Over the past few weeks, independent experts of think tanks and civil society organizations in the energy sector have been witnesses to an extremely politicized, distorted, and dangerous discussion concerning the issues of supplying coal from the areas of Luhansk and Donetsk regions temporarily not controlled by the Government of Ukraine.
A lack of systemic and strategic solution to the problem of dependence of the Ukrainian energy sector on economically unstable and morally controversial trade turnover with the enterprises beyond the division line has already resulted in confrontation. Controversy will grow even more unless a clear-cut and effective policy is developed and implemented. We understand that introduction of temporary extraordinary measures at the electricity market is a necessary, yet inadequate solution to this problem.
Drawing attention to the inactivity of the agencies responsible for the formation of the relevant policy over the past few years, we would like to call for approving and implementing the ways of overcoming the energy crisis as soon as possible. It is a process of constructive dialogue with due political will and responsibility that can unite the polarized society.
Therefore, independent experts of think tanks and CSOs in the energy sector would like to address the Government, the President, and the Verkhovna Rada with the following demands:
- To consolidate the confrontation parties around collective search for a solution to a key issue – ensuring energy independence of Ukraine. It is important to reach such a consensus on the short-term actions that would prevent emergency power cutoffs and, at the same time, solve the problems in the energy supply sector. The Cabinet of Ministers of Ukraine should act as a decision-making center, as the agencies responsible for the energy policy have already proved incapable to influence the situation.
- To ensure transparency and inclusiveness of a relevant dialogue and development of a specific action plan. The existing methodology of forming the tariffs for wholesale market price of electricity is socially unacceptable, as it has largely contributed to the income of heat generation companies, but failed to diversify the fuel supply sources and the energy security of the country. This approach bears a significant risk of corruption and does not encourage the enterprises to ensure stable functioning of the energy system.
- Any action plan shall include specific steps in the mid-term and strategic perspective with clear anticipated results, deadlines, and benchmarks. Emphasis should be placed on substituting anthracite coal with other types of fuel on condition that the national energy system will function properly.
- To conduct a comprehensive analysis and risk assessment of the technical capacities of energy units before a final decision on putting Ukrainian nuclear power stations into a maneuver mode is passed.
- A mid-term action plan should consider the following proposals:
- To create conditions for a stable and competitive import of coal of mark A from several supplying countries and to make the companies – regardless of their form of ownership – responsible for providing the necessary coal supply. These conditions might need correcting the existing methodology of setting prices for the thermally generated electricity and/or setting regulatory barriers to purchasing cheaper coal from the occupied areas of Donetsk and Luhansk regions at global prices.
- To develop and immediately adopt the Law of Ukraine on critical infrastructure and its security, recognizing thermal energy generation units as objects of critical infrastructure and obligating their operators to ensure uninterrupted work of the units in critical situations. To obligate the operators of thermal power plans and combined heat and power plants to provide daily detailed reports on the coal reserve and planned deliveries.
- The Government and the MPs should implement systemic transformations of the electricity market and the affiliated energy coal market. The draft law “On electricity market” has been prepared long ago. It is also high time that a law on coal market should be adopted.
- To switch thermal stations using anthracite coal into other types of fuel. It is absolutely possible to find investors interested in implementing such projects or to re-examine the proposals of businesses and the government of Poland and other Western countries. Re-equipment of existing thermal units should be economically and environmentally reasonable, as well as comply with the long-term energy strategy of the country. In other words, outdated and non-critical units should be closed down, while the outdated critical ones – re-equipped to make the use of fuel more effective.
- To pass a political decision on the model of technical connection of the united energy systems of Ukraine to the European network of transmission system operators for electricity ENTSO-E; to consider an option of building back-to-back stations along the western borders of Ukraine to diversify potential import of electricity.
- Strategic long-term solutions should consider the following factors:
- Every challenge is, at the same time, an opportunity. Refusal from domestic coal or considerable restriction of its consumption will be compensated best if done through reducing consumption due to increase of energy effectiveness and substitution of thermal generation with renewable energy taking into account the environmental impact.
- The Government and the Verkhovna Rada should not only settle the issue of energy coal supply, but also pay utmost attention to the sphere of renewable energy sources and its development. Renewable energy should get the top priority in view of a number of benefits – generation of new jobs, strengthening of national energy security, implementation of international commitments in the area of climate change and nature protection, development of the national knowledge-based economy, etc.
- We also understand that the governmental policy regarding particular areas of Donetsk and Luhansk regions, where the public authorities are temporarily not fulfilling their duties, should change. At the same time, it is critically important to keep the possibilities of re-integration of occupied territories, enterprises, and population into the economic space of Ukraine.
The mistakes in public energy policy cannot be fixed without due personal responsibility of the officials whose professional inactivity and negligence have resulted in a present-day critical situation. Violations at public and private energy companies regularly become a subject of investigation, and it is inadmissible to ignore the disclosed information.
Moreover, to restore trust, we call for fulfilling the commitments regarding rotation of the composition of the National commission for state regulation of energy and public utilities. According to the recently adopted Law, the process of rotation should have already started. We urgently need a regulator trusted by both the market, and the public.
We recommend that the President, the Government, the Ministry of Foreign Affairs, and Ukraine’s foreign diplomatic missions immediately pool their efforts to cooperate with the foreign partners to protect national and international interests of Ukraine in the sphere of energy security.
And the last but not least. We believe that the Government, the President, and the representatives of the parliamentary majority should improve the level of public communication both through the expert communities, and directly. The authorities should honestly inform the public about the problems with energy systems and describe the ways out of the current complicated situation. The Ukrainian people deserve to hear the truth.