Renewables will bring energy independence to Ukraine
Energy moved higher security on and the independence agenda in Ukraine have since Russia launched its war in the Donbas four years ago. Before 2014, Ukraine relied heavily on Russia as a gas supplier. But the war and the annexation of Crimea has turned Ukraine away from Moscow and toward friendlier, but pricier suppliers, like Hungary and Poland. Ukraine hasn’t imported any gas from Russia for its own needs for more than twoand-half years now. However, it still imports Russian gas that it transits on to Russian gas company Gazprom’s customers to the west. Now the construction of Nord Stream 2 — a pipeline that will transport gas from Russia to Germany via the Baltic Sea — has raised doubts about Ukraine’s continued status as a major transit country for Russian
gas, energy which security. in turn raises doubts about its To some the answer is clear: bolster renewable energy. While the share of energy Ukraine gets from renewable sources is still quite low, at 1.2 percent in 2017 (2.086 million kilowatts), the market is growing rapidly. Optimistic forecasts see Ukraine obtaining nearly all of its power from renewable sources by mid-century. But this “revolutionary scenario” would require significant investment and development of infrastructure.
Investment and incentives
Ukraine’s current energy generation mix is heavily tilted to fossil fuel and nuclear, with coal- and gas-fired power plants and nuclear power accounting for up to 92 percent of the energy generated. But that mix has been changing — slowly. Since 2014, $550 million has been invested in Ukrainian renewables, according to Ukraine’s National Investment Council. That’s a fraction of what Ukraine’s neighbors have invested over the same amount of time. Hungary, not known for its green policies, pumped $649 million into renewables in tor tion Ukrainian All 2017 is tripled the growing alone. Association same, from fast: 2012 Ukraine’s of to Renewable Renewable 2017, renewable according produc- Energy. sec- to a good One reason business for in this Ukraine, is that say renewables proponents. are “It’s an absolutely transparent business, which can bring project payback in one to six years,” said Yuriy Podolyak, the commercial director of IK NET, an energy project management company in Ukraine. Another reason is Ukraine’s green tariff system, set up in 2009, which offers a higher rate to producers of renewable energy on Ukraine’s national energy market — a rate that’s fixed for a producer when they enter the market. Add to that other favorable factors, such as Ukraine’s large land area and climate, good for both wind and solar power plants, and newable “A there renewable energy are ideal market market conditions to is develop. not just for the a cool rething to have,” Mats Lundin, acting chairman of the European-ukrainian Energy Agency and founder of wind-power company Vindkraft Ukraina, told the Kyiv Post. “If you look worldwide today, the renewable market is the only (part of the energy market) that is really developing.” Lundin says non-nuclear renewables will soon be Ukraine’s cheapest energy option, given the social costs of coal power. “The cost for society to keep coal-fired power plants will be much more expensive than simply going for renewables. So, it’s better to close (coal-fired power plants) and start building more renewables,” he said. Research by Ukraine’s National Academy of Sciences suggests that, with proper investment, 90 percent of Ukraine’s energy could come from renewables.
Wind and solar power
What sources of renewable energy will prove the most profitable, however, is a different question. The constant, steady winds in the south of Ukraine makes wind-power prospects there good. Wind energy accounted for 47 percent of Ukraine’s renewable electricity generation last year, or 970.5 million kwh. Sixty-five percent of that energy was generated by a single company: DTEK, owned by oligarch Rinat Akhmetov. The company operates the biggest wind power station in Ukraine — Botievo Wind Farm in Zaporizhzhya Oblast, with a capacity of 200 megawatts. That capacity will soon double, as DTEK has partnered with General Electric to build a second plant in Zaporizhzhya Oblast. The first stage of construction, a $150 million investment, is projected to be completed in 2019. After wind comes solar power, accounting for 35 percent of Ukraine’s renewable electricity lion kwh. production in 2017–710.7 milJust recently Ukrainian solar power company UDP Renewables announced a largescale partnership with the Spanish company Acciona Energia Global, a global leader in green generation. The plan is to operate a solar plant with an annual capacity of 57.6 megawatts in Kyiv Oblast. “We plan to reach a capacity portfolio of 100 megawatts in January 2019,” said Sergiy Yevtushenko, managing partner of UDP Renewables. Another large foreign company interested in solar power investments in Ukraine is TIU Canada, which last year built a 10.5 megawatt station in the city of Nikopol in Dnipropetrovsk Oblast. “Now we’re planning about four more projects in Ukraine,” said Valentyna Beliakova, director TIU Canada.
After wind and solar power comes biogas, accounting for 194.8 megawatts of Ukraine’s power generation capacity.
Biogas, generated mostly by by-products of livestock farming, has a lower failure rate than solar and wind power enterprises, says Podolyak. “We see the least number of all failures in the biogas and biomass projects, as these projects are initially evaluated as complex, and so are approached more carefully. In terms of documentation, solar power plants are the most difficult.” Biogas is most effective at a smaller scale: 1 megawatt, says Yuriy Epstein, director of the consulting company Accord. His opinion is that biogas projects are the most attractive long term, as they don’t depend on weather conditions and produce fertilizers for the agricultural sector.
Ukraine’s green tariff promises profits, but the country’s business climate remains less islation country. in July On the than 1 the Verkhovna next and welcoming legislative year, sparse Rada new credit owing side, proposes solar a to options new power shifting that, draft in plants from leg- law the over 20 at auctions, megawatts 10 megawatts as will opposed have and to wind to benefitting sell projects their power from over the Though green tariff. such auctions have been successful in other countries, investors said this law, as well as other changes to the legislation, makes planning their business difficult. “Investors always look for a certain amount of stability in order to predict their actions for a long time. But in Ukraine it’s a never ending process. The Ukrainian market can change for various unpredictable reasons,” said Lundin. “We have just started work with the green tariff, changing tors,” said and the Beliakova. now rules they’re of the cutting game it for off inves- and tions Lundin for green says the energy idea arose of switching because to of auc- the great interest in renewable energy projects. But he cautions that such auctions have failed elsewhere. “Look at the Turkish market… because the tariff is so low, (investors) will have to sit and wait for 5 to 10 years before equipment is cheap enough (for their costs) to match the tariff,” said Lundin. Another risk is the perennially shaky financial market in Ukraine, where banks will rarely give long-term credit, and, if they do, provide it at interest rates from three to four percent higher than in Europe. Investors who fail to get a loan from Ukrgasbank, Oschadband, or other such Ukrainian banks will have to go to the European Bank for Reconstruction and Development for credit.
Ukrainian company UDP Renewables plans to invest $200 million in the Ukrainian renewable industry and build solar power plants in Zaporizhzhya, Kyiv, Odesa, and Kherson. (Kostyantyn Chernichkin)
The prospects for wind power plants are very promising in Ukraine, as the southern regions of the country have light, constant winds, the best kind for electricity production. (Yuliana Romanyshyn)
Valentyna Beliakova, director of energy company TIU Canada in Ukraine, speaks to the Kyiv Post on May 13. (Kostyantyn Chernichkin)