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Imports from Russia and Belarus: How the Ukrainian electric power industry is trying to keep a balance until spring

A stalemate in the Ukrainian electric power industry could have been avoided due to the professional decision of the government, coal reserves formed in advance and careful repair maneuvering.

The capacities available in Ukraine are not enough to generate electricity in the required volumes. Many power units of thermal and nuclear power plants are now undergoing scheduled or emergency repairs.

In addition, there are critical coal reserves at the thermal power plants, and it is expensive to convert them to gas, and not all owners agree to this. It is shameful to return to the rolling blackouts of electricity consumers during the 30th year of statehood. And Ukraine in early January began importing electricity from Belarus in small volumes. And on February 1—also from the Russian Federation, without which it has got along without for 10 months. Politicians joined the discussion with experts.

For its part, NPC Ukrenergo plans to continue importing electricity from neighboring countries in the north and east. Although, back in December, such problems did not have to be solved. What led to such metamorphosis and imbalance? And how it all affects the ordinary consumers of electricity? The Page gives its vision on these issues. About the main issue—how to get the energy industry out of the systemic crisis—in our next publications.

April shortsightedness

Ukraine used 146.4 billion kWh of electricity (gross) in 2020, the Ministry of Energy notes in its report on the operation of the country's electric power complex last year. So, the officials headed by the Acting Minister Olha Buslavets made a mistake in their spring forecast electricity balances of the United Energy System (UES) of Ukraine by as much as 7.28 billion kWh.

The error is very large. It is commensurate with the amount of electricity, that would be enough, for example, for all machine building and the entire food industry at once for the whole of 2020. Only in December of that year, the underestimation of Ukraine's electricity consumption by the relevant Ministry reached almost 9% (it was predicted 13.8 against the actual 15.1 billion kWh).

By the way, the main "culprits" of the winter electricity deficit in Ukraine seem to be its own population and the chemical industry. The first one "ate" electricity by 1.3 billion kWh more than in the previous year, and also chemists—by 0.4 billion kWh more.

It turns out that the Ministry of Energy in April looked through the Forecast balance of the UES for 2020 in vain and reduced the forecast total consumption from 147.5 billion kWh to 139.2 billion kWh. After all, the previous, March balance signed by another Acting Minister—Vitalii Shubin—was much more accurate. The error of that forecast was actually less than 0.8%. In addition, it provided for even more electricity consumption than it actually turned out. If Ukraine prepared for winter exactly according to the "Shubin’s" balance, then there would be one fewer problem in the electric power industry now.

December disorientation

Since April 2020, the entire domestic power industry has been preparing for the winter season according to the "Buslavets’" underestimated forecast and has not particularly taken it easy. Heat generation has been also calm, producing 35% of the electricity in Ukraine and having its 79% of thermal power plants using coal. Moreover, the transitional reserves of coal at TPPs and CHPs from April to late autumn remained at a relatively high level and reached almost 3 million tons (according to the Ministry of Energy).

And this continued until November 2020. Then, with the onset of cold weather, more intensive consumption of electricity by the population began, and at the same time, the need for repair of nuclear power units increased. And the situation began to heat up.

But the main reasons for the current February problems in the electricity market were formed a little later—in December. After the Ministry of Energy suddenly, at the beginning of winter, in just one decade, halved the demands for the required volumes of coal reserves at TPPs and CHPs. As early as December 1, the department, that was then headed by the same Olha Buslavets, demanded that 1.98 million tons of coal be stored in warehouses, and already on December 11—only 0.98 million tons. And this despite the fact that real fuel reserves then decreased by 1.7-1.8 million tons and were already below the required level.

Since then, the coal resources of TPPs and CHPs continued to "burn up" every day, decreasing in the last decade of January 2021 to the level of 560-580,000 tons. And on February 4, coal reserves in warehouses in the thermal power industry fell to a record level—550,000 tons. The coal reserves at the TPPs were 5.5 times less than on the same date last year.

The estimated actuating time of reserves at most TPPs is now from one to nine days. Except for the Slaviansk and Luhansk power plants. At the first one, gas coal resources can last 44 days, and at the second anthracite coal resources can last 22 days (as of 02/04/2021).

At less powerful CHPs, the situation is not much better. Although the plan for coal production in Ukraine was exceeded by 5% in 2020, and by another 6% in January 2021 (production reached 28.8 million tons and 2.6 million tons, respectively). The import of coal according to foreign economic activity codes, that is supplied to both power engineers and metallurgists, decreased in 2020 by only 3.1 million tons. However, the coal problem has not yet been resolved in the heat power industry.

The situation is more complicated than it seems at first glance. There are many problems in the industry. But why they have become aggravated right now, we must first of all ask those who allowed a sharp decrease in coal reserves in the warehouses of TPPs and CHPs. It got to the point that half of the so-called emergency shutdowns of the power units at the TPP last week resulted in them standing actually idle due to the lack of coal there. Although I also admit the presence of unseemly actions on the part of individual market players, who could deliberately push the electricity price to rise on the exchange.

Dmytro Marunych

Dmytro Marunych

Co-Chair of the Energy Strategies Fund

Decoupling electrical circuit

As of the morning of February 4, 12 TPP power units were under emergency repair. Just yesterday, on February 3, the Zaporizhzhia TPP completely disconnected from the power system due to a short circuit at one of the regional power distribution company’s substations. And on the morning of the next day, only 1 of 6 power units of this station was working, however, at 12:00 on February 4, two units were already operational.

In addition, 6 power units at Ukrainian TPPs were not working at that time due to lack of fuel. In addition, right now, 5 blocks of nuclear power plants are also undergoing medium and overhaul repairs, according to the operational data of Ukrenergo.

And this situation has been going on for some time now. Therefore, the National Energy and Utilities Regulatory Commision’s (NERC’s) decision of January 25 to conduct an unscheduled inspection of five enterprises of the industry to fulfill their obligations in having the necessary reserves of the appropriate fuel, looks quite reasonable. In particular, the companies DTEK Dniproenergo, Donbassenergo, DTEK Zakhidenergo, Centrenergo, and DTEK Vostokenergo.

For its part, the state-owned NEC Ukrenergo, as the operator of the UES of Ukraine, continues to import electricity. Over the last week of January, Belarus alone imported 80 million kWh, that is, 2.5% of total electricity consumption, the company reports. In the first days of February, too, judging by our episodic online monitoring of the Ukrenergo dispatching office, there was an import of electricity in Ukraine. In particular, from 410 MW to 700 MW per hour were imported to the main part of the UES (mainly from Belarus, and a little bit from the Russian Federation).

NEC Ukrenergo plans to continue importing electricity into the UES trading zone in the amount of 300 MW to 3000 MW during the peak hours of the domestic system every day, throughout February of this year. At the same time, the maximum levels of imports are planned for the period of February 8-12, possibly due to the fact that it is from February 6 that the Ukrainian Hydrometeorological Center predicts a significant cooling throughout Ukraine. And the legal grounds for restrictions on electricity imports, starting from January 1, 2021, no longer exist, notes Ukrenergo.

The data of the European network of operators of electricity transmission systems ENTSO-E confirm that the import of electricity in Ukraine does take place, several market entities already have the right to supply the ebergy. In particular, also with regard to imports from the northeastern neighboring countries. So, for the period from February 1 to February 4, it is planned to supply electricity to Ukraine from Belarus every hour in the amount of 310-750 MW and from Russia at peak 6:00 of the day—100-200 MW each. The throughput of the system is 900 MW from the Belarusian direction and 2200 MW from the Russian direction.

Russian media, citing an exporter of electricity from the Russian Federation, in early February confirmed the start of commercial supplies to Ukraine in a test mode, on a competitive basis, by subscription and in small volumes. Earlier, in February, referring to the data of the relevant ministry, similar messages were published in the Belarusian media.

Ukrainian experts and many officials see nothing critical in such imports, and even more so in a crisis situation. Like, the usual market in a crisis.

Without the import of electricity from Belarus and the Russian Federation, when there were severe frosts, Ukraine would not have been able to pass through this critical period without limiting the supply of electricity to domestic consumers. Unfortunately, the situation with coal reserves in warehouses does not give grounds for optimism. We have to cover the capacity deficit by importing from Belarus and the Russian Federation. These are the realities.

Dmytro Marunych

Dmytro Marunych

Co-Chair of the Energy Strategies Fund

In addition, it is unlikely that imports in the amount of up to 4-5% of production significantly affect the energy security of Ukraine, experts say. At least for now. And someone in this situation will even make some money. For example, those traders who will buy cheap electricity in Russia and sell it in Ukraine. Indeed, during peak hours, this product on the Ukrainian stock exchange is several times more expensive than purchased in the Russian Federation. Enterprises that will consume imported electricity will also benefit.

Quote"It is obvious that Ukrainian traders buy electricity at a price lower than the Ukrainian market price. Then this electricity goes through the exchange to the industrial sector of the domestic economy. The benefit of the supplier and the consumer is mutual. I don't see any conspiracy here," Marunich explained to The Page.

Ordinary consumers are unlikely to have any benefit. Rather, one must beware of an increase in the electricity price in this situation, especially given the failure of the authorities in the energy sector.

Hot heads among politicians from different political groups are already demanding an immediate state of emergency in the electric power industry, banning imports from Russia and Belarus, introducing appropriate sanctions, and the like. In particular, similar demands have already been voiced by several people's deputies.

And the Chairman of the Council of the All-Ukrainian Energy Assembly Ivan Plachkov offers a comprehensive recipe for priority decisions from 11 points.

And number one in his program is the following requirement:

Quote"Immediately to impose a state of emergency with the adoption of all necessary measures, including limiting consumption to balance the operation of the power system."

We hope that the right decision will be made in the dialogue between politicians and experts.

Proposals for a gradual decrease in imports from the north and east seem to be the most suitable, with the prospect of completely abandoning them in the future. And at the same time focus on early integration into the European energy system. Moreover, the integration of the UES of Ukraine into the pan-European energy system ENTSO-E is provided for by the Association Agreement between Ukraine and the EU, and something has already been done in this direction.

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