/////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////// UKRAINIAN ENERGY MARKET Overview of the sector and future projects Publicatiedatum / 4.07.2018 //////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////// //////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////// 4.07.2018 Ukrainian energy market pagina 2 van 57 ACRONYMS AND ABBREVIATIONS BCM Billion Cubic Metres CHPP Combined Heat and Power Plant EPC Engineering, Procurement, Construction GDP Gross Domestic Product GCal Gigacalorie GTS Gas Transportation System GWh Gigawatt-hour HPP Hydro Power Plant HPS Hydro Power Station HPSPP Hydroelectric Pumped Storage Power Plant IRENA The International Renewable Energy Agency kW Kilowatt kWh Kilowatt-hour MJ Megajoule MW Megawatt MWh Megawatt-hour NEC National Energy Company NEURC National Energy and Utilities Regulatory Commission of Ukraine NNEGC National Nuclear Energy Generating Company NPP Nuclear Power Plant PSPP Pumped Hydroelectric Energy Storage PV Photovoltaic RE Renewable Energy RES Renewable Energy Source SE State Enterprise SHPP Small Hydro Power Plant the State Agency on Energy Efficiency and Energy Saving of SAEE Ukraine SPP Solar Power Plant SPS Solar Power Station TPP Thermal Power Plant UES United Energy System VAT Value Added Tax WPP Wind Power Plant //////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////// 4.07.2018 Ukrainian energy market pagina 3 van 57 CONTENT 1. Energy sector of Ukraine in key figures ............................................................................................................ 5 1.1 General overview 5 1.2 Nuclear power plants 11 1.3 Thermal power plants 13 2. Renewable energy sector.......................................................................................................................................... 14 2.1 General overview 14 2.2 Hydro energy 20 2.3 Solar energy 22 2.4 Wind energy 26 2.5 Biomass and biogas 29 2.5.1 Biomass 29 2.5.2 Biogas 33 3. Oil and Gas industry.................................................................................................................................................... 35 3.1 Natural gas 35 3.2 Oil 41 4. Energy sector reforms & regulatory changes ............................................................................................. 43 4.1 Integration with the EU energy system 43 4.2 Electricity market reform 45 4.3 Oil and gas 47 4.4 Alternative energy 48 4.5 Recent strategic regulatory changes 49 5. Energy Strategy of Ukraine until 2035: Security, Efficiency and Competitiveness (NES).. 51 6. Energy sector projects ............................................................................................................................................... 53 7. Data sources & useful links ..................................................................................................................................... 56 //////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////// 4.07.2018 Ukrainian energy market pagina 4 van 57 1. ENERGY SECTOR OF UKRAINE IN KEY FIGURES 1.1 GENERAL OVERVIEW Energy industry in Ukraine is a huge part of the economy of the country. The energy sector is first in terms of taxes paid (133 bln UAH or 25% of aid taxes) and in 2015 the energy industry ranked fourth in terms of GDP share (162 bln UAH or 8% of GDP). The sector employs 450 thsd people or 3% of the employed population. # Source % of total usage 1 Oil and gas condensate 19% 2 Coal 27% 3 Gas 33% 4 Oil products 77% 5 Nuclear fuel 100% Table 1. Energy sources imported by Ukraine Source: State Fiscal Service of Ukraine, Naftogaz of Ukraine, calculations based on statistics from the State Statistics Service of Ukraine, Aequo In 2016 Ukraine ranked 28th for energy consumption. Despite this high consumption of energy, Ukraine is 60th in terms of economic volume. This suggests low energy efficiency. Ukraine is among the top 20 least energy-efficient countries in the world. Ukraine spends three times more on energy than Poland. Figure 1. Energy consumption by source, % Ukraine World 3% 7% Coal 28% 21%% 11% Natural Gas 36% 21% Nuclear Energy 33% Oil 30% Hydropower 24% 5% Renewable energy Source: British Petroleum, Aequo Ukraine ranks 7th in the world in terms of coal reserves, 12th for uranium, and 29th for natural gas. Lack of investment in exploration, processing and energy efficiency, as well as complicated bureaucratic procedures, impede the development of Ukraine’s energy sector. //////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////// 4.07.2018 Ukrainian energy market pagina 5 van 57 # Energy Resource Volume Number of years for which there will be enough reserves at current production levels 1 Gas 591000 mln m3 33 2 Coal 34000 mln tons 834 3 Uranium 0.1 mln tons 115 4 Oil 55 mln tons 25 Table 2. Confirmed amount of energy resources in Ukraine at the end of 2016 and their location Source: British Petroleum, World Nuclear Association, Aequo Figure 2. Energy reserves in Ukraine Source: British Petroleum, World Nuclear Association, U.S. Energy Information Administration, Naftogaz of Ukraine, Aequo //////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////// 4.07.2018 Ukrainian energy market pagina 6 van 57 Energy production More than half of Ukraine’s total electricity is produced in the Zaporozhia, Donetsk and Mykolaiv regions. Type of energy production plant/Name of plant Volume, bln kWh NPP Zaporizhia NPP 31 South-Ukraine NPP 17 Rivne NPP 17 Khmelnytskyi NPP 15 Thermal power Zakhidenergo 15 stations Dniproenergo 13 Centrenergo 10 Skhidenergo 9 Donbasenergo 3 Other Pumped storage and hydroelectric power plants 9 Heat plants and isolated generating plants 13 Wind power station 0,9 Solar power stations 0,5 Biomass 0,2 Total 153,6 Table 3. Electricity balance. Energy production Source: SE “Ukrenergo National Power Company”, Aequo 20% of Ukrainian electricity is spent on its own generation and transportation. Energy consumption by type of expenses and industry Volume, bln kWh Expenses Electricity costs for transportation in distribution networks and for the needs of 13 suppliers at the regulated tariff Electricity consumption for production (needs of power plants) 13 Electricity costs for transportation in trunk and interstate networks 4 Electricity consumption of PSP in pumping mode 2 Industry Metallurgical industry 29 Machine building 4 Food and processing 4 Fuel 4 Building materials 2 Chemical and petrochemical 3 Other 4 Population 36 Other Municipal consumers 15 Transport 7 Other non-industrial consumers 6 Farming 4 Construction 1 Total 151 Table 4. Electricity balance. Energy consumption Source: SE “Ukrenergo National Power Company”, Aequo //////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////// 4.07.2018 Ukrainian energy market pagina 7 van 57 It is difficult to determine the optimal electricity generation structure. Energy issues in each country have their own characteristics and challenges. There are plans to increase the share of renewable energy sources in Ukraine up to 12% by 2020. Figure 3. Structure of electricity production in Ukraine and the EU in 2016, % EU Ukraine 18% 6%1% TPPs and CHPPs 41% 44% NPP 11% HPS 52% Renewable energy 27% power plants Source: International Energy Agency, State Statistics Service of Ukraine, Eurostat, Plan of development of the United Energy System of Ukraine for 2017-2026 (project), Aequo Figure 4. Structure of electricity production in Ukraine in 2017 and 2018 (forecast), % Source: Ministry of Energy and Coal Industry of Ukraine, State Statistics Service of Ukraine The key problem of the electric power industry is the high level of wear and tear of electric power equipment, the majority went into operation in the 1960s-1970s and were designed in accordance with the norms of the 1950s. //////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////// 4.07.2018 Ukrainian energy market pagina 8 van 57 Years of operation % <25 8% 25-30 6% 30-40 22% >40 64% Table 5. State of transmission networks lines as of 31.12.2016 Source: Ministry of Energy and Coal Industry of Ukraine, SE “Ukrenergo National Power Company”, Aequo Since 1991, the population has significantly increased the efficiency of heat consumption. Figure 5. Heat consumption by the population, MJ/person Source: Eurostat, State Statistics Service of Ukraine, Aequo Natural gas is responsible for more than 70% of the heat consumption in Ukraine. 2% 2% 1% Heat plants 5% (boilerhouses) TPS TPS 30% Disposal plants 61% CHPP NPP’S Other plants Figure 6. The structure of heat production in Ukraine 2016, % Source: Eurostat, State Statistics Service of Ukraine, Aequo ////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////