What is happening currently in Ukraine’s troubled power sector is unprecedented and can potentially have disastrous consequences for the whole of Europe.
In 2020 Ukraine’s drag towards power sector monopolization and major disruptions to its normal functioning does not catch the eye and remains largely unnoticed, overshadowed by media noise and COVID-19. But what is happening currently in Ukraine’s troubled power sector is unprecedented and can potentially have disastrous consequences for the whole of Europe.
Disrupted electricity market liberalization
This year Ukraine is experiencing a long sequence of corruption scandals, strong rebound against electricity market liberalization and environmental protection reforms. Since March, after abrupt reshuffling of the government, Ukraine is in fact, incrementally losing control over the power sector and its regulation to oligarchs and Russian proxies. Political turbulence in Ukraine is growing and there are clearly internal contradictions, but also clearly visible Russian interference in the energy sector.
The Ukrainian renewables sector, which attracted record investments in 2019, is now in limbo with the state authorities failing to meet the terms of the official memorandum on support scheme restructuring signed on June 10 with renewable energy associations. Meanwhile, the Ministry of energy seeks to postpone environmental compliance or closure of polluting coal thermal plants in Ukraine for another 6 years, effectively bidding on conservation of current state of play in the sector, which is increasingly dominated by private energy company DTEK, and preventing entry of new players and further displacement of coal with renewables. But the utmost concern is the situation with Ukraine’s nuclear power, which provides more than half of electricity generation in the country.
Effective functioning of the nuclear power plant operator “NNEGC “Energoatom” and other state-owned companies in the sector (large hydro operator “Ukrhydroenergo”, grid operator “NPC “Ukrenergo”) is disrupted and undermined by constant manual re-arrangement of the monopolized electricity market and continued cross-subsidies through dubious public service obligation (PSO) scheme, which already resulted in huge financial distortions and major losses for state-owned enterprises.
Due to consecutive financial and organizational problems, “NNEGC “Energoatom” postponed for indefinite terms the commissioning of a strategically important facility for the country — the Central Spent Fuel Storage Facility in Chornobyl exclusion zone, which prolongs reliance on Russia for spent nuclear fuel processing and handling. State-owned company also postponed implementation of a number of important nuclear safety measures included in the Complex Consolidated Safety Upgrade Program (CCSUP), which is partially funded by EBRD and Euratom through a 600 mln euro loan agreement.
Troubles with the largest nuclear power plant in Europe
Of particular concern is Energoatom’s failure to meet deadlines and compliance requirements for regular repairs campaign at Europe’s largest nuclear power plant - Zaporizhzhya NPP, which can result in rendering several 1000 MW reactor units inactive in the autumn-winter period of 2020–2021 or their entry exploitation without meeting safety requirements, provided by the nuclear regulator.
There is a long-standing problem with the purchase of spare parts for reserve diesel generators at Zaporizhzhya NPP, which, as the experience of the accident at the Fukushima nuclear power plant has shown, are critically important links in the nuclear safety chain of nuclear power plants. According to EU-funded CCSUP program, all 20 diesel generators АСД-5600 should have been retrofitted and receive modern electronic controls. This retrofit has not taken place as of November 2020, while the overall final date of the CCSUP completion has been shifted to 2023.
Media reports point to large-scale corruption involving current management of “Energoatom”, who repeatedly organized tenders for spare part supply of АСД-5600 generators in favor of the Russian company “MK “Diesel-Energo” through intermediaries. Back in 2017 previous head of “Energoatom” Yury Nedashkovsky was trying to establish a local supply chain for the servicing of the АСД-5600 generators independently from Russia. But, according to the journalist investigation published by Nashi Groshi, the pro-kremlin MP Andriy Derkach used his connections in the Security Service of Ukraine to sabotage this initiative.
In November, a number of Ukrainian non-governmental organizations appealed in open letters to the National Security and Defense Council (NSDC) of Ukraine and president Volodymyr Zelensky with their concerns about the situation around Zaporizhzhya NPP.
“Unfortunately, the current management of Energoatom is not imbued with a culture of safety and allows itself unprecedented disrespect for the Regulator, putting pressure on it by its own means, and involving other government agencies, including the Security Service of Ukraine. […] The purpose of this pressure is to obtain permits for the operation of Zaporizhzhya NPP power units despite the shortcomings in their repair,” says one of these open letters to NSDC from civil society organizations.
According to the letter signed by members of the civic council of SNRIU shortcomings in maintenance of ZNPP units were identified by the nuclear regulator during a comprehensive inspection held at the power plant from 9 to 13 October 2020 on the readiness of Unit №5 for operation at nominal power levels. Civil society points to the results of this inspection, officially outlined by SNRIU in the Act №АІО-112/1-19 dated 13.11.2020, which indicated numerous unfulfilled safety measures that make it impossible to extend the license for operation of Unit №5.
“Unit №5 of ZNPP is forced to stand idle due to the fact that the new management of “NNEGC “Energoatom”, with the support of the Security Service of Ukraine, is promoting the purchase of spare parts from “MK “Diesel-Energo”, which, according to SNRIU, cannot provide adequate quality for safety,” notes the appeal.
Civil society groups were urging the National Security and Defense Council of Ukraine to intervene in the situation to ensure independence of the SNRIU in accordance with national legislation and the Convention on Nuclear Safety, to which Ukraine is a Party, and set safety of nuclear power plant operations as unconditional priority for “NNEGC “Energoatom”. They didn’t receive any response yet.
How power sector situation is tilting the country towards multi-dimensional collapse
Let’s start with the financial dimension. According to recent analysis by Razumkov Center Energoatom's annual electricity production potential is about 95 billion kWh/year, but in the Energy Balance for 2021 it is planned to generate only 75.2 billion kWh. Thus, given that the price of production of electricity from NPPs is almost twice lower than the average for other types of generation, Ukrainian consumers due to dispatch restrictions and delays in scheduled repairs will be forced to overpay more than 10 billion UAH annually. Meanwhile, financial results of Ukrainian key state-owned enterprises for 9 months of 2020 are so shocking, that they make experts think about how these companies, which are critical for the country's economy, will function in the future. The total loss of the two system-forming energy enterprises — “Energoatom” and grid operator “Ukrenergo” — on which the socio-economic condition of the country depends is projected to be about UAH 40 billion (1,2 bln euro) by the end of the year.
Another consequence is that coal share in the generation mix will increase as well as CO2 emissions and levels of air pollution with dust, sulfur dioxide and nitrous oxides, which are already at hazardous extremes. According to the Report from the Centre for Research on Energy and Clean Air Ukraine is the single biggest emitter of sulphur dioxide in Europe, with most of the emissions coming from coal-fired power plants. According to the World Health Organisation’s information, Ukraine has the highest mortality and chronic diseases rates inflicted by the ambient air pollution in all of Europe. This illustrates health and environment dimensions.
All 14 major coal-fired thermal power plants in Ukraine were privatized (DTEK, Donbasenergo) or captured (Centerenergo) by oligarchs. But their fortune may not last, as their assets with an average age of 60 years are starting to fall apart.
In November two major accidents at Dobrotvir and Burshtyn thermal power plants happened. They resulted in large capacity outages and emergency situations for transmission grid operator NPC “Ukrenergo” and grid operators of Poland and Hungary.
On November 17 all four generators at Dobrotvir TPPs with total capacity of 300 MW unexpectedly were disconnected and switched off due to malfunction of power station’s grid connection equipment, which is operating far beyond its designated lifetime. This power station was built in 1954 and is one of the oldest in the country. 200 MW of its capacity is utilized for electricity exports to Poland.
On November 27 three 200 MW coal units simultaneously failed at Burstyn TPP and were undergoing emergency repairs. To prevent blackouts the Hungarian grid operator MAVIR had to provide emergency assistance and enact power generation reserves following the request from Ukrenergo. Burshtyn TPP is the main power source in the grid area of so-called “Burstyn energy island”, covering Transcarpathia, Ivano-Frankivsk and Lviv regions, which is synchronized with the continental European grid ENTSO-E. The accident of 27 November is quite serious, as malfunction of several large generating units at the same time is dangerous for the stability of the grid and can cause problems for transmission networks operation in the whole synchronous area of continental Europe. Here we see how Ukraine’s multi-faceted power sector crisis translates into problems in the dimension of grid operational safety.
What happened to these two power plants, which are mostly not engaged in the operation of the synchronous grid area of Ukraine’s mainland energy system, should be a dare warning for everyone. The condition of the rest of Ukraine’s coal power plants is not much better than that of Burstyn and Dobrotvir. According to an analysis of TPP malfunctions performed by environmental group Save Dnipro, there were a total of 256 equipment failures at Ukrainian TPPs in 2019.
Worst case scenario
If a multitude of these 60+ year-old coal power plants simultaneously fail in the grid area of the United Energy System of Ukraine, this can potentially lead to a country-wide blackout, especially if neighbors in the post-soviet synchronous area — Russia and Belarus — will fail to provide emergency assistance in necessary volumes. To date according to acting agreements with these countries unplanned transboundary capacity exchange is limited and cannot exceed 100 MW. Ukraine has never experienced country-wide blackouts before.
If power generation capacity loss in the energy system is not compensated quick enough by the use of reserves or disconnection of consumers and grid frequency drops below 49,8 Hz, functioning TPP and NPP units can begin tripping off and disconnecting, causing the cascading collapse of the power grid.
Now let’s return to the question of backup diesel generators АСД-5600 at Zaporizhya TPP, which should have been modernized according to partially EU-funded CCSUP program. In the case of a blackout, diesel generators are providing power for the reactor's water circulation pumps, preventing reactor core meltdowns. What happens if they don’t we’ve seen at Fukushima Daichi in Japan.
Rampant corruption, greed and neglect to safety among Energoatom’s top management, coupled with the deterioration of thermal power plants and other elements of power system infrastructure, can create a deadly mix of circumstances and lead to another Chornobyl, or even worse consequences with multiple core meltdowns at the largest nuclear power plant in Europe.
This risk is growing. As underlined in civil society appeals to the National Security and Defense Council, current political pressure on SNRIU is undermining thorough oversight on functionality of diesel generators and other safety systems of NPPs by independent and competent nuclear regulator.
Instead of conclusion — international action is needed
Apart from the worst-case scenario, which is extremely concerning, prospects for modernization and decarbonization of Ukraine’s power sector are currently under threat, as actions undertaken by Shmygal’s government since spring resulted in setbacks in electricity market reform and created a hostile environment for any kind of investments in new generation capacity, which is needed already now to substitute depreciated coal assets and in near term future to fill in the looming capacity gap associated with nuclear decommissioning.
Ukraine’s power sector is crumbling due to rampant domestic corruption, special interests in the government and hostile foreign influence. This not only undermines the economic development of the country but also creates a source of instability, endangers proper maintenance of critical infrastructure (including nuclear power plants) and therefore poses risks for the whole Europe.
Brussels has a direct leverage in this situation through the Complex Consolidated Safety Upgrade Program, which is partially financed through 600 mln euro loan from EBRD and Euratom. Unfortunately, as shown by a recent investigation by Deutsche Welle, financial resources of “NNEGC “Energoatom”, including loan money, are continuously being abused through rollbacks and dubious contracts with shell companies, which serve as intermediaries in supply chains of spare parts and equipment for nuclear power plants from Russia.
Moreover, government is seeking to set up a discussion with the European Commission on how to bypass EU’s environmental regulations on air pollution, extend the lifetime of coal power plants and strengthen DTEK’s monopoly at domestic electricity market, while maintaining access to European markets to export dirty electricity generated by Burstyn and Dobrotvir thermal power plants.
Hopefully, it does not take too much time to advance in understanding of Ukraine’s power sector situation from obscure to obvious and obscene. One of the possible solutions could be start of investigation on the current situation with reserve diesel generators at Zaporizhzhya NPP and check of pressure presence on SNRIU.
A little bit of attention and courage from international partners could play a vital role to support Ukraine’s national struggle against corruption and state capture.
By Oleh Savitskiy, climate and energy policy expert of Ukrainian Climate Network
Article presents author's opinion that might not always coincide with official position of the Heinrich Boell Foundation.
