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An energy strategy for the future

Ukraine’s ‘New Energy Strategy’ charts an ambitious course through 2035

July 24, 2017

With the recent completion of the “New Energy Strategy of Ukraine through 2035: Energy Safety, Efficiency, Competitiveness”, Ukraine now has the means to carry out a broad reform of its national energy complex that focuses on the achievement of priority targets for safety and efficiency, and can assure innovative upgrades and integration with the EU energy sector.

The execution of New Energy Strategy (NES) tasks in the 2025-2035 period will involve taking a different approach towards regulating Ukraine’s energy sector, and is predicated on basic principles that EU countries have adopted.

The new document provides for cross-sectoral cooperation to effectively and reliably satisfy the country’s energy-related needs. The envisioned transformation of Ukraine’s energy complex is based not only on industrial factors, but also on socio-economic changes within the country. Another key objective is to achieve greater energy independence.

The NES, developed in the context of Ukraine’s “2020 Sustainable Development Strategy” (which was approved by the President of Ukraine on January 12, 2015), will be implemented in three stages.

STAGE 1: Energy sector reform through 2020 

Emphasis over the next three years will be on the implementation of reforms and the development of a competitive and attractive investment environment.

Complete implementation of the “Third Energy Package” is envisaged during this period, allowing for the creation of full-fledged natural gas and electricity markets in accordance with EU energy legislation. Also to be carried out during this stage is the complete institutional integration of Ukraine into the ENTSO-G network, as well as to meet most of the requirements for integrating Ukraine’s unified power system (UPS) into the ENTSO-E grid.

Moreover, this stage involves reforming energy companies in accordance with Ukraine's Energy Community treaty obligations, increasing gas production, reducing GDP-based energy demand, and further developing renewable energy capacity.

Furthermore, a coal market will be created that restructures the coal industry. This initiative will be accompanied by a set of measures to mitigate the social and environmental impacts of mine operations and closures, as well as the reconversion of pit closure areas in accordance with best European practices.

During this stage, compliance with high environmental standards of production, transportation, transformation and consumption of energy should be ensured in the field of environmental protection, as well as the financing of investment projects under the “National Emission Reduction Plan” in accordance with the legislation of Ukraine and its commitments to the Energy Community.

Finally, by 2020, Ukraine is expected to achieve radical advances in the field of renewable energies by increasing its share in final consumption by 11 percent (8 percent of total primary energy supply, or TPES). This will be pursued through stable and predictable policies both to promote the development of renewable energies and to attract investment.

STAGE 2: Optimisation and innovative development of energy infrastructure through 2025

The second stage of NES implementation will be geared towards operating in a new market environment and under Ukraine’s actual IPS integration into the European grid, which will significantly affect the rationale in selecting facilities for renovation (or new constructions in the energy sector) and boost energy efficiency as well.

The objectives of this stage include introducing mechanisms to attract investment for carrying out a programme to replace facilities to be decommissioned under the new energy infrastructure. There are also plans to improve corporate governance of business entities and to enhance their ability to use tools available from both internal and external capital markets.

Concrete objectives to be realised within this stage include:

  • achivieving operating-mode integration of the Ukrainian energy system into the continental European ENTSO‑E grid;
  • full integration into the European ENTSO-G gas transport system, and further intensification of cooperation with Central European countries to enhance the reliability of energy supplies;
  • implementation of investment projects under the National Emission Reduction Plan;
  • establishment of local heating systems based on an economically justified use of local fuels, supply logistics, and regional and national energy infrastructure;
  • improved efficiency of existing district heating systems; and
  • attracting private investment.

Ukraine also expects to upgrade its metering systems, and plans to involve energy customers in managing their own demand for energy resources. 

In the gas sector, the country expects to ensure full coverage of domestic natural gas needs from its own resources (owing to increased production) and to optimise its gas transport system in accordance with envisioned load scenarios.

Finally, the securing of intensive investments in the renewable energy sector is foreseen by 2025, which includes distributed generation development through the design and launch of an implementation plan for “smart” power grids (i.e. smart grids) and the creation of an extensive infrastructure for electric transport.

STAGE 3. Sustainable development (through 2035)

The third stage of the NES anticipates innovative development of the energy sector and the construction of new-generation facilities. It also looks to secure investments in new power generation facilities to replace those which are to be decommissioned. Selected types of generation will depend on projected fuel prices and the growth rate of each energy generation system, which will in turn raise the level of competition within the sector. Another aim is to is to introduce smart technologies to secure the flattening of peak power prices.

In the area of energy efficiency and environmental management, it is envisaged to introduce “passive house” building standards so as to achieve emission reduction targets for SO2, NOx and dust under the National Emission Reduction Plan. Ukraine also plans to introduce its own greenhouse gas trading system (GTS).  

The primary tasks within the gas sector are to increase domestic gas production (including non-conventional gas production and offshore gas development) and to adapt GTS capacities to a (by then) highly evolved pan-European natural gas market. 

It is also to be expected during this period that the coal sector will have achieved competitive and transparent operating conditions.

Renewable energy sources (RES), meanwhile, are expected to be the fastest-growing sector in terms of power generation, with an envisioned share increase within the TPES structure to 25 percent.

Conclusion

Overall, the tasks within these three stages must be implemented in a coordinated manner if Ukraine is to achieve the targeted qualitative and quantitative indicators as defined in the NES. Furthermore, the achievement of the parameters as listed in the TPES forecast balance for the period through 2035 — as well as the share of renewables in TPES and energy efficiency of the national economy — should be an integrated result in terms of quantitative indicators of NES performance.

Finally, it is important to emphasise that a successful implementation of the NES can only occur in the context of full integration with other socio-economic reforms taking place in Ukraine.


TAGS: Ukraine | Energy efficiency | Energy planning | Energy security | Environmental law | renewable energy

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