Power consumption in Ukraine is expected to fall by more than 29.6 terawatts over the next decade, from 127 terawatts in 2020 to 92 terawatts in 2030, according to a report by analytics company GlobalData published on May 28.
The decline in energy generation is the result of political instability and an inconsistent energy policy combined with industry downfall due to a declining population, the report reads.
“Electricity consumption in Ukraine witnessed a downward trend in the last decade mainly due to decline in industrial output,” Pavan Vyakaranam, expert at GlobalData writes.
But energy expert Oleksandr Kharchenko disagrees with Vyakaranam’s conclusion. For him, the market is also moving towards more energy efficiency, which means people will consume less energy.
“Energy efficiency compensates for the decrease in consumption,” Kharchenko told the Kyiv Post on June 1.
It’s also hard to have precise statistics on population because immigration to Ukraine compensates for the demographic decline, he said.
But the report fails to consider that the energy market in Ukraine is now open to private competition, which according to Kharchenko, leads to a decline in production as the market adapts to new rules.
In August 2020, energy officials ended public service obligations in the gas sector that forced energy producers to sell some of their power to the state at below-cost prices to keep energy cheap for the public.
The move was aimed at reducing the power of local gas distributors by letting Ukrainians choose their source of energy at a competitive price.
Now that the energy market for gas and electricity is open and energy companies can set their own prices, energy production is closer to the country’s real consumption, according to Kharchenko.
The transition to more efficient forms of energy has been anything but smooth. Massive debts hamper Ukraine’s ability to move towards green energy.
Today, renewable energy secures about 8% of all the energy produced in the country, while the government’s official goal is 25% by 2035.
While the government focused on fighting the pandemic last year, further reforms in the energy sector stalled and the state amassed a $1 billion debt to green energy developers.
Ukraine started to foster green energy production in 2008, when it introduced green tariffs, obliging the company known as State Guaranteed Buyer to buy renewable electricity at the highest price in Europe — 0.46 euros per kilowatt.
But when the pandemic hit, the state couldn’t keep up with payments anymore. Many green energy developers, deprived of fast returns, were left with debts. After much negotiation, the government and investors reached a compromise to repay the government debt in exchange for reducing the tariffs.
But Ukraine still hasn’t managed to pay off the debts and several renewable developers have threatened the state with international arbitration.
Meanwhile, some regional energy companies continue to pump gas without paying for it, adding to the sector’s debts.
