The Strategy defines the target model of the energy security system as a component of national security and the main threats to the energy security.
The Strategy defines 29 key threats to energy security, in particular, cyber threats for critical infrastructure objects, the Russian Federation aggression, failure to complete integration with the EU electrical- and gas supply systems, depreciation of fixed assets comprising Ukrainian energy infrastructure, absence of energy reserves, insufficient level of economic rivalry and antimonopoly regulation at the energy markets etc.
Given the defined threats the Strategy observes three prospective scenarios of changes in the energy sector and their impact on the Ukrainian energy sector:
- "no changes" scenario (preservation of the current energy policy as well as energy markets functioning principles);
- "unfriendly impact" scenario (development of the "no changes" scenario in the circumstances of escalation of the external impact of the Russian Federation aimed at taking over the control over Ukrainian energy system);
- "positive transformation" scenario (gradual and efficient pursuing of the course on euro- and Atlantic integration).
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The Strategy defines the strategic goals to be achieved for completion of the "positive transformation" scenario:
- Availability of energy and energy sources for all types of consumers, which includes inter alia, modernization of energy supply systems of ultimate consumers, improvement of the support of separate groups of consumers and elimination of cross-subsidization, enhancement of exchange trade at the energy resources markets.
- Sustainable functioning of the energy sector, which includes inter alia, procurement of cyber and physical security of the critical energy infrastructure, development of the self-procurement capacities of local communities in the circumstances of centralized energy supply misfunctioning.
- Economical efficiency of energy sector, energy supply systems and substitution of imported raw materials with Ukrainian resources, which includes inter alia, introduction of efficient and transparent energy markets, modernization of the fixed assets of the energy sector through implementation of mechanisms for stimulation of investments in the energy infrastructure objects, enhancement of import substitution through development of bio energy, wind energy, substantiated extraction of local mineral resources.
- Energy efficiency of resources consumption and energy efficiency of the national economy, which includes inter alia, simplification of procedures and development of services for implementation of energy efficient projects, procurement of energy resources consumption accounting.
- Ecologically acceptable impact of energy sector on the environment.
- Integration of the energy sector with the political, technological, economical and legal EU space.
- Independence of the state in internal and external energy policy-making, prioritization of national interests.
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According to the draft of the Concept, published on the website of Ukrainian State Energy Efficiency Agency, of the national economy would be enhanced by partial reimbursing of credits engaged by individuals and commercial entities for implementation of energy efficient decisions and purchasing of energy efficient equipment.
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- The renewable energy producers ("RES producers") selling power to the Guaranteed Buyer under the Feed-in-Tariff, will have the right to exit the Guaranteed Buyer balancing group and sell power under bilateral contracts, at the day ahead market ("DAM"), intraday market and balancing market at the prices formed at the respective markets. Such operations will be deemed as the service on securing the increase of the electricity share from alternative energy sources (the “RES Service”) which RES producers supply to Guaranteed Buyer.
- Guaranteed Buyer will be obliged to pay the RES Service covering the difference electricity output and consumption by the respective RES Producer (net output).
- The amount of the FiT Premium to be paid shall be calculated by multiplication of the net output of the produced power and the difference between the applicable FiT and an average market price which may not be lower than the price at DAM or average price under bilateral contracts at the electronic auctions where power is sold by Guaranteed Buyer or by the national nuclear power plants operator "Energoatom". The formula for calculation of the FiT Premium to be introduced by the Regulator.
- In addition to the Feed-in-Tariff Premium mechanism the Draft Law establishes the stop date – 31 December 2022, for FiT awarding to (i) solar power plants with capacity not exceeding 1 MW, (ii) wind power plants with capacity exceeding 5 MW, (iii) energy generating facilities producing power from other sources (i.e. biogas), stated power generating facilities commissioned after 31 December 2022 won't be able to obtain the Feed-in-Tariff.
The published FiT Premium Draft Law is open to commenting and submission of proposals until 26 September 2021. Most possible that the final adopted version of the Draft Law will suggest the FiT Premium mechanism which may differ from the described above.
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UN climate report increases urgency for green investment funds
A U.N. Climate Report found that global warming is dangerously close to spiraling out of control. According to the report, even the most severe carbon emission cuts are unlikely to prevent global warming and the most profound way to prevent the global crisis is to invest in the green energy.
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Naftogaz and RWE sign memorandum of understanding on hydrogen
NJSC Naftogaz of Ukraine and German energy trading company RWE Supply & Trading have signed a memorandum of understanding on exploration of opportunities along the full value chain of green hydrogen and its derivatives like ammonia produced in Ukraine.
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This includes the development of green hydrogen and ammonia production and storage in Ukraine and its import to Germany. This focus is particularly relevant in the context of the H2Global initiative launched by the German government for green hydrogen imports produced outside the EU.
“Ukraine has great potential for the development of the hydrogen economy in cooperation with Germany. As a national company, Naftogaz is ready to be a pillar of this development. We consider green hydrogen as our strategic priority, and we are happy to work on it with RWE, our reliable partner in trade and natural gas supplies”, commented Naftogaz CEO Vitrenko.
Ulf Kerstin, Member of the Board RWE Supply & Trading: “Hydrogen will be key to the decarbonisation of the industry, as certain parts cannot be electrified with renewable energy. As a partner of the industry, RWE is part of that solution. We are very pleased to jointly explore with Naftogaz opportunities for supply of green hydrogen from the Ukraine in future.”
Working groups representing the two companies will start working together within the next month. According to Oleksiy Ryabchyn, advisor to the Naftogaz CEO responsible for developing low-carbon businesses, Naftogaz is ready to be a driver for the implementation of hydrogen projects in Ukraine. The signing of the memorandum is the first important step towards working with German partners to develop the hydrogen business and new green areas of activity for Naftogaz.
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NS-2 had earlier asked to have the part of the pipeline on German territory be exempted from the EU regulations requiring that companies that are producing, transporting, and distributing natural gas within the territory of the EU should be divided into independent entities.
Bundesnetzagentur in May last year refused to issue a waiver. Under the EU gas directive, exemptions can only be granted to pipelines completed by May 23, 2019. The measures were revised after works on the pipeline had started -- a move that NS-2 alleges was discriminatory.
The court on Wednesday said because the physical construction wasn’t completed by the cut-off date, NS-2 couldn’t get the carve-out. The judges rejected the company’s argument that economically, the project was completed at that time because the bulk of the money was already invested.
To comply with the EU Gas Directive, NS- 2 must be certified as an independent transmission or system operator under the EU regulation. That mean that Gazprom must give up control and command rights over the leadership of NS-2 company and include other measures guarantee NS-2’s independence from Gazprom. Under the EU-rules NS-2 is also required to offer its capacities to the third parties seeking exploitation of the NS-2' transportation capacities.
The Zug, Switzerland-based company said it would evaluate the ruling -- which can be appealed -- before announcing any next steps.
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