Main events of 2020 in the energy sector

2020 will leave its mark in Ukrainian energy history as a year of unrest, crises, debts and regulation issues across all industries. At the same time, we have both the gas market and the electricity market. And the energy collapse did not happen.

Gas victories and defeats

At the end of 2019 – the beginning of 2020, everyone in the gas industry enthusiastically followed the "serial" about the unbundling (separation) of the gas transmission system of Ukraine from Naftogaz.

On January 1, the unbundling of the GTS was completed, and the independent operator began fully independent activities. Chairman of the Board of Naftogaz Andriy Kobolyev called this event the most ambitious reform in the energy sector in the entire history of independent Ukraine.

In January, JSC Ukrtransgaz reported another positive thing in terms of gas independence: Ukraine had not been importing gas from Russia for 1496 days.

In February 2020, gas prices were also pretty nice – they stubbornly declined due to the outbreak of the coronavirus pandemic and a decrease in gas consumption, and, according to analysts, reached a record 10-year low. The same reasons contributed to the fact that Ukraine ended the heating season with the highest gas stocks in the last 30 years.

But at the beginning of 2020, everything was not so rosy in the field of gas production: Ukrgazvydobuvannya reported that its 5 largest fields were depleted by 84%.

At the same time, Naftogaz announced the development of a new gas production strategy called Tryzub. At the end of last year, the State Service of Geology and Subsoil of Ukraine actively began to attract investments, including in projects for the production of hydrocarbons. And the Ministry of Energy and Environmental Protection announced that it was opening the portal of the Extractive Industries Transparency Initiative (EITI) "to minimize the interaction of business with the bureaucracy, and to ensure fair and equal conditions for all market players"

However, all efforts to increase production did not lead to the success of the strategy. And in November, NJSC Naftogaz of Ukraine announced that they were launching a new program for exploration and production of gas.


2020 brought innovation to residential gas consumers – from January 1, the payment for the distribution (delivery) of gas comes in a separate payment. Because suppliers of gas as a commodity from now on are not the same companies that maintain gas networks and carry out delivery.


On August 1, another historical transformation took place on the gas market – PSO had been canceled, and household consumers could choose a gas supplier at their own discretion, focusing on its conditions and price.


In November, the European Energy Community noted the highest level of reforms implemented in the energy sector in Ukraine at the end of 2020 in the gas market – 84%.

But despite a number of positive changes, the gas market ended 2020 with $100 billion in debt and problems with regulation.

Достижения на рынке газа

Oil collisions

Ukraine's own oil production in 2020 did not become any significant on a global scale. Therefore, we followed the development of the situation in the world. Moreover, there was so much to watch.

In early January 2020, oil prices increased, for the first time in seven months, rising over $70 per barrel. Analysts even warned that the price could more than double to $150.

But already at the beginning of March, the coronavirus pandemic appeared – the decrease in oil consumption directly affected prices. On March 9, after reports that OPEC could not agree with the OPEC+ countries on a reduction in oil production, prices on the exchanges fell by more than 30% - the price of Brent crude oil dropped to $31.43 per barrel.

Ukrainians who buy fuel from imported oil immediately had a question – should they be happy about the future decline in gasoline prices? The experts answered – the decrease will be insignificant. The drop in oil prices is disadvantageous for the Ukrainian economy.

Throughout March, the world oil market was in a fever – prices were falling almost steadily. In particular, the price of WTI oil fell below $15 (for the first time since 1999).

Meanwhile, the price of Ukrainian oil fell by almost 39%.

This situation forced drilling rigs to stop work worldwide.

Oil producers solved the problem by reducing production. In April, OPEC+ agreed on a record cut in oil production. Although they could not fulfil this plan in May.

In August, oil rose in price in anticipation of a decline in production by OPEC+. And then the hurricane in the Gulf of Mexico contributed to the rise in prices.

However, in September, oil began to fall in price again due to the seasonal weakening of demand and reports that Iraq might not fulfill its obligations under the OPEC+ agreement.

The oil "swing" continued throughout the fall with variable growth and decline. At the end of December, the price was kept at around $50 per barrel. The most recent decline in December was due to a new type of COVID-19.

Returning to the Ukrainian reality, Ukrtransnafta reported it transported more than 13 million tons of oil over 10 months, which is 4.9% more compared to the same period last year.


Цены на нефть

The glance and poverty of renewable energy

Renewable energy in Ukraine started the year of 2020 with the joyful news that about €3.7 billion were invested in a record 4,500 MW of renewable energy capacities in 2019. Ukraine had risen to eighth place in the rating of investment attractiveness of renewable energy in emerging countries from a modest 63rd. But then something went wrong.

In January 2020, Minister of Energy and Environmental Protection Oleksii Orzhel said that there was no need to stimulate Ukrainian renewable energy – it is more competitive than other generations. And at the end of January the state-owned enterprise Guaranteed Buyer predicted that in 2020 the deficit in payments for renewables would amount to UAH 8.2 billion.

In March it became known that renewable energy generation in some hours exceeds the coal one. In April, even the SSU got alarmed: the Service said that "the uncontrolled growth in the volume of renewable generation threatens the country's energy security and may destabilize the IPS of Ukraine.”

In May, they started talking about revising the FIT, because the financial problems of Guaranteed Buyer and the lack of funding in the state budget created huge problems in renewable energy sector.

Renewable energy experts called the revision of tariffs dangerous for the investment attractiveness of Ukraine.

Meanwhile, in June, the debt of Guaranteed Buyer to renewable energy producers reached UAH 14 billion.

On June 10, the Cabinet of Ministers of Ukraine signed a Memorandum of Understanding on the settlement of problematic issues in the field of renewable energy. On July 21, the Verkhovna Rada approved the restructuring of the FIT. On August 1, NEURC revised the FIT.


But even this hard-won decision saved neither renewable energy sources nor the state from the problems. In August it became known that renewable generation had filed a lot of claims against Guaranteed Buyer.

And in 47 people's deputies doubted the constitutionality of the FIT and appealed to the Constitutional Court.

At the end of September, the Cabinet of Ministers adopted a resolution stating that renewable energy electricity will be sold on the Ukrainian Energy Exchange. Several auctions have already taken place. In November, NEURC approved a mechanism for compensating “green” producers for forced disconnection from the grid.

As of December, Guaranteed Buyer fully paid for renewable electricity in October. And in general, payments under the FIT for 2020 exceeded UAH 21 billion, which is 45.5% of the total debt.

Долги перед ВИЭ 2020

The Constitutional Court's decision on the constitutionality of the FIT had not been adopted. However, Zelenskyy believed that there was no reason to do so.

Meanwhile, the Association of Solar Energy of Ukraine was sure that it was too early to stop state support for renewable energy in Ukraine – “we have not achieved our goals”.

The ups and downs of the power industry

For the Ukrainian power industry, the year did not work out from the very beginning. Therefore, there were more falls than ups. Zaporizhzhia TPP had been put into idle mode due to the unfavourable situation on the electricity market. Ukrenergo limited the capacity of nuclear power plants. Solar and wind power plants were limited to balance the power system and ensure its operational safety.

Meanwhile, the Head of Ukrenergo announced the accumulated debt of UAH 1.5 billion to the company for transmission and dispatching services.

In February, Ukrenergo said that the rapid launch of renewables in Ukraine required an additional 20% of the capacity to the power system. There were a lot of discussions on the need to develop energy storages.

The outbreak of coronavirus and quarantine in the second half of March threatened to significantly reduce electricity consumption. The forecast becane true anyway. And experts started talking about problems in the energy sector (some even considered the situation close to catastrophic), as well as how to solve them.

Meanwhile, individual energy companies have already faced the consequences of quarantine - their payments have dropped. NEURC even had to urge consumers to pay for energy consumption.

The Guaranteed Buyer also faced considerable problems - in February-March 2020 it accumulated a debt of more than UAH 5 billion to Energoatom. The Cabinet of Ministers even thought about eliminating GarPok. Although international experts called this idea very bad.


At the end of April, due to the growth of renewable energy sources, a decrease in electricity consumption and the need to balance the power grid, Ukrenergo was forced to limit nuclear power plants and apply a number of other steps atypical for the system.

To start getting rid of the crisis phenomena in the operation of the power system of Ukraine, the Ministry of Energy approved a new energy balance, and proposed a set of steps to solve problems, as well as to support Energoatom – it was allowed to enter the market of bilateral contracts.

But there were several ups in the Ukrainian energy sector. In June, the Rada adopted a law on the mechanism for writing off debts on the wholesale energy market. In July, the 500 kV Kremenska substation was commissioned, which actually returned Luhansk region to the Ukrainian power system. In August, NEURC approved a new incentive tariffs methodology for distribution system operators (RAB regulation), which helped stimulate investment and improve the quality indicators of electrical networks. And in September, the Verkhovna Rada equated the cost of electricity for technical needs with the cost for the population, which reduced the payment for consumers.

The electricity market ended the year not as positively as we would like. According to the Ministry of Energy, the state's debt by the end of the year may reach UAH 40 billion.


The troubles of the coal mining industry

For coal mining, the year of 2020 began with the Minister of Energy bluntly stating that miners' children had to choose another job because Ukraine was planning to get rid of the coal industry. The Ministry of Energy announced that they would be engaged in the professional reorientation of miners. And analysts offered options for changing the coal industry.

The Delegation of the European Union to Ukraine expressed their readiness to support our state in reforming the coal industry.

In July, the Ministry of Energy reported that a pilot project was being prepared to close mines in one of the cities based on German experience.

In September, the Ministry of Energy presented the conceptual framework for reforming the coal industry. The Ministry estimated that at least 15 state-owned mines would be closed.

At the same time, the state provided UAH 1.4 billion to pay miners by the end of the year and to pay off the debts.

And they planned to close unprofitable mines within 10 years.

At the same time, coal prices on the world market rose due to increased demand in Asia.

Украине откажется от угля

Fueling concerns over hydrogen

2020 has become a year of glory for hydrogen. People not only started talking about it but even started doing something.

In January, the Ministry of Energy and Environmental Protection announced high interest in hydrogen technologies as an opportunity to transform energy in Ukraine.


And as Stepan Kudrya, director of the Institute of Renewable Energy of the National Academy of Sciences of Ukraine, told Kosatka.Media, hydrogen is not just a newfangled topic in Ukraine. This technology has been developed for over 30 years.

And the latest news of 2020 – scientists of the National Academy of Sciences announced the presence of natural hydrogen in the earth's interior on the territory of Ukraine.

At the same time, large energy companies are interested in hydrogen. In particular, in March RGC announced plans to build a hydrogen production unit at one of its experimental sites. In June, preparations began actively to inject hydrogen and hydrogen mixtures into the network. Already in August, it conducted the first tests, and in September successfully completed the first stage.

The Ukrainian GTS Operator has also announced an interest in hydrogen technologies. And Ukrhydroenergo even more. It was informed that they will join the construction of a hydrogen production plant.

In October, the Ministry of Energy announced a tender for a study of the potential of hydrogen energy.

In November it became known that the Ministry of Energy is developing a roadmap for Ukraine's hydrogen energy. They promise to present it to the public in January 2021.



Personnel and organizational changes

The changes affected the Ministry of Energy and Environmental Protection itself - at the end of May it was decided to split it into two departments. But the minister has not yet had a chance to head the new Ministry of Energy.

Even before the separation, in March, Vitalii Shubin was appointed acting Minister, who was Deputy Minister before. In April, the Cabinet of Ministers appointed Olha Buslavets First Deputy Minister of Energy and Environmental Protection and acting Minister.

In November, Buslavets was dismissed from the post of interim minister. Yurii Boyko became new interim head of the ministry. And on December 21, Yurii Vitrenko became the first deputy minister of energy, as well as the interim head of the Ministry of Energy. Moreover, he was predicted for the post of Minister of Energy and Deputy Prime Minister. But the Verkhovna Rada did not support this idea.

The personnel reshuffle has not spared large energy enterprises.

Several personnel rotations took place in Naftogaz. In early April, Andrew Favorov resigned from the post of Director for the Integrated Gas Business. A little later, the company decided to cut the position of the executive director occupied by Yurii Vitrenko.

In addition, as part of the transformation, Naftogaz Group liquidated the Integrated Gas Business division and created the Exploration and Production division and the Commerce division. Olena Kobets was appointed General Director of Ukrgasvydobuvannya JSC.

In February, Vsevolod Kovalchuk, acting Director of the State Enterprise NPC Ukrenergo, resigned. At the same time, the Supervisory Board only on August 2 chose and appointed Volodymyr Kudrytskyi to the position of chairman of the company's board based on the results of the competition.

On March 31, the Cabinet of Ministers of Ukraine appointed Petro Kotin as the interim president of NNEGC Energoatom. Before him, since the beginning of this year, two people managed to be in positions.

In October, the head of the State Enterprise Market Operator changed – Roman Sutchenko was appointed to the positionn, having replaced Volodymyr Evdokimov.

Tags: oil, coal mining, energy market, renewables, Gas market, hydrogen

Read also

What will change in housing and utilities and energy sector in 2021
"The road the whole world will follow": Mykhaylo Krutikhin about the future of hydrogen, Nord Stream 2 and the main results of 2020
Andrew Favorov about the TV series "Sviy Gaz": we filmed for Netflix