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Energy Insight: Energy profile Ukraine
Energy trading relations between Ukraine and Russia are characterised by Ukraine’s dependency on Russian imports (and Ukraine’s desire to reduce this dependency) as well as the importance of Ukraine as transit country for Russian exports to Europe: Russia is the main EU supplier for crude oil, natural gas and solid fuels. Russia’s leading position as fuel supplier is particularly marked in the case of gas: In 2015, 37% of EU natural gas imports were from Russia. About half of these imports come through pipelines through Ukraine. On the other hand gas exports to Europe accounted for 81% of all Russian gas exports.
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1 Key energy statistics
1.1 Current energy mix
Fuel | Percentage of primary | Percentage of gross |
Solid fossil fuel | 47% | 36% |
Gas | 19% | 34% |
Nuclear heat | 25% | 19% |
Oil and petroleum products | 4% | 9% |
Renewables | 4% | 3% |
1.2 Gas
In 2007 imports accounted for 84% of gas consumption, in 2016 this number had fallen to 33% (11.1bcm). While in 2011, 100% of gas imports were from Russia, in 2016 all imported gas came from Europe (although the origin of part of this imported gas is still Russia). Gas consumption declined by 44% from 59.3bcm in 2011 to 33.3bcm in 2016.
Ukraine has 0.6 trillion cubic meters of natural gas reserves, representing 0.3% of global resources, (UK: 0.1%; BP Stat Rev 2017). Natural gas production in Ukraine decreased by one-third from 28 bcm in 1990 to 19 bcm in 2014 but has stabilised at around 20bcm in 2015 and 2016. The delayed development and reduction of natural gas can be attributed to the ineffective market mechanism and the unfavourable investment climate in Ukraine. Gas accounts for 89% of Ukraine’s total hydrocarbons production (oil: 7.9%, gas condensate: 3.1%).
1.3 Coal
Ukraine has significant coal reserves (11353 mt of proved reserves at the end of 2016, BP Stat Rev 2017) and coal has dominated primary energy production before 2014. However a significant part of those reserves is located in the eastern part of the country in regions, which are now only partially under control of the Government. As a consequence coal production has decreased from 36.6 mtoe in 2013 to 17.1 mtoe in 2016 (2015: 16.4 mtoe) (BP Stat Rev 2017). In March 2017 Ukraine imposed a cargo blockade to the breakaway eastern provinces. Furthermore the Government wants to reduce coal imports from Russia.
1.4 Electricity
Fuel Source | Capacity [GW] | Percentage of total capacity |
Coal | 25.4 | 47% |
Gas | 8.4 | 15% |
Nuclear | 13.8 | 25% |
Renewables | 6.8 | 13% |
- Hydro | 5.9 | 11% |
- Wind | 0.4 | 1% |
- Solar | 0.4 | 1% |
Table 2: Electricity capacity mix in 2015 (Energy Community)
Gross electricity production was 164TWh in 2015 (2014: 183TWh, EuroStat). Losses in transmission and distribution networks are estimated to be as high as 35TWh in 2015. Due to decreased demand and problems of coal supply (see above), nuclear has become the main energy source for electricity generation, with 54% of electricity generated by nuclear plants in 2015 and a share of 60% expected by government.
2 Energy Policy
To increase energy security and self sufficiency the country aims to increase domestic production from fossil and renewable resources as well as to deepen trading relations with the EU.
2.1 Increasing domestic production
IRENA has suggested Ukraine could increase the share of renewable energy even higher to 22% by 2030 with biomass technologies accounting for almost 80% of the renewable energy potential. They furthermore estimate increasing the renewables share from 13% to 22% in 2030 would enable annual savings of $1.3bn. 73% of renewable energy potential by 2030 is accounted for by heat, 20% by electricity generation, 7% by transport.
2.2 Cooperation between EU and Ukraine, G7 and Ukraine
2.3 Recent reforms and policies
2.3.1 Gas
A gas market reform entered into force in 2015 with the goal to reduce dependence on Russian imports (they have already been reduced significantly) and to open the market for foreign businesses. Since April 2017 foreign traders are allowed to bid for contracts to supply the national pipeline operator with gas. An electronic procurement platform (ProZorro) has replaced paper based tenders. Trafigura, one of the world’s largest energy traders, and Engie have entered the Ukrainian gas wholesale market.
2.3.2 Electricity
The Ukrainian Parliament adopted a reform package, the Electricity Market Law, in April 2017 and signed by President Poroshenko in June 2017. Similar to the gas market reform, the law aims to establish a new market framework compatible with the EU Third Energy Package and thus includes TSO unbundling, DSO unbundling, deregulation, and increasing competition. While the EU points out that full compliance has not yet been achieved, progress has been made in some specific areas, for example electronic auctioning for both, exports and imports, has started in May 2017, allocating capacity on all borders on a daily, monthly and yearly basis. The new law envisions abandonment of the current single-buyer-market and introduction of bilateral trading by 2019 along with balancing, intraday and day-ahead markets.
2.3.3 Energy Efficiency
With an energy intensity that is more than double that of the EU, Ukraine is one of the most energy-intensive economies in the world. In 2015, energy subsidies cost 7%-8% of GDP, creating a significant financial burden.
3 Further Reading
Energy Profile: Ukraine; FfE 2014