The growth of RES generation can significantly strengthen Ukraine’s energy independence and contribute to the implementation of the Green Deal, experts assure. According to the recovery plan of Ukraine, about 130 billion US dollars will be spent on this
For the fifth month, the world is watching how constant shelling by the russian federation destroys energy facilities and critical infrastructure of Ukraine. The actions of the aggressor encourage countries dependent on Russian energy carriers to accelerate finding solutions for their own energy security.
The European Commission has developed REPowerEU, which is an action plan that is based on the approaches of the European Green Deal and provides for increasing energy efficiency, increasing energy consumption from RES, developing hydrogen and biomethane technologies as well as switching from gas to electricity.
If the EU has time for a planned transition, then Ukraine is forced to respond quickly to the challenges of the war because its energy sector functions in conditions of large-scale destruction of heat and electricity generation facilities. However, at the same time as current measures, the country is developing an action plan for the future reconstruction of the energy sector, and it is doing so according to the principles of maximum energy security and environmental protection.
What the main directions of the Ukrainian green transition are, how experts assess the role of renewable energy in the overall mix, its current state and the things slowing down this movement – in the review of Ukrainian Energy.
The recovery of Ukraine is focused on energy independence and the Green Deal, and requires significant funding
At the international Ukraine Recovery Conference, which took place in Lugano (Switzerland) on 4-5 July, the Ukrainian delegation presented a large-scale Recovery Plan. According to the calculations of the Ukrainian party, Ukraine will need USD 750 billion to recover the country over the next 10 years. At the same time, approximately USD 130 billion will be needed to strengthen energy independence and implement the Green Deal.
President Volodymyr Zelenskyy singled out compliance with environmental standards and the use of green technology from among the main principles of future recovery.
Specifying measures for the future green reconstruction in the Recovery Plan, the proposal of the state is to build 3.5 GW of hydroelectric power plants and pumping hydroelectric power plants, to localize the production of RES equipment, such as wind towers, transformers, cables, electrolyzers and batteries. In addition, there are plans to build more than 30 GW of RES capacity for H2 production and to develop biofuel production.
Olena Pavlenko, President of DiXi Group Analytical Center, commented on the topic of recovery of Ukraine in a more complete context than Green Recovery. She emphasized that the modernization of the Ukrainian economy should be based on three important directions: decarbonization, energy efficiency and environmental protection.
“This triangle should apply all projects that will be developed as part of the National Recovery Plan. It is not only about projects in the energy sector but also in agriculture, industry and transport. And then we’ll talk about Green Recovery,” says Olena Pavlenko.
At the same time, the expert emphasized that the green recovery of the country requires much more funds than simple reconstruction, therefore it is currently important to determine the sources of external financing.
“We will see that after the war, many Ukrainian citizens will find themselves below the poverty line. It will be unfair and unrealistic to ask these people to finance the reconstruction and modernization of Ukraine. Governments should find other sources to help Ukraine ensure green recovery,” emphasized the President of DiXi Group.
According to the expert, compensation for damages from the aggressor, loans and grants from the EU, effective Ukrainian and international business projects in energy and ecology can be possible sources of green recovery financing.
The RES market is hampered by destruction, technical and financial limitations
At the beginning of 2022, Ukraine had an ambitious RES sector. This is how Andrii Pylypenko, Head of Guaranteed Buyer SE, assessed the state of the industry on the eve of the russian invasion during an expert discussion on the current state of the RES sector and directions for post-war recovery.
He specified that the volume of investments in the sector exceeded USD 12 billion at that time. In addition, the government worked on the repayment of accumulated debt to renewable energy producers and directions of further work.
Generation of green energy and installed capacities for 2021. Source: presentation of the Ukrainian Wind Energy Association
But with the beginning of the war, the question arose not concerning development but concerning preservation of the industry because the main facilities were located in the temporarily occupied territories of the south and east of Ukraine. Every day, energy facilities, including green ones, are under threat of shelling throughout the territory of Ukraine. Part of the infrastructure is already damaged.
At the same time, experts point to the destabilization of the energy market. The drop in electricity consumption during the war caused its surplus, which triggered the process of limiting generation, including from RES.
Oleksandr Kozakevych, Head of the Ukrainian Association of Renewable Energy, assessed the drop in electricity consumption as catastrophic. Such conclusions were made public by the expert during the event regarding the possibilities of green energy.
“First of all, we are talking about industrial regions. Everyone knows the sad consequences of Mariupol and other regions of eastern and southern Ukraine. We are currently talking about a drop in consumption by 30-35% and, as a result, this affects RES,” he expressed concern.
Solar power plants suffer the most from system restrictions, specified Vladyslav Sokolovskyi, Head of the Management Board of Solar Energy Association of Ukraine Public Association. According to his estimates, the estimated amount of system restrictions of SPPs for March-May 2022 was approximately 30% of the potential generation, which is equal to approximately UAH 2.5 billion.
“In addition to this challenge, there are a number of other problems that complicate the work of electricity producers under the green tariff,” said Yuliia Usenko, Head of the All-Ukrainian Sustainable Development % Investments Agency.
She called incomplete payment for produced energy the main burden for producers of the renewable energy sector because currently all calculations for energy from renewable energy sources are made at certain percentages of the green tariff.
The following difficult question is: technical limitation of generation which is related to balancing. Solar and wind generation suffer the most from this, however biosector producers also receive quite high payments for imbalances. The expert believes that in conditions of incomplete payment under the green tariff, this will become an additional financial burden for energy producers from RES.
In addition, the expert reminded that investors in the RES sector have obligations to creditors, and there are many such projects in Ukraine. Banking institutions are still understanding but are in no hurry to revise credit conditions for more loyal ones.
Guarantees of origin will promote the export of energy from RES
According to experts’ estimates, the situation on the green energy market should be improved by the introduction of a system for issuing guarantees of electricity origin, i.e. a document that contains detailed information about the source of production, for example, wind or solar energy. This should become an additional incentive for the European integration of the Ukrainian economy and expand the export possibilities of green electricity from Ukrainian producers.
Currently, the issue of the responsible for issuing guarantees of origin has not yet been settled, noted Oleksandr Kozakevych, Head of the Ukrainian Association of Renewable Energy.
To begin with, he suggests agreeing with the EU community on a transition period in order to quickly develop its own system of issuing guarantees of origin, and then synchronize it with the European one.
Vladyslav Sokolovskyi, Head of the Management Board of Solar Energy Association of Ukraine Public Association, agrees with the expert. He clarified that it was necessary to create a mechanism for confirming green generation even before the introduction of the law on the electricity market. In addition, the professional noted that green certificates should become a financial instrument.
“The use of certificates on the financial market would make it possible to produce more green energy and then use green certificates to confirm its production in Ukraine and further export of green energy to the European Union,” the expert argued.
Ukraine should take into account all opportunities for the development of renewable sources
It is impossible to stop traditional energy today, but the world should count on the future, according to Andrii Konechenkov, Head of the Management Board of Ukrainian Wind Energy Association (UWEA).
Regarding the Ukrainian energy mix, the Head of the UWEA Management Board stated that the pre-war plans to increase the share of RES were also quite ambitious, but they are currently being revised.
“As of 2021, we had almost 55% of electricity production due to nuclear power, reached almost 13.2% of production from RES, taking into account large hydropower, the rest fell on thermal power. According to the plans of the National Economic Strategy until 2030, it was expected to reach 25% of renewable energy sources in the electricity balance and to reduce production at the expense of nuclear energy,” the expert clarified. “However, it is currently said that the strategy plans for the period after 2031 will be changed, while the terms of operation of nuclear units are planned to be extended again. According to the previous statements of Herman Halushchenko, Minister of Energy, the current plans for the development of the energy industry of Ukraine included the construction of nine new nuclear units.”
“At the same time, according to the Ukraine Recovery Plan presented by the government in Lugano, two nuclear power units should be built by 2032,” added Andrii Konechenkov.
The Head of the UWEA Management Board considers the idea of expanding nuclear generation in the conditions of a permanent war threat to be an adventure, arguing this with the particular vulnerability of these facilities during the war.
At the same time, he pointed to greater resistance of RES facilities to hostilities, and in general to any global crises, which was demonstrated by the coronavirus crisis and the consequences on the energy market that it led to.
The expert believes that in order to preserve green energy, it is necessary to leave a green tariff for those projects that have already been built, have settled their relationship with banks and continue to work. He also pointed out that despite all economic, political and other problems, a competitive market has already formed in Ukraine.
“In recent years, such companies as Vestas, Nordex Group, General Electric, GoldWind and others have come to Ukraine. And Wind Parks of Ukraine National Company continues to produce turbines, although the production facilities had to be moved from Kramatorsk to safer cities of Ukraine,” noted Andrii Konechenkov.
Summarizing the assessments of experts, we can say that the general trend of post-war development will be an increase in the share of electricity from RES in the overall energy balance. This will be facilitated by the elimination of financial and legislative restrictions on the development of renewable generation, the expansion of opportunities for the exportation of electricity from RES, and the consideration of the Green Deal which is focused on clean energy.
Larysa Bilozerova, specially for Ukrainian Energy