Energie­si­scherheit in der Ukraine

Olena Pavlenko, DiXi Group

The destruction of Ukraine’s energy sector has been a goal in Russia’s war against Ukraine from the start. This involves, firstly, the attempt to wreak the maximum destruction on the country’s energy infra­structure (power grids and gas pipelines) with the aim of cutting off the energy supply of as many Ukrainian consumers as possible. There have been days during the war when as many as a million consu­mershad no access to electricity, though Ukrainian energy companies were able to re-estab­lishe service swiftly.Secondly, the seizure of strategic energy facilities – the Kakhovka HPP, the Chernobyl NPP and the Zaporizhzhya NPP, has been a priority of Russian forces. The behaviour of Russian troops at the captured facilities makes it clear that they do not under­stand how dangerous the conse­quences of their actions there could be – they walked around in the areas conta­mi­nated by high radiation at the Chernobyl station, andRussian units have fired rockets over the Zaporizhzhya nuclear power plant at very low altitudes. It is unlikely that Russia plans to fully develop these facilities – rather, its behaviour suggests that its seizure of power­plants is aimed at black­mailing Ukraine and the world. Thirdly, Russia has stepped up the frequency of its cyber-attacks on Ukrainian energy facilities. The number of cyber-attacks has tripled during first phase of the war. There were more than 300,000 cyber-attacks during the first 80 days of the war. Ukraine has amassed anincre­dible amount of experience in cyber warfare and is now in a position to train other countries, including EU countries, in cyber defence. Fourthly, Russia has tried to leave Ukraine completely without fuel. In addition to blocking fuel imports, it destroyed many of Ukraine’s fuel storage facilities. This was the most painful blow. Ukraine is only now returning to a stable fuel situation. As a result of Russian aggression, as of the fifth of June, almost 5% of the installed electricity generating capacity had been destroyed, and 35% of generating capacity is now in terri­tories occupied by Russia.

Despite the doubts of some, Ukraine’s energy system has shown a high level of resilience in the face of Russia’s war. Ukraine’s electricity system was discon­nected from Russia and Belarus on the day that the war broke out. For three weeks, it supplied electricity to consumers while operating in isolation, giving the lie to pessi­mistic predic­tions from many European experts. On 16 March 2022 Ukraine’s electricity system was synchro­nized with the European ENTSO‑E system, and on 7 June 2022, the EU trans­mission system operators agreed to open commercial trading between Ukraine and the EU. The Ukrainian grid operator Ukrenergo believes that exporting electricity to the EU may become one of its most profi­table economic activities, as prices in Ukraine today are three times lower than those in Europe. This will help to reduce the illiquidity of the Ukrainian energy market and attract investment to it in the future.

Ukraine has also shown a high level of resilience in the gas sector. Despite repeated cases of destruction of local gas pipelines, Ukrainian companies have been able to resume supplying gas to Ukrainian consu­merspromptly. Ukraine was able to make it through the heating season successfully. It is important to note that Russia has consis­t­ently refrained from firing on the gas pipelines that transport gas to the EU. This is further evidence of the importance that Russia attaches to maintaining gas supplies, and it also helps explain why Putin was so eager to launch Nord Stream 2 – the availa­bility of the bypass pipeline would give the Russian forces free reign for shelling strategic Ukrainian facilities in the gas sector and beyond. At this point, I wish to point out that Ukrainian experts consis­t­ently empha­sized this risk at public discus­sions in Germany and in other countries during the construction of Nord Stream 2.

Turning now to oil and oil products: before the war, Ukraine was dependant on imports from Russia and Belarus for more than 60% of its petroleum needs. Of the three sectors discussed here, the oil sector proved to be the least resilient. Belarus and Russia blocked oil and fuel exports to Ukraine immediately after the war began. In response, the Ukrainian government began to import more of these products from the EU. However, Russia has attempted to destroy Ukraine’s capacities for refining and for storing oil and other fuels – Russian missiles have wiped out 27 oil depots in different regions of Ukraine. Russia also fired 20 missiles at theKre­menchug refinery plant, rendering it inope­rable. The country has lost its infra­structure. To facilitate fuel imports from the EU, the government has libera­lized prices on the oil market and simplified all import proce­dures. In June, there was a severe shortage of fuel in Ukraine, but the situation grew more stable toward the end of the month. It is difficult to say how Ukraine might have prevented the crisis and protected its infra­structure to avoid the physical destruction of depos and refineries, but one of the biggest lessons learned with regard to the oil sector is that Ukraine must never again become dependent on fuel imports from Russia and Belarus.

Facing the threat of a long-term war, the government is now focused on the rapid resumption of opera­tions in the energy system. Today, infor­mation on the share of total electricity production generated by parti­cular energy sources is not released due to security concerns, but it is known that nuclear power together with wind‑, solar- and hydro-power account for almost 90% of total electricity production (meaning that electricity generation from coal is just over 10%). Nuclear power remains the main source for electricity production, despite the occupation of two nuclear power plants. The Chernobyl plant was liberated in early April, while the Zaporizhzhya nuclear power plant is still under Russian occupation. This is the first act of this kind of aggression in the world; the Ukrainian government has already described Russia’s actions as „nuclear terrorism“. This situation demands an additional response from the world, which should seek to limit further­de­ve­lo­pment of the nuclear sector in Russia and prevent the sector from sharing its techno­logies abroad. This situation has also shown that the IAEA is not able to act in a truly effective manner to ensure nuclear safety in the world: there is a need to discuss deep reform of such bodies in the future.

To reduce Ukraine’s depen­dence on Russian nuclear energy, the state-owned Energ­oatom and the US company Westing­house have signed an agreement in June 2022 to increase the number of AP1000 nuclear power units in Ukraine from 5 to 9. There is also an agreement to increase the volume of American nuclear fuel supplies to cover the needs of all Ukrainian NPPs. In addition, the companies confirmed their intention to establish a Westing­house engineering and technical centre in Ukraine.

Ukraine’s coal reserves were at a low level as it entered the 2021–2022 heating season, and many experts had criti­cized the government for failing to prepare effec­tively for the winter. However, Ukraine built up its reserves quite quickly during the wintertime and as it prepared for synchro­nization with ENTSO‑E. As of the beginning of the war, the country’s coal reserves were in line with planned levels, but coal production fell by 30% after the war started and Russia destroyed several mines. In prepa­ration for the upcoming heating season, the Ukrainian government has banned all exports of coal, oil fuel and gas. It expects to have amassed 2–3 milliontons of coal in its warehouses by October 2022. There is also another radical change that has taken place in the coal sector: unlike in previous years, there is no public confron­tation today between the government and the companies in this sector, including private energy companies.

The renewable energy sector was also badly damaged during the war. As of 5 June, about 30% of the country’s solar-power capacity and over 90% of its wind-power capacity had been destroyed. Also, renewable energy producers have not been receiving the feed-in payments they are entitled to under the Green Tariff scheme (only 10% is being paid out according to some estimates), driving them into insol­vency. And because many of the solar and wind generation facilities are located in the east and south of Ukraine, many have come under fire and lost capacity due to missile damage.

In the gas sector, Ukraine now consumes almost as much gas as it produces, due to a rapid fall in consumption, of 30% or even more, after the start of the war. Ukrainian gas storage facilities still held about 9 billion cubic metres at the end of the heating season. Ukraine has not yet imported gas from the EU. This will likely change as the country begins to prepare for the heating season. Though, Naftogaz believes that Ukraine will not need to import large quantities of gas. The government has begun negotia­tions to purchase gas in various countries, including Norway, poten­tially – in the form of liquefied natural gas. The European Bank for Recon­s­truction and Develo­pment will provide the NAK Naftogaz with a loan of 300 million euros, the first 50 million of which will go to emergency gas purchases.

Ukraine also continues to transport Russian gas to Europe. Some Ukrainian and European experts have suggested that Ukraine stop trans­porting gas on its own initiative but doing so would put Ukraine in breach of commit­ments primarily to European companies and European consumers, and Russia would use any such act to accuse Ukraine of being an unreliable partner. Therefore, the Ukrainian TSO (Trans­mission System Operator) could only stop the transport if European companies first took the appro­priate decision.

The Ukrainian route remains the primary route for trans­porting Russian gas to Eastern and Western Europe. Poland termi­nated its gas agreement with Russia on the Yamal-Europe gas pipeline in May 2022. Nord Stream 2 was completed in October 2021 but was not put into operation – German Chancellor Olaf Scholz announ­cedat the press confe­rence on 22 February 2022 that Nord Stream 2 certi­fi­cation had been suspended after Russian President Vladimir Putin issued a statement recognizing individual states in Ukraine. Russia uses the Nord Stream 1 gas pipeline as a tool for political manipu­lation – gradually reducing the volume being trans­ported through it, and blaming this on, for instance, the sanctions preventing Siemens from returning an overhauled compressor from Canada. By reducing gas supplies through the Nord Stream 1 gas pipeline, Russia does not want to increase gas trans­por­tation through Ukraine. At the same time, the Ukrainian Gas Trans­mission System Operator has been proposing that gas flows be rerouted through Ukrainian terri­to­ry­since the beginning of the war, as the Ukrainian pipeline has free and Gazprom-reserved capacity. Unfort­u­nately, neither European companies nor Russia have listened to or discussed these proposals.

Streng­thening the sustaina­bility of Ukraine’s energy sector in the medium term means large business invest­ments and further integration into the EU energy sector.

Ukraine needs an EU policy that will enable it to receive aid but also allow it to become an equal partner. This means creating the condi­tions for the energy sector to become more liquid and generate more electricity. The EU can help to increase electricity exports from Ukraine and avoid creating obstacles in the form of CBAM regulation for Ukraine.

It also means that the EU and US govern­ments need to develop policies that will help attract foreign investment in electricity generation in Ukraine. Ukraine will not be able to offer a new set of programs to support renewable power generation, due to the lack of liquidity on its electricity market and high level of energy poverty (which will increase even further after the war). As Ukraine can’t develop support programs for the renewable sector on its own, the EU countries can help in this.

Also, Ukraine – as a candidate country for EU membership – can be recognized as a full member of the European Green Course and gain access to European funds. Ukraine has clearly defined the goal of decar­bo­nization and must achieve this goal from a much more difficult starting position than any other EU member state. The possi­bility of receiving additional financial support will allow the country to make swifter progress in this direction.

Incre­asing energy efficiency is a policy aim that would be supported by any government and all consumers. But improving energy efficiency will require many more mecha­nisms (for house­holds, cities and commu­nities, and companies) than currently exist. And these mecha­nisms must be very simple and trans­parent. The EU can help both in the develo­pment of such mecha­nisms and by providing the necessary funds.

In the gas sector, Ukraine must remain the main transit country for Russian gas – and Nord Stream 1 should be stopped. It is already clear that the transport of Russia gas through Ukraine has an inhibiting effect on the level of Russia’s armed aggression – and will continue to do so, at least so long as Russia remains interested in exporting gas to the EU. Ukraine does not manipulate technical problems for its own purposes, as Gazprom does with offshore gas pipelines. Also, Ukrainian gas storage facilities should be made a fully-fledged part of the EU’s energy security archi­tecture – European companies should store gas in them for the winter, and EU regula­tions should provide for this. The EU can also provide funds to increase the capacity of inter­con­nectors between Ukraine and Poland and Slovakia. This will ensure better gas flows between countries and the ability to respond to crises more quickly.

Moreover, if the EU is seriously thinking about granting EU membership to Ukraine in the future, Ukrainian politi­cians and government officials can already start to attend meetings and discus­sions of EU energy policy – for example, meetings of energy ministers. This would allow a better under­standing of EU priorities and a faster synchro­nization of Ukraine’s and the EU’s energy security policies in the future.