The Zaporozhye nuclear power station seen from the 'Nikopol' bank of the river Dnieper, Ukraine. Photo: Ralf1969 via Wikimedia Commons (CC BY-SA).
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Thirty years after Chernobyl, what chance of a post-nuclear Ukraine?
Jan Haverkamp & Iryna Holovko
26th April 2016
The Chernobyl nuclear catastrophe may have scared most of the world off nuclear power, write Jan Haverkamp & Iryna Holovko. But mysteriously, not Ukraine, where the reactor meltdown actually took place. Thirty years on more than half of Ukraine's electricity is still nuclear, while the power sector is dominated by powerful oligarchs. So what are the chances of a post-nuclear Ukraine?
Given the dilapidated state of Ukraine's energy industry, moves towards a clean energy future are not only possible - they are inevitable. The question is not whether they will be taken, but how many opportunities will be wasted before they are taken.
Thirty years on from the world's largest nuclear catastrophe in Chernobyl, people are often astonished that Ukraine is still highly dependent on an ageing nuclear fleet for its electricity provision.
Indeed, Belarus, Russia and Ukraine continue to face the trauma of Chernobyl on a daily basis - both in the form of human tragedy and on-going economic losses.
You might expect the governments of these states to have turned away from nuclear energy and, in the light of the latest climate science, from fossil fuels too.
But Russia continues to promote nuclear power, and Belarus is trying to introduce nuclear reactors at home. Indeed, Belarus and Ukraine share a high dependence on Russia for nuclear technology, fuel, gas, oil and coal - a problem that has only been exacerbated by the crisis in the Donbas.
A move towards clean, renewable energy sources - such as wind, water, sun, biomass and geothermal - would seem a logical route, especially given the potential savings in health costs and increase in energy independence.
Here, in these countries most afflicted by Chernobyl, economic realities make this switch to a clean energy future inevitable: the old centralised energy economy is collapsing, slowly but surely, and an awareness movement is growing.
In Ukraine, future-oriented enterprises will choose independence from the politically and economically unstable conglomerates that dominate the country's energy sector. The question is: are these companies getting the space they need to start Ukraine's energy [r]evolution?
The [r]evolution is inevitable - but not when it happens
Clearly, Ukraine currently faces several fundamental choices for the future. These choices relate to political contexts and preferences, but none of them is as inevitable as the need for an energy [r]evolution.
We are not asking anyone to experiment with unknown technologies. The techniques for a clean energy future exist, and Ukraine has even built up experience with them. Technically, then, the next step is an evolution. But one that means a revolutionary departure from a highly unstable energy politics that rely on centralisation of access to gas, oil, coal and nuclear power, and the energy policy and planning paradigms associated with it.
Ukraine has significant potential for the development of renewable energy sources. As research for The Solutions Project by Mark Jacobson and his team at Stanford University shows, Ukraine could cover its entire energy demand in 2050 with wind, solar and water and a 32% decrease in primary energy need.
However, the fact that Ukraine currently enjoys only 1 GW of installed capacity from renewable sources signals that energy policy is yet to undergo fundamental change, and the obstacles are many.
The staying power of old energy structures should not be underestimated. Ukraine's electricity market is a political battlefield, and not only due to interference of oligarchs and dependency on Russia for coal, nuclear fuel and technology. The market is virtually completely regulated, and regulation has become a political tool.
Consumer prices are set by the powerful state energy regulator (NERC), which enables low tariffs for consumers and even lower ones for consumers using less than 150 kWh/month. Special groups, like recognised victims of Chernobyl, receive other rebates.
While there have been several minor rate hikes since 2014 (with a further increased planned for September 2016), cost realistic increases in electricity prices would be politically risky for any government in power. Low tariffs for private consumers are cross-financed by higher industrial tariffs, but in comparison with, for instance, EU markets, these are still low.
Needless to say, this means that providers don't receive much in the way of income in comparison with costs.
Oligarchic control of Ukraine's energy sector
Ukraine's energy oligarchs have a strong voice in the country's day-to-day politics. Take the concentration of the thermal coal power market, for instance: thermal is largely steered by the DTEK conglomerate, which is Ukraine's largest energy company, and is controlled by Rinat Akhmetov, Ukraine's richest man.
In the past, DTEK was able to negotiate a strong position (and higher tariffs) for coal generation, which, in turn, had to be cross-financed by lower prices for nuclear power.
The gas sector of Ukraine's electricity generation market is highly dependent on the Russian-Ukrainian company RusUkrEnergo, which is under control of Gazprom and another Ukrainian oligarch, Dmytro Firtash, who has strong ties to the current Poroshenko government.
Ukraine's renewable energy market initially also grew along the lines of large-scale developments driven by oligarchs. For example, Activ Solar, which is owned by Andriy and Serhiy Klyuyev, two powerful figures within the Yanukovych clan, developed large-scale solar power stations in 2011-2013 mainly in the sunny regions of Odessa and Crimea.
This was done while blocking other players from entering the market and securing inflated guaranteed feed-in prices for their projects - in the process undermining the popularity of solar energy in Ukraine.
Donbas war triggered coal crisis in Ukraine's power market
In 2014, the crisis in the Donbas saw the Ukrainian state lose control of two thirds of its coal mines - and with that of most of its coal resources for the country's thermal power stations.
This situation led to the coal sector's financial position deteriorating, which was then exacerbated by the termination of €400m of direct subsidies to state coal mines in 2015. The remaining coal power plants within the country are now dependent on coal trickling in from the Donbas and imports from Russia and South Africa - and that comes at a price.
DTEK's position has also been hit heavily: a significant part of its assets are situated in the Donbas. This loss of control and income seems to have driven the conglomerate over the edge into bankruptcy.
All this pressure on Ukraine's energy sector means that Energoatom, the state enterprise that currently generates 55% of Ukraine's electricity, has to balance the books
Although Ukraine's gas sector, which covered only 6% of the country's electricity generation in 2014, recently saw some inflow from the European Union, it remains largely dependent on gas deliveries from Russia. The bulk of gas-fired capacities are large combined heat and power plants, which provide district heating in winter and constitute critical infrastructure for a number of major Ukrainian cities, including Kyiv.
Further south, the annexation of Crimea put an end to the dreams of Activ Solar. The bankrupted company now seeks to sell its leftover assets to a Chinese investor.
All this pressure on Ukraine's energy sector means that Energoatom, the state enterprise that currently generates 55% of Ukraine's electricity, has to balance the books. This share needs to be covered by four nuclear power plants with 15 nuclear reactors. Twelve of these reactors were built in the 1980s, and are now in need for large safety upgrades if they are to be operated with a lifetime extension beyond 30 years.
Risky business: ageing nuclear plants starved of investment
And this is where the investment side comes in. Low consumer prices for electricity have combined with heavy pressure to compensate powerful political allies from the coal, gas and (tiny) renewable sectors to reduce Energoatom's returns. As a result, Ukraine's nuclear giant has to make adaptations on the cost side.
Every nuclear operator has to put aside money to later decommission its nuclear power plant(s) and manage its high level nuclear waste for the next 100,000 years. In order to do so, reserves are built up during the operation time of a nuclear power station, normally in the form of a fixed amount per kWh sold.
Ukraine decided to lower this amount, slowing down the build-up of these reserves. This has created a shortage in these reserves, which is now used as an argument to continue operating ageing reactors to create at least some income for another 20 years.
The necessary safety upgrades (for life-time extension, but also in reaction to the Fukushima catastrophe - Ukraine participated in the EU post-Fukushima nuclear stress tests) are thus weakened or postponed, and there are even indications that there is a lack of money for operational costs.
At the same time, Ukraine's nuclear fleet faces an increased security risk due to political instability. The risks for terrorist or insurgent attack on nuclear infrastructure are currently higher than in peace time, meaning further upgrades are necessary.
In addition, most of the upgrading work is dependent on Russian technological input. Delays in the implementation of upgrades are not only caused by lack of finance, but also by unforeseen technical complications and problems with tender procedures. On top of that, Energoatom is bleeding funds on an unrealistic nuclear new build programme in Khmelnytksy, western Ukraine.
The political position of Ukraine's increasingly risky nuclear sector is strengthened by the rhetoric that only lifetime extension of the 'independent' ageing nuclear fleet can fill the gap left by lost coal resources in the east.
The nuclear sector's dependency on Russia has been masked by swapping the tenders for upgrading and new builds from Russian companies to a Czech-based company Skoda JS (a deal that is part of anti-corruption investigations in Switzerland), which is actually Russian-owned, and by tests at the Yuzhnoukrainsk nuclear power station with the use of Westinghouse nuclear fuel (produced in Sweden), partly in reaction to delivery problems with Russian fuel in the last few years.
The fact that economic control over technology and a large proportion of fuel will always come from Russia remains off the table.
The reliability risks associated with the fact that over 50% of Ukraine's electricity production comes from an ageing nuclear fleet hardly gets attention. A December 2014 incident in Zaporizhzhya's nuclear power station (see photos) resulted in heavy blackouts across the region. And the experiences in Japan have shown that a severe accident in any of the reactors could lead to a long suspension of power production across the nuclear fleet.
This poses the question: why then, with 30 years experience of the Chernobyl aftermath, has Ukraine still not kick-started an energy revolution that could shore up its energy independence and, in the long run, lead to important reductions in cost?
Planning without comparison of alternatives
One of the reasons for the Ukrainian elite's reluctance to engage with renewal energy is that comparative studies on alternative energy policy pathways play no role in major energy decisions. These decisions are taken on political grounds.
There are signs that this inertia is beginning to change. For instance, EcoClub Rivne, a Ukrainian NGO, won a landmark case in 2014 under the Espoo Convention. In principle, the convention and the ruling oblige the Ukrainian government to carry out an environmental impact assessment, in which such a comparison with alternatives would need to be made for decisions on lifetime extensions of nuclear power stations.
However, the Ukrainian authorities have so far done everything to undermine implementation of these international standards.
Another chance would have been for the European Bank for Reconstruction and Development (EBRD) and the EU to have forced comparative studies for the lifetime extension of the Ukrainian nuclear fleet to be carried out. Instead they chose to flatly deny that their €600m investment programme in nuclear upgrades has anything to do with life-time extension, probably because their donors would see life-time extension very critically.
This is in spite of the fact that it was clear from the start that Ukraine intends to add 10 to 20 years more of operation time for the ageing reactors on the basis of these upgrades - if only to recuperate its own investments and prevent problems with the lack of sufficient decommissioning and waste funds.
Systematic obstructions to energy sector reform
In central and eastern Europe, several strong myths about renewable energy remain a barrier to its growth. In Ukraine's energy strategy, these myths result in a meagre target of only 11% renewables in the electricity sector for 2020, and that includes 8% hydropower.
In comparison, Germany generated a third of its electricity with non-hydro renewable energy sources in 2015, and intends to increase that to 40% or more in 2020.
The most important of these myths is that renewable energy is expensive. And indeed, recent investigations from Greenpeace and NECU showed that it still is virtually impossible to turn Ukrainian houses or public buildings into efficient renewables-powered units in a financially sustainable way.
The regulated consumer price system and lack of accounting (metering) of energy used by consumers makes changes difficult. Relaxation of price regulation could cause severe energy poverty in a country that already is facing sluggish economic growth and high unemployment rates. This means that as long as energy prices remain under what they would be in a healthy market, the combination of energy efficiency and renewable energy sources will need some kind of support.
A first and crucial step to motivate energy efficiency in Ukraine would be to introduce metering of electricity, gas and/or heat used by households. Heating is the highest burden for private consumers and is, for a large part, provided by imported gas. But less than half of the buildings with centralised heating systems have metering in place.
It is estimated that non-metered consumers, who cannot influence their energy bill with efficiency measures, pay over 30% more for their heating than in buildings with individual metering. A law on metering in accordance with EU standards has been prepared, but is stuck in the legislative procedure.
There is a lot of verbal support for the development of energy efficiency and renewable energy sources in Ukraine by western institutions and investors, including rhetoric about how decentralisation of the energy market by the introduction of efficiency and renewables could reduce corruption and increase sustainability.
However the reality is that only 15% of EU total support for energy projects in Ukraine and less than about 16% of EBRD and EIB loans goes to energy efficiency and renewable energy sources.
Neither the EU, nor the EBRD have a sufficiently pro-active policy to turn Ukraine's energy system onto a sustainable pathway. This is, among others, illustrated by their support for the development of new electricity corridors, which are basically oriented on enabling export of Ukraine's nuclear power to the EU instead of developing an electricity network that could support the uptake of large amounts of variable renewable sources.
Change is in the air - finally!
What is changing, however, is public perception of clean energy technology. The collapse of Activ Solar and the fact that feed-in tariffs for solar PV are now in the same order of magnitude as those for wind power have changed the idea that renewables are expensive play toys for the enrichment of a few and indeed can deliver an affordable alternative.
Also the awareness that a lot of the corruption in Ukraine is related to the centralised nature of the old energy carriers is growing, and we see an increasing amount of courageous small and medium investors seeing efficiency and renewables as chances for job and income creation.
Ukraine's 2014 legislative framework for prosumers (people that produce their own electricity and sell the surplus to the grid) enables home generators of solar PV power to sell their surplus for grid-price. This is motivating a growing group of homeowners to investments. Meanwhile, a group of environmental NGOs and a coalition for energy efficient cities are pushing for further steps to decrease Ukraine's energy wastage and at the same time promote the uptake of renewable energy sources.
But what is really needed is a shift in gear from small, localised projects to efficiency and renewable energy development becoming the backbone of energy policy. It needs projects like the 140 MW Kherson wind project from Windkraft. It would need initiatives from global corporations like those united in the RE100 Climate Group to secure a 100% renewable supply chain in Ukraine.
And it would need the political elite in Ukraine to break with the energy oligarchs, looking instead for support for
- local municipal initiatives and structures that motivate small and middle large enterprises;
- the development of a grid structure based on decentralised electricity generation and optimising the regional advantages in the country; and
- international cooperation partners like the EU, the EBRD and the World Bank to be consistent in their support for an Ukrainian energy [r]evolution.
Given the dilapidated state of Ukraine's energy industry at this moment, these steps are not only possible - they are inevitable. The question is not whether they will be taken, but how many opportunities and funds will be wasted before they are taken.
The sooner Ukraine moves towards a clean energy future, the better for all involved. After all, it could become a positive model for Belarus and Russia to find - at last - a way off the path set by Chernobyl.
Jan Haverkamp is an expert consultant on nuclear energy and energy policy for Greenpeace in Central and Eastern Europe. He has an academic engineering degree in environmental sciences.
This article was originally published by openDemocracy under a Creative Commons Attribution-NonCommercial 4.0 International licence.
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