Electricity consumption in Ukraine will increase significantly

The volume of electricity consumption in Ukraine in the coming decades will be higher than previously expected. The Ministry of Energy believes that this demand can be met primarily by increasing the production capacity of coal-fired thermal power plants. This is planned to be achieved through private investment.

As Nikita Konstantinov, director of the electricity department of the Ministry of Energy, told Kommersant yesterday, the ministry has prepared the electricity part of the updated Energy Strategy of Ukraine until 2030. According to the document, electricity consumption in the country in the next 19 years will increase from the current 183 billion kWh to 272 billion kWh per year. Previously, the forecast volume of consumption was estimated at 225 billion kWh. The revision is due to the fact that a significant part of industry and heating and power utilities plans to abandon expensive gas and switch to electricity, Mr. Konstantinov explained. Let us recall that earlier the Ministry of Energy stated that from 2012 to 2017 Ukraine is going to reduce gas purchases from the Russian Federation from 41 billion cubic meters to 12 billion cubic meters. Nikita Konstantinov says that increased use of electricity will save at least 8 billion cubic meters.

The Ministry of Energy began talking about revising the Ukrainian energy development strategy after the signing of gas agreements with Russia in January 2009. Let us remember that at that time a formula was established for calculating the price of gas. This led to its value beginning to increase almost quarterly. Thus, the price for the fourth quarter of this year is $350 per thousand cubic meters - that is, at the level of EU countries, or even higher. “The Ministry of Energy has relied on thermal energy due to the fact that we are not dependent on coal supplies from Russia, while the cost of such electricity is several times lower than that generated from alternative sources,” says Stanislav Zelenetsky, an analyst at the ART-Capital Investment Group. At the same time, the rate on thermal electricity will allow the development of the coal industry. According to Nikita Konstantinov, the volume of thermal coal production by 2030 should increase from the current 50 million to 75 million tons per year.

Commenting on the new energy development strategy during an investment teleconference held by the SPFU for potential foreign investors in energy companies, President of NJSC Energy Company of Ukraine (NAC EKU) Petr Omelyanovsky said that it would be impossible to implement “without large-scale investments in the energy sector.” According to him, today all Ukrainian generations have exhausted the so-called “park resource” - that is, they require urgent modernization. Moreover, 72.5% of power units have already exhausted their “permitted individual resource”, after which their operation is prohibited. But they are still in use. And finally, 4.8% of the capacity cannot be used, since the service life of the metal from which they are made has exceeded the limit.

According to NAC EKU, 37.3 GW of operating generating capacity was commissioned before 1980, another 14.9 GW from 1980 to 1990, and only 4.2 GW after. In Ukraine, the share of thermal power plants over 40 years old is 38%, and in the European Union countries it is only 22%. “Ukrainian power units are in critical condition and are in dire need of modernization,” said Mr. Omelyanovsky. According to him, their further wear and tear could lead to the fact that already in 2015 it will be necessary to decommission a significant part of the capacity, and the country will experience a shortage of 14 GW (for more details, see the chart on page 7).

According to Mr. Konstantinov, for the priority renewal of thermal power plant capacities, Ukraine needs UAH 96 billion of investments. To ensure additional construction of 11 GW of capacity, UAH 113 billion is needed. And Ukraine’s entry into the European Energy Community will require investing 43 billion UAH in the installation of dust and gas cleaning equipment.

According to the head of NAC EKU, current electricity tariffs do not allow quickly accumulating sufficient funds for energy modernization. “And it is impossible to attract loans to modernize generation systems due to high accounts payable,” says Mr. Omelyanovsky. According to NAC EKU, at the beginning of November 2011, the debt of power generation companies amounted to UAH 9.1 billion. “In the updated strategy, we rely on the privatization of generation and the arrival of private investors,” said Nikita Konstantinov. Let us recall that earlier the Cabinet of Ministers announced the conditions for the privatization of state-owned stakes in Zakhidenergo and Kyivenergo. In investment conditions, the State Property Fund obliged the future buyer to modernize generation capacities. As the head of the State Property Fund, Alexander Ryabchenko, told Kommersant yesterday, the department expects to allocate 50% of the funds received from the privatization of generation and regional power companies for modernization through NJSC EKU (which will retain a 25% stake in all).

And about. Chairman of the Board of Zakhidenergo Vladimir Mazyar believes that it is possible to attract the funds necessary for the implementation of the energy strategy provided that transparent privatization is carried out. “The State Property Fund is trying to attract the maximum number of participants - recently they sent out proposals to the largest European energy companies, held a teleconference with investors in Frankfurt and New York and a number of conferences,” says Mr. Mazyar. “But market conditions are not yet in favor of the SPF - in the European Union, due to the economic crisis, investors are very cautious in making investment decisions, and there is a chance that only Ukrainian and Russian companies will submit applications,” says Mr. Zelenetsky.

Oleg Gavrish

Newspaper "Kommersant Ukraine" No. 183 dated 08.11.2011, page 1

Themes:

Energy

The current will flow like a river