When Russia invaded Ukraine in February 2022, for the electricity sector it had the unexpected side effect of speeding up plans for Ukraine’s transmission system to become a synchronous part of the European network. That milestone – passed less than a month after the invasion – was followed three months later by the start of commercial trading of power between Ukraine and EU customers (albeit limited at present) and it illustrates how the country’s power sector has had to move quickly to adapt to rapidly changing conditions over the last six months. The sector is continuing to face huge challenges as it prepares for the coming winter, but the west European link also means it has an upside to the model.
Overall, demand in Ukraine has reduced to around 10 GW, or 36% of normal levels, according to Maxim Timchenko, chief executive of DTEK, which has energy assets in Ukraine and abroad, including thermal stations and networks in both the free and occupied areas of Ukraine.
Some 800 towns remain without power, largely in eastern Ukraine where Russia is currently in control. That area also includes major industrial users such as steelworks and ports that have shut down, reducing power consumption.
In an update in August 2022, Timchenko said that Ukraine can meet its current demand from its large nuclear fleet, capable of providing about 70% of supplies, along with over 2 GW of thermal plant and 1 GW of renewables in central and western areas. But that included a contribution from the nuclear plant at Zaporizhzhya, which had been providing around 2 GW to western Ukraine. By September, the Zaporizhzhya plant was in shutdown after shelling of the site and of its power connections. The plant is in a highly vulnerable condition, but the situation remains fluid. Offsite power supplies were entirely halted in early September but restored a few days later.
Ukrainian renewable capacity totalled over 9 GW in February but most of that capacity – and most major new developments – is situated in the flat south and eastern region. Most of the existing wind and solar assets have been shut down (and in some cases been damaged by shelling) and development projects halted, although Ukraine has reiterated plans to pick up those developments again as soon as possible. There is currently some discussion of reviving work on wind and solar projects in the west where development had halted and Ukraine remains firmly behind its target to build 30 GW of renewables capacity by 2032, which has now become part of its post-conflict rebuilding plan.
The eastern region also includes coal mines and factories that make mining equipment. DTEK says it has relocated staff and tools production to the west, where extraction continues.
The Ukraine energy industry has also been subject to sustained cyber attacks, which have so far been warded off successfully, albeit at the cost of absorbing more human and financial resources as projects to beef up security have been brought forward. One side-effect of the war has been a slowdown in plans for the EU to introduce a new pan-EU bidding platform for reserve and response. The software for that project was, in large part, being developed in Ukraine.
The new interconnection has allowed Ukraine to sell power to western buyers since June. Export capacity is currently limited to 250 MW to Slovakia and Romania (up from 100 MW in June) and 220 MW to Poland, but it provides an important income stream. Power is sold in daily auctions – the uncertainty precludes longer term contracts – but the differential between the wholesale price in Ukraine and that of neighbouring countries is huge (in August 2022, the price was €80/MWh in Ukraine, versus €350-380/MWh in buyer countries). Over 90% of the income goes to the state via the Ukraine system operator, but Timchenko said that “gives us great financial support” in maintaining the system and reconnecting customers.
Network restoration is an ongoing burden and Timchenko said it was an area where Ukraine needs urgent help from its allies, to provide the equipment and skills required. Ukrainian companies had tried to get priority from their suppliers with regard to network assets and components, some of which had lead supply times of several months under normal circumstances.
Maintaining and restoring energy supply is the “energy front line” and “a lot depends on us” Oleksiy Povolotskiy, DTek corporate governance and compliance director, said in a September update, giving a flavour of the pressure placed on the sector’s employees in a situation where regular shift patterns have been replaced by a 24/7 effort to maintain supply both to the population and to meet military needs.
The network operator is also grappling with the loss of staff, some of whom have been killed in the armed forces (Timchenko said in August that 76 workers had been killed in this way) and three killed in the course of work. Restoring power supplies is often dangerous and network companies work in close co-operation with the military to assess when and where they can gain access.
Preparing for winter
Ukraine is aiming to increase cross-border capacity to get more revenue to support the sector and help strengthen the grid. Timchenko said so far progress had been “Not as successful as we hoped”. Nevertheless, Ukraine’s aim remains to work with Entso-E to get an agreement to increase exports to 800 MW by the end of 2022.
Timchenko described two projects that would support that aim. One is a 20 MW battery. Following a successful 1MW pilot project last year, DTek is “in active discussion” with partner Honeywell and it is hoping for a financial close on the 20 MW plant at the end of the year. If that comes to pass, by the end of 1Q the new battery should be in operation and “will directly affect cross-border capacity,” said Timchenko. In the second project, it wants to use statcoms that are already in place on solar farms.
In August 2022, DTek said that Ukraine expected to have sufficient resources for the winter season and can even plan for increased exports if the link is expanded. However, that included the contribution being made at that time by Zaporizhzhya, which was shut down in September. Planning is made more difficult by the fluid situation. The areas controlled by Ukraine and Russia have shifted, and Russia has targeted power stations as it retreats, for example striking a power station that supplies Ukraine’s second city, Kharkiv, and its environs.
DTek said it has 1.7 Mt of coal in stock. Timchenko said the company was trying to increase production volumes from coal mines and hoping for 1.8 Mt in storage by winter. That is lower than government targets, but, he said, “with this stock we can be quite confident that our thermal plant can operate at full capacity during the winter”.
The Ukrainian TSO, Ukrenenergo, also believes it will be possible to maintain power supplies during the coming autumn-winter period. “This is a difficult but achievable task”, said Volodymyr Kudrytskyi, chairman.
Ukrenergo has looked at various scenarios for the winter heating season and “is ready for any development of events.” Currently, Ukraine not only has enough indigenous generating capacity and sufficient fuel to run it, the TSO estimates, but “thanks to synchronisation with the power system of continental Europe, we can also ask European partners for help.”
“Imagine what would have happened if we had still been connected to the power grid of Russia and Belarus,” noted Kudrytskyi.
The gas picture is more complex. Ukraine has 12.7 bcm in storage and forecasts suggest 14.5-15 bcm will be enough for the season. Ukraine does not need to import gas as it is a producer and demand destruction means 50-60% of gas production is being injected into storage. But that remains on the producers’ balance sheets. There is a ban on gas exports, so state-owned Naftogaz is the only customer. However, an ongoing dispute over payments mean there have been no sales to Naftogaz for months. The dispute is over royalty payments, which are determined by the international benchmark price – which at $2500/per thousand m3 is nearly three times the Ukrainian price of $900 – even when it is sold in Ukraine. Producers say they want to be allowed to export the gas (at international prices), or pay royalties according to the Ukrainian price paid in sales to Naftogaz. Proposals such as an auction have been put forward, but currently, the parties are at a stalemate.
In practice, gas generation is a relatively minor component of the electricity supply, despite Ukraine’s large reserves.
Closer to the West
It has become commonplace to comment that a major outcome of Russia’s invasion of Ukraine has been to quickly strengthen and extend Ukraine’s links with the West.
Electricity interconnectors are one example and gas supplies is another if Ukrainian hopes are realised.
Ukraine claims the largest gas reserves in Europe after Norway, which it also hopes to export now and in the long term, and on that point, Ukrainian Minister of Energy Herman Galushchenko recently said that Ukraine can help increase the security of gas supply for Europe because it has the continent’s largest gas storage facilities.
When Russia limits gas supplies Ukraine can work with partner companies help maintain reliable gas supplies in winter, Galushchenko said, noting that consumption peaks in Ukraine do not coincide with those of other countries. Speaking as the Ukraine grid was synchronised with the rest of Europe, he said Ukraine could be an important exporter, saying “We are one of the leaders in Europe in the production of carbon-free electricity. Today, 70% of electricity production in Ukraine is carbon neutral. If we compare this with the countries of the European Union, last year the average in Europe in terms of carbon neutrality was 63%”.
This article first appeared in Modern Power Systems magazine.
