The sad reality is that, in three years, we haven't achieved independence from coal supplies from the ATO zone. Even though we've already paid for energy independence with rising tariffs. So where is the promised independence, and where did the 10 billion hryvnias go? And who will be held accountable?
Over the past year, we've heard many different (often contradictory) positions regarding thermal coal from the President, the Chairman of the National Commission for State Regulation of Energy and Public Utilities (NKREKP) Vovk, and Energy Minister Nasalik. Dmytro Vovk explained the introduction of the Rotterdam+ price in electricity tariffs by the unavailability of coal from the ATO zone and the need for independence from the temporarily uncontrolled territories, Novoye Vremya reports.
However, yesterday, 10 months after the introduction of Rotterdam+ tariffs, which was supposedly supposed to ensure independence from the ATO zone, Prime Minister Volodymyr Groysman stated that there is no alternative to coal supplies from the ORDLO.
Is this really true? No, in my opinion, there is an alternative.
We need about 9 million tons of grade A per year. This can be replaced in the following way.
- Converting the power plants from grade A to grade G coal. The simplest and most appropriate way to do this is at two thermal power plant units. This would eliminate 1 million tons of grade A coal. This would take about six months, and was already promised for 2016. However, there have been no results, and a new promise is for 2017.
- Ukraine has the so-called "Burshtyn Energy Island," which is disconnected from the Ukrainian Unified Energy System (UES) and connected to the European one. It is technically feasible to deploy three units of the Burshtyn Thermal Power Plant (TPP) with a total capacity of 600 MW to the Ukrainian UE. These units, operating on grade G coal, could thus replace those using grade A coal. This would save another 1,5 million tons of grade A coal.
- Coal imports. The tariff in April-May 2016, when the Rotterdam tariff was introduced, allowed coal to be purchased at $55-60. In Turkish ports, the same coal cost $50-52. This meant that imports were possible for diversification. But companies didn't do this, and the price rose. Consumers shouldn't pay for companies' management mistakes.
Furthermore, Rotterdam+ operates on both grades of coal: the scarce A grade and the surplus G grade. Consequently, excess profits from G grade should have been used to purchase grade A coal (with the exception of Donbassenergo, which does not operate G grade stations). The port infrastructure allows for the transshipment of 5 million tons of grade A coal annually. Imports come from South Africa, the USA, Australia, Vietnam, and China.
- Coal is merely a resource for electricity generation. It's possible to import ready-made electricity. But in our country, this is perhaps the only market where imports are impossible—it's closed by regulators. But consumers benefit from imports because competition works in their favor.
- In general, imports of around 4 GW are possible, and even without Russia, Ukraine can import up to 0,5-1 GW of capacity, which replaces around 2 million tons of coal.
- It is also worth noting that in 2016, the wholesale price of electricity in Europe was lower than in Ukraine.
- In total, these measures could replace 9,5 million tons of grade A coal, which is more than the annual requirement.
In addition, there are several other measures that may be appropriate.
- Integration with the European system using DC links, which are being installed at the border of the Ukrainian IPS and Burshtyn Island. While full integration with Europe would take up to 10 years, this project could be completed in three years, providing the ability to supply low-cost Energoatom electricity at night and import electricity from Europe if needed.
- Timely accumulation of coal reserves to a minimum balance. With a 2-3 month supply of coal in storage at all times, Ukraine can feel confident in any circumstances.
In my opinion, the priority isn't even a complete refusal to rely on supplies from the ORDLO, but rather the establishment of energy independence from supplies from the ORDLO. After all, such supplies wouldn't meet any basic security of supply criteria.
Yes, it's fair to admit that the aforementioned measures will require certain financial resources. But last year, all Ukrainian consumers already paid over UAH 10 billion in additional payments under the "Rotterdam+" formula, when independence from the ATO zone was supposed to begin to take shape. Therefore, before discussing financial needs, we need to know: where is the promised independence, and where did the UAH 10 billion go? And who will be held accountable?
Answers to these questions should be the beginning of a dialogue. The sad reality is that, after three years, we haven't achieved independence from coal supplies from the ATO zone. And for the next one to one and a half months, the ORDLO is the only viable option for grade A coal supplies. Even though we've already paid for this energy independence with rising tariffs.
On the topic: Igor Nasalik. The criminal face of Ukraine's energy sector.
Subscribe to our channels on Telegram, Facebook , Twitter , VK - Only new faces from the SKLEP section!