Swan, Pike and Crawfish: How power engineers agreed to get out of the crisis

So much problems have accumulated in the Ukrainian energy sector that experts began to talk about a possible collapse and the introduction of a state of emergency. However, so far no one sits and does not freeze without electricity, although the spring is not as warm as we would like.

However, the relevant state bodies understand the problem and do not want to bring it to collapse. At least for this purpose they gathered at a round table initiated by the Verkhovna Committee on Energy, Housing and Utilities Services to discuss ways out of a difficult situation. The event was called "Overcoming Crisis Phenomena in the Ukrainian Energy Sector." Representatives of the main market participants, the Regulator, the Ministry of Energy and Environmental Protection and a large circle of interested parties, including water utilities and mayors of cities, took part in this almost 5-hour marathon.

And everything would be fine if it were not for Swan, Pike and Crawfish situation.

What happened and what to do?

Acting Minister of Energy and Environmental Protection Olha Buslavets in her opening remarks noted that Ukraine is now experiencing the biggest crisis because we have physical, fuel and economic imbalance. The situation is complicated by the coronavirus pandemic and a significant reduction in energy consumption. This interferes with the stable operation of the system and threatens the safe operation of the equipment.

However, the Minister did not voice the clear vision of the Ministry – how to change the situation. Because everything has already been invented before us. Buslavets recalled that on April 24, the Anti-Crisis Energy Headquarters was created under the chairmanship of Prime Minister Denys Shmyhal, and on April 29 its first meeting was held. And it was there, according to the minister, that a comprehensive plan for overcoming the crisis was developed. But what exactly it consisted of – she also did not say. She only noted that these are “20 of the most necessary activities that need to be implemented in a short time.” And she promised that the document would be sent out and brought to the attention of all relevant enterprises, departments and organizations.

Regarding what exactly the relevant ministry will be doing: the department is now developing the necessary regulatory legal acts to make up the situation on the electricity market and prevent collapse. 4 working groups have already been created in the following areas: improving PSO mechanism and the functioning of the electricity market; renewable energy; debt management in the market; cybersecurity in the energy sector.

The Minister also assured that negotiations with investors on resolving the problems of FIT had reached the finish line.

Regarding the introduction of a state of emergency in the energy sector, Buslavets noted that it would mean manual control of the industry, and she would not want to, because "this is wrong, the market should not work like that."

And how exactly it “should” be, and what to do, did not become clearer. Although, as it turned out later, not only the Cabinet of Ministers has its own vision of how to get the Ukrainian energy out of the crisis.

 NEURC’s alternative plan: one for all and on its own?

During the round table, Valerii Tarasyuk, Chairman of the National Energy and Utilities Regulatory Commission, described the vision of the problems, in particular, the problem of non-payments and arrears in the market.

However, the regulator not only identified problems, but presented 2 scenarios for solving them. Basically, the thing was renewables. According to NEURC, the root of the problems is renewables.

So, one scenario is tough, and the second seems to be softer. But the main steps in both converge: a ban on the construction of new renewable energy sources until the issue of maneuvering is resolved, a reduction of FIT for SPPs and wind farms (depending on the scenario, either to 8-9 eurocents, or 30% for SPPs and 15% for wind farms), as well as 100% responsibility for unbalances .And the creation of a capacity market and the creation of a “strategic reserve”.

The scenarios of the National Regulatory Commission include changes for consumers: the abolition of the preferential category of consumption to 100 kWh per month for the population, and the gradual (within 2-5 years) transition of household consumers to electricity tariffs at the industry level. And also the regulator calculated what effect each scenario will have.

It is interesting why the National Regulatory Commission did not present these scenarios at a meeting of the Anti-Crisis Energy Headquarters. Of course, our Regulator is independent. But for a general solution to the problem, it would be logical to discuss it together and share best practices with colleagues.

However, even to the voiced proposals of NEURC, the participants in the round table did not actively respond. It seemed that everyone set a goal to just cry for life.

“Poor relatives” of the energy sector and their opinion on how to live further

The leaders of the largest energy enterprises stated that each of them is not having a sweet life, but they “hold on”.

Acting Head of Energoatom Petro Kotin said that the total debt to Energoatom was more than UAH16 billion. Of these, 11.7 are debts of the “old” Energorynok SE. And about UAH 5 billion was received by Energoatom from the energy market over the past 3 months.

The level of revenues for supplied electricity is about 33%. They are enough only for the implementation of mandatory payments for wages, taxes and loan servicing. The production program is almost not funded. And soon the enterprise will not be able to produce electricity if it does not receive payment for it.

General Director of Ukrhydroenergo Ihor Syrota said that hydropower has significant problems due to insufficient water availability this year. Reservoirs are 93% full. In particular, it takes another 2 months to fill Kremenchuk reservoir, and therefore the plan for generating electricity will not be completed on time. About 60 million kWh will be underproduced.

In addition, the enterprise cannot, within the indicated time frame, put into operation the 4 th unit of the Dniester PSP stipulated by plan and complete the construction of new stations, in particular the Kaniv PSP.

Representatives of other enterprises called their own numbers of shortfalls and overdue plans. But the essence was the same - "everything is bad with us, we will not be able to work soon, but for now we are faithfully fulfilling all our obligations." None of the enterprises has provided a list of concrete steps, what exactly should be done to the Cabinet of Ministers, the ministry, the NKREKP and other policymakers in order to pull the energy enterprises out of trouble. They probably agree with the anti-crisis action plan, no matter what it is (given that a significant part of the participants in the round-table discussion has still not even seen that plan, since the minister only promised to send it out).

The mayors of the satellite cities of energy enterprises, in fact, voiced this thesis: we agree on everything, just tell me what to do.

European partners tried to help and explain what Ukrainians should do.

What Europeans think about Ukrainian energy issues

Director of the Energy Community Secretariat Janusz Kopacz noted that Ukraine was not the only one suffering from quarantine-pandemic restrictions. Although he spoke at the very beginning of the round table, he did not hear that in fact quarantine is not on the list of the main problems of our power engineers.

Among the main tasks of the Ukrainian energy sector, Kopach called the continuation of the course on market relations, the rejection of subsidies and excessive market regulation. This is what will ensure Ukraine stability in the energy sector, and not at all manual control and the introduction of a state of emergency. But judging by the further speeches of representatives of the Ukrainian energy business, it looked like they were striving for manual control.

Swans, Pikes and Crawfishes

This round table session showed that the main problem of the Ukrainian energy and energy markets is disunity. Each company takes care of its own interests, does not see itself in the general energy system, seeks to find the “main enemy” and the very hand that will save everyone. And if our government chooses market regulation of energy and market ways out of the crisis, then this position of power engineers is definitely not what we need. Because market relations are about shared responsibility, activity and involvement in the process.

 

Tags: The Cabinet of Ministers, NNEGC "Energoatom", electricity, NEURC, The Minystry of Energy and Coal Mining, energy market, feed-in tariff, electricity market, Ukrhydroenergo, renewables, quarantine, crisis

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