
There are no significant changes from the previous Energy Strategy in terms of hydro energy. The construction of new facilities and the upgrading or renovation of existing ones through 2035 is proposed. Among the new facilities: the construction of the Kanevskaya PSPP, the completion of the Dnistrovskaya and Tashlykskaya PSPPs, and the erection of the Kakhovskaya HPP-2. Furthermore, the Strategy envisages a feasibility study on the construction of the Verkhnednistrovsky Cascade.
The construction of these facilities will improve the country's energy security and promote its energy independence and overall development.
The part of the strategy pertaining to hydro energy must be implemented in order for us to join Europe's unified energy system. The Energy Strategy includes the goal of raising regulating facilities to 15% of the overall energy balance of the Ukrainian energy system, which is double the present level. At present, the specific gravity of nuclear energy in total production is increasing due to reduced TPP output, so the need for balancing facilities is growing.
Ludvig Litvinsky, director of the State Scientific and Engineering Center for Control and Emergency Systems (GNITs SKAR)
More than the previous Energy Strategy, the current one takes into account the significant changes that have taken place in the country's economy and the energy sector. I don't think the previous strategy was good and I wouldn't say that the current one is perfect.
As with previous strategic documents, the present Energy Strategy will hardly be fully implemented. In particular, if the stipulated amount of construction of renewable energy facilities really takes place, then under the current green tariffs, this will only harm the economy. The positive side to this is that in terms of nuclear energy, the Energy Strategy provides for the construction of two units of the Khmelnitsky NPP.