This spring and the global COVID-19 pandemic have demonstrated the painful consequences of all the years when the need for comprehensive energy reforms in Ukraine has been ignored, sometimes deliberately.
The Pandora's box of Ukrainian energy is finally open to the general public. This spring and the global COVID-19 pandemic have demonstrated the painful consequences of all the years when the need for comprehensive energy reforms in Ukraine has been ignored, sometimes deliberately.
Experts have long said that in the current state of Ukrainian energy will not last long. Back in 2014–2015, you could hear discussions about the need to reduce the “green tariff,” including the cost of nuclear plant decommissioning into the nuclear energy tariffs, the need to increase grid flexibility, etc.
It is therefore hardly surprising that we observed all these problems exploding at once this spring. As of May 29, the issue of the “green tariff” had not been resolved, and the negotiations with investors who may have their investment terms changed retroactively are hardly progressing. Another illustration of the crisis was the shutdown of nuclear power plant units at the end of April. The Security Service of Ukraine was quick to lay the blame and immediately reported the “threat to the country’s energy security due to the growth of ‘expensive’ manufacturers of the ‘green’ energy,” who are allegedly displacing the “cheap” nuclear power. Interestingly, it has actually been TTP generation that has been growing during the past two months.
Some experts see this limitation of nuclear power plants and increasing coal generation as indisputable proof of the infamous green v. coal paradox and warn that due to the growing share of solar and wind energy in Ukraine, dependence on thermal generation to balance the power system is also increasing. We tried to understand the situation and found out if there was a way to avoid it.
Green coal... what?
Like every country in the world, Ukraine is currently undergoing a climate crisis. We all felt the absence of a meteorological winter this year. The number of warm months of the year is growing. The spring of 2020, while stingy on precipitation, “blessed” us with hail, dust storms, cold spells and prolonged rains in May.
The main cause of climate change is greenhouse gas emissions. In Ukraine, the energy sector accounts for ⅔ of such emissions. Scientists highlight the need to stop the industrial mining and burning of fossil fuels over the next 20 to 30 years. This will keep climate change at 1.5-2°C, in line with the Paris Agreement, to which Ukraine is a signatory.
Therefore, the world's leading countries have begun to move to clean technologies — renewable energy sources. To stimulate the development of the renewable energy sources (RES), our government introduced the so-called “green tariff” in 2009, and from April 2020, it was supposed to switch to an auction model for large-scale solar, wind and other RES capacities.
Last year serves as a prominent illustration of the outcomes — renewable energy capacities tripled (from 2.3 to 6.8 GW), which is a positive trend to combat climate change. But this rapid development of the industry has led to a great number of fears, whether substantiated or not, including the creation of the “green v. coal paradox.” idea.
The idea of this paradox was first broadly introduced by former head of Ukrenergo Vsevolod Kovalchuk. Its essence is, in particular, that due to the inflexibility of the electrical system, further construction of new RES capacity will lead to the need to increase coal generation to balance the entire system. That is, the development of clean generation can lead to increased greenhouse gas emissions.
Ironically, in the Ukrainian reality, it is oligarchs who benefit most from the paradox. The main monopolist in the coal industry is the private company DTEK, which owns the entire coal generation chain (from coal mining to combustion). At the same time, as part of the diversification of its portfolio, the company has built a little more than 1 GW of RES capacity. Thus, any statement that the Ukrainian energy sector will not cope with the development of RES and will always need coal balancing primarily serves to support the idea of irreplaceability and exclusivity of one single private company.
In fact, if we take a look at the current state of affairs in the Ukrainian energy sector and try to look into the future, it becomes obvious that the green v. coal paradox will gradually lose its relevance. That is, of course, if the government finally gets enough political will to fulfill its promises on energy sector reforms.
The End of the Coal Age
Ukrainian coal facilities were built 50-70 years ago, and the power plants operating today are physically worn out and, in some places, in a state of emergency. The government acknowledges this, since the Concept of the “green” energy transition, presented in early 2020, includes closure of all functioning TPPs and full abandonment of the use of coal in the energy sector by 2050.
It should also be borne in mind that since 2011, Ukraine has been a member of the Energy Community, with the respective commitments to shut down coal power plants. By 2021, 8 units of the Dniprodzerzhynsk TPP and Kherson TPP must be decommissioned, and by 2023 the same should be done with 5 units of Burshtyn TPP, 6 boilers of Dobrotvir TPP, 2 boilers of Sievierodonetsk TPP, Mykolaiv TPP, and PivdenMash TPP.
In total, Ukraine has to shut down 21 coal and 14 gas units over the next 10 years. Talks about building of new facilities are met with healthy scepticism, since big investors (World Bank, European Investment Bank, EBRD, AXA, Allianz) refuse to invest in the coal industry, and building new units or even plants for budget money does not make economic sense. Such a change in plans will lead to an overall reduction in the generation of electricity from coal, and the green v. coal paradox is impossible in the absence of one of its constituents.
How do we replace the decommissioned coal facilities?
We will be saved by nuclear energy. Or not?
At first glance, nuclear energy, which provides over 50% of Ukraine’s energy generation, could become an alternative. But this is impossible for several reasons. More than a half is too high of a share for reliable work of the power system. Due to the excessive capacity of the nuclear power plant units, if one of them shuts down, it means a sudden loss of 5-6% of all production, which must be quickly compensated by the work of other plants.
In addition, nuclear power plants are inflexible. Demand for electricity varies throughout the day, while nuclear power plants are designed to operate at constant capacity. If there are too many nuclear power plants in the system, they will have to change their capacity in response to changing demand. Therefore, the theoretical increase in the share of nuclear power plants due to the closure of coal units makes the Ukrainian power system dependent on the inflexible type of generation, where an accident could lead to the second Chernobyl.
But there is another reason to avoid relying on nuclear energy.
As of the end of May 2020, 12 of the 15 operating power units of Ukrainian NPPs have already exhausted their 30-year design life. They now work overtime, which further increases the risk of accidents and increases the amount of accumulated radioactive waste. In addition, the Soviet legacy of equipment does not meet modern international safety standards for new nuclear power plants. Therefore, the process of gradual decommissioning of old NPPs should begin in the next 5-10 years.
What do we do if we avoid nuclear and coal generation?
Developing Storage and Balancing Capacities
The sharp increase in the share of RES is justifiably alarming in countries that have not prepared in advance for possible problems with balancing of the installed capacities. After all, the generation of electricity by solar and wind power plants directly depends on external factors, such as time of day, season, weather conditions.
The need to increase balancing capacities has long been known both at the level of executive authorities and in Ukrenergo. At least since 2017, there has been a mechanism for holding a competition for highly manoeuvrable balancing generation, but the government has only recently announced it in the autumn of this year, when the impending problem was no longer possible to disregard.
One of the obvious solutions for Ukraine may be RES storage capacities. They are rapidly becoming more cost-effective than balancing stations based on fossil fuel. RES power plants with installed batteries are already competing with new coal or gas stations in Germany, the United Kingdom, and the United States. It is projected that in the next 10 years their cost will reduce by half, and in the next 30 years—by four times. What may be of particular interest for Ukraine is the Power-to-Gas (P2G) technology, when excessive energy is used to synthesize gas, which later produces energy to satisfy peak loads.
Other important balancing mechanisms may be the connection of Ukraine's grid to the EU grid, with the permission to import electricity, and the introduction of smart grids and demand management mechanism, when energy consumers are actively involved in grid balancing, for example, charging electric vehicles in times of excess.
Supporting the Development of Solar and Wind Energy in Communities
It is symbolic that decentralization, perhaps the most successful reform in Ukraine in recent years, may open the door to reforms in the energy sector. It is through decentralization that Ukrainian communities have been given more powers and financial resources on the ground that they can dispose of to solve their own pressing problems.
24,000 Ukrainian households have already installed solar power plants with a total capacity of 618 MW. Such a dynamic in the emergence of solar power plants among regular Ukrainians is a prerequisite for energy independence of communities. If this trend continues and if there is a large number of geographically dispersed capacities (roof solar power plants, small wind farms), this may also reduce the imbalance of power generation schedule and make the grid more flexible.
Despite the fact that a significant part of generation capacities, renewable and otherwise, belongs to oligarchs indeed, RES is the only option to reduce their hold on the industry. The state should make small RES producers full-fledged players in the energy market who can produce energy for their own needs and even make a profit. In other words, small generation is an effective way to de-oligarchize the industry.
Conclusion
The green v. coal paradox is not inevitable. It can be avoided if dirty fossil fuels are not supported (through such means as budget funding of the coal industry and subsidies to players of the fossil fuel market etc.). Instead, investment is needed not for oligarchs, but for the future security and the guarantee of true energy independence of the country through the development of small RES and their balancing and storage capacities.
Authors:
- Kostiantyn Krynytskyi, Head of the Energy Department, NGO Ecoaction;
Oksana Aliieva, coordinator of the Climate Change and Energy Policy program, Heinrich Boell Foundation, Kyiv Office — Ukraine.