Electricity exports are back, but will it be enough for us and Europeans?

Electricity exports are back, but will it be enough for us and Europeans?

Energy analyst, Ukrainian Institute for the Future
21.04.2023, 13:07

Talk of resuming electricity exports has been going for a month and a half, but first days of trade did not show the announced volumes

Ukraine’s electricity exports to Moldova on the first day were significantly lower than they could have been. Full exports to Poland are delayed due to several days of grid repairs, which the Polish system operator announced in advance. Slovakia's operator simply had no time to hold an auction for cross-border access because it did not know about the ministry of energy's intentions to resume exports, and will then be repairing the grid for several days as well.

In addition, EU countries require joint auctions. Ukraine’s regulator has only recently adopted the relevant framework, but it is unclear when the joint auctions will start working.

Ukraine’s permitted cross-border capacity is higher now than last year. In late March, ENTSO-E expanded its technical capacity for electricity trading from 700 to 850 MW.

However, 75 percent of thermal power stations and 30 percent of combined heat and power stations are still damaged by missile and drone strikes, and 67 percent of wind power capacity is located in the Zaporizhzhia and Kherson regions, much of which is occupied. Half of the units at nuclear power plants will be under repair for two months in the summer. And in the event of a hot summer, the demand for electricity may be high. Finally, new missile attacks on energy infrastructure are unpredictable.

Solar power plants, which generate the largest electricity volumes in the summer, may provide some hope for covering demand and ensuring exports in the coming months. For them, exports are also an opportunity to improve their financial position. The issue of renewable electricity debts has been dragging since 2020. And with the outbreak of a full-scale war, the situation has naturally only worsened.

According to recent reports, the level of payment by the Guaranteed Buyer for the services of renewable energy producers is 99 percent for 2021, 53.3 percent for 2022, and 63.4 percent for electricity purchased in 2023. (To be fair, debts are an integral part of most energy markets in Ukraine, due to the half-heartedness of reforms.)

The donor for the Guaranteed Buyer to pay for green electricity is Ukraine’s state energy company Ukrenerho; among other things, the company's electricity transmission tariff includes a component for payments under the green tariff.

The volume of electricity transmission, however, has decreased by a third as a result of the war, and Ukrenerho is losing money because the independent regulator has not approved the tariff increase to the required level.

In addition, the company is among those that have suffered the greatest losses as a result of Russia’s missile attacks since last autumn, and therefore needs additional funds for repairs and preparation for the next winter.

However, there is no time to lose.

The resumption of Ukrainian electricity exports is of great importance for the economy in general and energy companies in particular. This includes additional foreign currency inflows – over USD 8 million a month – and support for the hryvnia exchange rate, as well as additional funds to subsidise the price of electricity for households.

Given that the duration of these exports is uncertain, all obstacles need to be removed urgently.

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