Ukraine faces massive reconstruction needs in the aftermath of the Russian invasion. A reconstruction programme should be focussed on low-carbon technologies taking into account the cost reduction of green technologies, Ukraine’s climate policy obligations and EU accession perspective, elevated global fossil energy prices and price volatility, as well as energy independence from Russia.
Ukraine’s electricity sector will play a salient role in decarbonising the economy. A cost-optimal configuration of the power plant park in 2032 implies a complete replacement of coal-fired power generation by renewables and gas turbines. In the transition phase, around EUR 1.5 bn per year will be necessary to finance those new generation technologies.
Ukraine needs €47bn of additional investments to reach 2NDC emission targets. The €102bn figure often mentioned includes €55bn of regular investment unrelated to NDC. Ukraine’s investment need still is high, but not as high as often mentioned. Additionally, efforts must be undertaken to re-channel some of the €55bn into “green” projects. A carbon price would be a crucial instrument to achieve this.
Summary: The Housing and Utilities Subsidy (HUS) is a social transfer meant to assist low-income individuals in the payment of housing and communal services. However, and despite its heavy weight on the government budget, many poor households are not awarded the HUS (only 50% of poor households received the HUS in 2018, and only 28%
Ukraine risks significantly falling behind on implementing the National Emission Reduction Plan (NERP), a binding obligation towards the Energy Community (EnC). A debate about a possible revision of the NERP has started in Ukraine but so far focuses on relaxing the requirements of the NERP, including the deadlines already extended especially for Ukraine.
On June 29th and 30th, 60 Ukrainian participants from academia, the government, private companies and public energy agencies joined Low Carbon Ukraine and the Kyiv School of Energy Policy for a workshop on energy and electricity system modeling.
Ukraine recently committed to carbon neutrality in 2060 and signalled support for the European Green Deal aiming for net zero emissions by 2050. On the course of its decarbonisation and the country’s path towards the EU, it will need to adopt the stricter environmental rules and standards introduced by the Green Deal. At the same time, it will need to restructure its coal sector, which is heavily subsidised, loss-making and environmentally harmful.
Ukraine’s draft 2nd NDC (NDC2) envisions an economy-wide reduction of emissions from ca. 340 MtCO2eq in 2018 to ca. 290 MtCO2eq in 2030. It projects that the electricity sector will ensure roughly 45% of the total projected emission reductions from now until 2030.
This series presents ten Policy Proposals aimed at helping Ukraine reach its energy and climate targets.
Our policy event “Reaching Ukraine’s energy and climate targets”, organized together with the NGO “DixiGroup” in Kyiv, was a complete success. 240 participants attended the meeting, and another 200+ visitors watched the livestreams.
Deferred maintenance and repair investments reduce the value of the Ukrainian building stock. A long-term retrofitting strategy is required for residential as well as public buildings.
Greenhouse gas emissions from transport have been slightly increasing since the year 2000. With the right policies, Ukraine can further decrease transport emissions and reach its mid-and long-term climate goals.
This paper considers the potential for decarbonizing Ukraine’s steel sector and gives policy recommendations that take into account the challenging international environment Ukraine’s steel sector finds itself in.
A coal phase-out is an inevitable step for Ukraine on its decarbonization path. This paper proposes accompanying measures for the phase-out, aimed at dampening its negative impact.
Synchronising Ukraine’s and Europe’s electricity grids will be expensive, but hugely beneficial. This paper discusses the challenges and potential benefits in detail.
We propose regulatory changes that would reduce RES imbalances, ensure a more efficient dispatch of Ukraine’s electricity system and hence reduce the need for costly balancing energy.
We assess the recent market development after the first year of market opening, and address a number of issues that we deem critical for ensuring the development of a stable, transparent and competitive market.
Fossil fuel subsidies have been a popular measure for governments, but have adverse effects. We propose a phase-out of consumer subsidies until 2022.
Ukraine’s current carbon tax is too low to effectively reduce emissions. We propose a carbon tax of EUR 39/t CO2 and discuss the implications.
This paper proposes tailor-made green financing schemes consisting of public and private funding. We elaborate on certain financial instruments typical for green measures such as green bonds.
Renewable electricity generation has reached record level. A decline in nuclear output could be observed in May 2020 that was not justified by technical or economic reasons, lower electricity demand or RES deployment.
Our 5th issue of the MEMO series now takes stock of the first 12 months of operation under the new wholesale market.
NPP electricity generation in May was significantly below the economic efficient level. This cannot be explained by Covid-related demand decrease or a high RES generation share.
On July 22, LCU submitted a draft of the “Integrated National Energy and Climate Plan” to the Ministry of Energy. As a Contracting Party of the Energy Community, Ukraine committed to submit a NECP by the end of 2020.
Curtailing and compensating RES can be cheaper than taking up 100% of RES electricity through investment into conventional plant park or transmission.
Anti-crisis measures in electricity sector. Ukrenergo certification. Gas market. RES support scheme. Electricity market opening. Electricity consumption decrease due to Covid-19.
2020 electricity consumption might decrease by 5% (best case) to 8% (worst-case scenario).
Dr. Zachmann explained that LCU analyses indicate a decoupling of wholesale market prices and marginal costs of production, leading to prices well above those in neighbouring countries.
Frequent changes to the legal framework fail to address the structural problems. Loopholes undermine the market and speed up debts’ accumulation. Extended data transparency is an upside of the reform.
Progress of Ukraine’s 2050 Green Energy Transition Concept. Legislative amendments to the electricity market. FIT restructuring issues. Signing of gas transit deal. Regulatory framework on energy storage. Carbon taxation.
Ukraine’s electricity market does not need state support for energy storage projects. It needs a properly working electricity market aligned with the EU 4th Energy Package to boost the flexibility of the grid.
Basic technological & economic features of electricity markets (in EU countries). Challenges in market development: new forms of trading, sector coupling and digitalisation.
On December 14th, 2019, LCU experts gave an introduction into aspects of energy and climate policies to a group of experts and parliamentarians, most of them members of the energy committee of the Ukrainian Verkhovna Rada. The aim was to provide newly elected MPs with fundamental expertise on the complex topic of electricity markets, to discuss specific challenges of integrating renewable energy sources into Ukraine‘s energy system, and to look into challenges of coal phase-out in Ukraine.
Further RES expansion is needed to replace the ageing power plant fleet and to sustain energy security. To account for a higher variability in the system, different instruments can be utilized.
Different sets of RES quotas are analyzed. In the best-case scenario, 3 GW wind & solar are built and RES quotas set at 1.6 GW, enabling a RES share above 20% in 2025.
Tax revenues from a potential upstream carbon tax in Ukraine of 27UAH/t CO2 are estimated between UAH 5.6 and 6.1 bln. Price increases from taxation are strongest for coal (+3.5%-4.3%).
Progress on gas TSO unbundling and certification, corporatisation and certification of Ukrenergo, licensing in upstream sector. Analysis and recommendations on ESU action plan implementation.
Assessment of feed-in-tariff, related expenditures for RES, current scheme of financing, impact on state budget and electricity prices. Analysis of risks of retroactive change in support scheme.
Assessment of the progress on the ESU 2035 action plan implementation, analysis of gaps, barriers and the lessons learned, providing recommendations on further improvement of the process.
Increasing electricity imports from Russia can help to improve competition, reduce prices and reduce emissions. But it should be regulated to minimize adverse effects.
Curtailment should be considered as a regular flexibility option. It helps to mitigate the green-coal paradox and to reduce system emisions from 94 to 40 Mt CO2.
Market power remains strong and starts exploiting balancing market. Changes to PSO does not help the competition. Prices in the IPS start to drop as nuclear power ramps up production.
The Ukrainian electricity system can absorb fluctuations of higher RES shares and support a further expansion with RES auctions.
The rising cost of RE support pushes electricity prices beyond affordable level in Ukraine. Yet the revision of the established FIT scheme should be carefully designed and consider potential risks.
Analysis of (inflated) wholesale prices after electricity market opening. What could be done in the short and long run to fix this?
Dr. Georg Zachmann took part in a meeting that President Zelensky held with relevant stakeholders on the situation in the electricity market.
Analysis of curtailment as a flexibility option in the short and long run, including mitigation of the ‘green-coal paradox’ and comparison with hardware solutions. Overview of curtailment experiences across the world.
Recommendations on making energy markets competitive, increasing RES share, structural change in coal sector and regions, investments in infrastructure, energy efficiency in residential sector.
Prices are stable as the market shows no signs of effective competition. Increase of import to the BEI does not affect prices. Price caps are higher than the estimated marginal costs of coal generators.
Progress on ensuring of the NEURC’s independance, unbundling and PSO on gas market, and launching the NECP development process. Key priorities in energy policy for the new administration.
Ukraine has finally opened its electricity market despite many concerns. Prices are high, some market segments do not work properly, and the smaller BEI trading zone is under the reign of monopoly.
Before the deadline for electricity market opening, Ukraine’s official work hard to patch the holes in the upcoming regulatory framework. Does it help or constraints the future market?
Main features of a successful electricity market based on the 20 years’ history in opening the EU electricity market. Lessons learnt and best practises for the Ukrainian context.
A successful structural change can avoid a negative impact on the labour market and trigger an economic shift towards a more future-oriented industry.
Ukraine is about to liberalise its electricity market. Yet the devil is in the details: the rules are far from perfect and key players are not ready. What are the risks?
The market opening on July 1st may have negative impact on final prices for industries and economy as a whole. With little time left, at least critical risks should be mitigated.
Analysis of implementation challenges related to wholesale market reform, in particular preparation, coordination, issues of market design, concentration and liquidity.
Accumulated debt poses a major obstacle on the way towards a new electricity market. A solution to this problem needs to be found before the new market design is introduced.
On April 25, the Verkhovna Rada passed the law introducing renewable energy auctions.
Developments on the law introducing RES-e auctions, launch of daily balancing on gas market and Naftogaz issues. Deep dives into the issue of debts in the Ukrainian electricity system and progress with electricity market reform.
25% of electricity generation can come from Renewables in 2035 when annually installing around 500MW, what seems realistically as of today.
Ukraine’s 2035 electricity demand is estimated based on GDP growth, electricity price and energy efficiency trajectories. Only in a high GDP growth scenario, demand increases substantially.
The concentration of wind and solar plants in high-yield regions increases balancing needs and grid constraints. We recommend introducing a transparent curtailment charge mechanism.
Key messages: Multitude of energy & climate obligations must be coordinatedRES share surpasses unambitious targetsDiffering indicators in national strategies – risk to cause confusionProgress in energy intensity – but still a long way aheadEmission targets are not ambitious
The NECP is an opportunity for Ukraine to reflect on its key energy challenges. But its preparation is complex and requires strong political commitment.
Introduction to the development of National Energy and Climate Plan (NECP) for Ukraine, namely timeline and structure of the document.
Recommendations: Dynamically adjusting FIT based on project duration. Incentives for a smart & grid-friendly location selection. FIT reduction in 2019 to contain costs.
Ukraine is about to adopt changes to the RE support law and introduce auction-based remuneration scheme. But is it not too late? Will the conservative changes to FIT help to contain the expensive boom?
Changes in the environmental taxes and related challenges, new PSO rules on the gas market and supply billing issues. Deep dive into the draft law on new RES support scheme (auctions) and introduction to Ukraine’s National Energy and Climate Plan.
Key Developments in Ukraine’s Energy Sector. Balancing Needs due to RES increase. Introducing the Low Carbon Ukraine Project
Small renewables projects can have important side benefits. Well targeted feed-in tariffs can support a cost-efficient deployment.
Based on a LCU’s Optimised Dispatch Model (ODM), we assess that the current Ukrainian power system can balance fluctuations of up to 15 GW of wind and solar (in-depth analysis).
Wind and solar installations should be distributed over the country. Policy should strive for an optimal mix of wind and solar installations in order to reduce system cost.
Based on a LCU’s Optimised Dispatch Model (ODM), we assess that the current Ukrainian power system can balance fluctuations of up to 15 GW of wind and solar (overview of results).