A thesis submitted to the Department of Environmental Sciences and Policy of Central European University in part fulfillment of the Degree of Master of Science Development of energy systems and energy policies in Ukraine: historical analysis, current state and future scenarios CEU eTD Collection by Anna SHUMEIKO Supervisor: Professor Aleh CHERP May 2014 Erasmus Mundus Masters Course in Environmental Sciences, Policy and Management MESPOM This thesis is submitted in fulfilment of the Master of Science degree awarded as a result of successful completion of the Erasmus Mundus Masters course in Environmental Sciences, Policy and Management (MESPOM) jointly operated by the University of the Aegean (Greece), Central European University (Hungary), Lund University (Sweden) and the University of Manchester (United Kingdom). CEU eTD Collection i Supported by the European Commission’s Erasmus Mundus Programme Notes on copyright and the ownership of intellectual property rights: (1) Copyright in text of this thesis rests with the Author. Copies (by any process) either in full, or of extracts, may be made only in accordance with instructions given by the Author and lodged in the Central European University Library. Details may be obtained from the Librarian. This page must form part of any such copies made. Further copies (by any process) of copies made in accordance with such instructions may not be made without the permission (in writing) of the Author. (2) The ownership of any intellectual property rights which may be described in this thesis is vested in the Central European University, subject to any prior agreement to the contrary, and may not be made available for use by third parties without the written permission of the University, which will prescribe the terms and conditions of any such agreement. (3) For bibliographic and reference purposes this thesis should be referred to as: Shumeiko, A. 2014.Development of energy systems and energy policies in Ukraine: historical analysis, current state and future scenarios. Master of Science thesis, Central European University, Budapest. Further information on the conditions under which disclosures and exploitation may take place is available from the Head of the Department of Environmental Sciences and Policy, Central European University. CEU eTD Collection ii Author’s declaration No portion of the work referred to in this thesis has been submitted in support of an application for another degree or qualification of this or any other university or other institute of learning. Anna SHUMEIKO CEU eTD Collection iii THE CENTRAL EUROPEAN UNIVERSITY ABSTRACT OF THESIS submitted by: Anna SHUMEIKO for the degree of Master of Science and entitled: Development of energy systems and energy policies of Ukraine: historical analysis, current state and future scenarios. Month and year of submission: May, 2014 The modern ages are characterised with our growing dependence on previously unknown forms of energy, such as electrical and nuclear, due to world population growth and increasing energy demand in practically every corner of the planet. Climate change, energy security and energy access are the three global energy challenges which have to be addressed by humanity in 21st century. However, as some authors state, there is no global energy governance as such. Thus, in order to achieve global sustainability goals, national energy systems should be transformed and guided by internationally accepted principles focused on dealing with the mentioned above challenges. From this perspective, there is a clear necessity to study and analyse each country in particular, as a part of global and regional energy transitions research. The present thesis focuses on energy system of Ukraine as a country rich with natural resources and with an immense untapped potential for energy efficiency, renewable energies and extraction of fossil fuels. Ukraine’s geographic location at the Black Sea and between the two large political powers of the present, the EU and Russia, gives the country a substantial strategic importance, and at the same time puts it at the crossroads as a direction for its future development is concerned. The International Energy Agency states that Ukraine “… has the unique opportunity to undertake an energy revolution” by driving economic growth, modernising infrastructure of its energy sector, reforming its energy markets, increasing energy efficiency and exploitation of indigenous energy resources. However, what are the current real priorities of Ukraine’s energy policy? Who and what stands behind them? And what are the possible paths for the development of its energy system? The analysis carried out in the work is based on a theory of historic and modern transformations of a state and state’s energy systems, vital energy systems theory and a framework where energy systems, energy institutions and energy policies interact driving the development of the country’s energy sector. The results show that Ukraine’s vital energy systems (electricity, nuclear, natural gas, coal, oil) through history are deeply imbedded in its economy and closely related to the state of Ukraine-Russia relationship. The study concludes that a ‘business as usual’ scenario could become the most deteriorating one for the country’s energy sector. A simultaneous cooperation with the EU and Russia would provide a smooth path towards CEU eTD Collection economic growth, ensuring that the country meets its future energy demand, while in case of EU integration and hostile relationship with Russia Ukraine would have to face many difficulties, such as phasing out its nuclear power capacities and looking for alternatives to meet its energy demand. Keywords: Ukraine,energy, system, policy, environment, history, nuclear, coal, oil, gas, electricity, crisis, scenarios, development iv Acknowledgements The subject of the thesis occurred naturally as an attempt to combine the knowledge and experience which I gained while living, studying and working in Ukraine, as well as the knowledge on environmentally-related issues during the two years at MESPOM. The topic of energy became a source of my deep fascination during the first academic years at the National Technical University of Ukraine “KPI” thanking to the wonderful professors and old school professionals who opened us the enchanting world of power engineering: O.V. Georgiev, V.V. Bosyi, N.M. Fialko, L.O. Kesova to name but a few. Also I would like to express my cordial gratitude to M.F. Onyshcenko and D.O. Vest, with whom I learnt about energy design and international cooperation during the time of working at “Ukrenergoprom-2” Ltd., and who always supported me in all my aspirations. Constant contributions and sincere devotion to development and improving of the Ukrainian energy system of these people made me believe that notwithstanding all the difficulties Ukraine has been facing since its independence, the country has a bright future until their experience is not forgotten and passed further to future generations. To say that a decision to apply for MESPOM was one of the most important ones in my life is to say nothing. There were moments of happiness and excitement, moments of despair and loss of reality; there was a colourful Budapest autumn, a rainy Manchester winter and a warm sunny Lesvos spring. Through all this I was lucky to go through with the most amazing and unique people from all around the world. I would like to say thank you to Shu-Yuan, Saurabh, Sophia, Boris, Kata, Gabor and Omniah, who were there to share the happiest and saddest times. You are my angels. Also I would like to thank all the MESPOM staff, who made this unparalleled experience possible and were always there to support and help. Special thanks to prof. Aleh Cherp, who kindly agreed to guide me through the interesting and tangled thesis writing process. His clear views, rich experience and academic works opened a whole new world of energy policy to me constantly inspiring and pushing forward. I wouldn’t have been who I am and where I am now without my parents. Thank you. For everything.Marta, Tanja, Anton, Konstantin, Viktoria, Abi, Niels,thank you for believing, guiding, inspiring. While I was working on the thesis, Ukraine was going through extremely difficult times struggling for democracy, dignity and freedom: a good and simultaneously tragic example of “transition”, which currently takes place in a number of developing countries around the world. My friends and relatives were there in the centre of events, and so my heart had been with them, as well as with the whole country. Never CEU eTD Collection before in my life had I felt as patriotic, as worried, as proud to be a Ukrainian. Thus, I would like to dedicate this work to the new Heroes of Ukraine: to the dreamers, who believe in a brighter future, who are ready to fight until the very end for peace, integrity and better lives of our next generations. Some of them may not be with us anymore, but their energy of a strong will is always there in our hearts and memories. v Table of Contents Acknowledgements .......................................................................................................... v List of figures ................................................................................................................... x List of tables ................................................................................................................. xiii Abbreviations ................................................................................................................