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Regarding the current state and prospects of energy development. In today's discussion, my colleagues mentioned that we should start with integrated approaches, and I certainly agree with our speakers. So, I would like to elaborate a bit on the importance of using a comprehensive approach and its important impact on the prospects for energy development in the post-war period.
First, it concerns the regulatory and legal measures for the adaptation of the European Union's legislation in Ukraine in the field of energy and the energy industry. Of course, this includes the introduction of a new technical glossary on electrical engineering, adaptation of European industry standards, regulatory documentation in the energy sector, namely: codes of distribution system operators and transmission system operators, rules for the installation of electrical installations, rules for the technical operation of power plants and networks, technical safety rules, numerous SOPs, etc.
It is important to pay attention to the issue of liberalizing the rules for non-standard grid connection, as well as to the issue of state guarantees of investor protection. Thus, it should be a set of laws, industry norms and rules that guarantee investors security and realization of investments in the development of the energy sector.
Second, it is economic measures.
The country needs a post-war national plan for the economic development of Ukraine. Even today, amid the war, both forecast balances and redistribution of available capacity are being formed and adjusted accordingly, as production facilities and the population are being relocated from the war zone and the gray zone.
As a result, the current structure of electricity and gas consumption has undergone significant changes, so in the postwar period, all this should be reflected in the national plan in the form of a basic energy and resource balance and consider forecasts for the production and consumption of electricity and other energy carriers. Separate attention should be paid to water conservation, with the prospects for economic development of territorial communities considering the specifics of the region.
It is worth paying attention to the need to reform the electricity market model, as the market rules were imperfect even in the pre-war period.
Today, they simply do not function properly, effectively pushing all companies operating in the energy sector into bankruptcy. It's no secret that energy companies, which have always been potentially profitable, are now operating on the verge of bankruptcy.
A proper reform of the market model and market rules is one of the key components that is part of the energy security today and in the future.
Thirdly, it is the solution of socio-economic measures, such as the settlement of accumulated debts for previous periods in the energy markets, revision of the existing PSO model and abolition of cross-subsidization for the effective protection of the poor.
We must realize that in the post-war period, households will not be able to pay an economically reasonable price for energy for some time until the country's economy recovers.
All mechanisms of compensation for the cost of electricity or gas, including PSO, should be reviewed to ensure the sustainability and viability of the new model and market rules and should not lead to the destruction of profitable energy companies.
Fourth, it is a sector-wide technical policy. I will start with the structure of generating capacities in the energy balance to reduce manipulation of consumer opinion by various experts.
In the future, we will definitely have a major share of at least 50% of nuclear generation in the electricity generation structure. Whether we want it or not, it ensures an affordable price of electricity for consumers.
Hydroelectric power plants and pumped storage power plants will continue to operate in any case, as they, in addition to generating cheap electricity, also perform the function of regulating the power system and water balance.
As for renewable energy sources, they must be developed in a civilized manner to avoid the distortions that occurred in the pre-war period. This applies not only to the issue of balancing the power system, but also to maintaining a healthy financial balance in all segments of the electricity market, as the uncontrolled development of renewable energy sources has led to significant distortions in the normal operation of the power system. As a result, there were significant restrictions on the supply of power from RES to the grid with a simultaneous increase in the specific rates of raw material combustion per kW for TPPs whose power units participated in the regulation of the power system, and if we also recall the inefficient operation of the Guaranteed Buyer and imperfect market rules, all this together basically disrupted timely payments for electricity.
It should be noted that the operation of TPPs and CHPPs is important in our energy balance. These are the facilities that ensure the inertia and reliability of the power system. You have all heard about primary, secondary and tertiary regulation. It is TPPs that provide primary regulation. Without TPPs and CHPs, the development of renewables is difficult, as it is directly related to the physics of processes and, consequently, to the reliability of the grid, so the relevance of the issue of rotating capacities in the IPS cannot be canceled at will.
In any case, over the next 10 years, during and after the war, TPPs and CHPs will occupy a significant share in the electricity generation structure of our energy mix.
I would like to draw attention to the fact that in order to ensure the reliability of the energy system and the sustainable revival of the economy as a whole, we need to focus on distributed generation. This refers to the generation of small power up to 20 MW. It can be of different types: it is like all types of renewable energy sources such as solar, wind power plants, cogeneration including biomass and biogas, small hydroelectric power plants, thermal power plants, CHP plants, and GTU or GPU, etc.
Given the above, the formation of regional balancing groups that will be united regardless of the type and type of generation is an important step in ensuring energy security.
These groups should be managed by a certain regional dispatch center, ensuring their self-balancing, fulfilling mobilization obligations to guarantee power supply to critical infrastructure facilities and participating in demand management by involving large consumers. In this way, regional balancing groups will be able to provide services to the system operator in the ancillary services market and will be more viable themselves, being able to operate in all segments of the electricity market and outside the market.
Importantly, the basic rules of operation for balancing groups, regardless of whether they are regional or national, should be the same to avoid discrimination and ensure the viability of the new electricity market model and market rules. It is crucial to consider the experience of past mistakes in the future.
I would also like to emphasize that the development of trunk and distribution networks should be in line with the standards, rules and regulations of the European Union. This will further increase the reliability, flexibility, and security of the power system and reduce losses in the transmission and distribution of electricity. This means the construction of new interconnectors, implementation of measures to digitalize the operation of all networks and a mandatory transition to a voltage class of 500-400 kV instead of 750 kV for the transmission system operator, and a transition to 20 kV for distribution networks should be considered. Such measures will increase the reliability and safety of the grid, optimize losses and improve the quality of electricity, which is important for the end consumer, but it should be noted that not all distribution networks are optimally suited for switching to 20 kV.
Fifth, the last and most important measure is to ensure effective communication between the Government and the relevant EU institutions on the reform of the market model and rules. Today, the European market model and rules are being finalized, as Europe is facing complex challenges resulting from the pandemic and the war in Ukraine, and the main goal for the EU is to make them more resilient and adequate to the current economic and political conditions in the EU.
Proper communication with the European Union can give us confidence that we will be as prepared as possible for integration with the European electricity and energy markets after the mandatory transition period in the post-war period.
Why is it important to provide for a transition period? This is to ensure that large consumers and participants in all segments of the electricity and other energy or energy resources markets are as prepared as possible to operate under the laws, rules and regulations of the European Union.
Thus, with the introduction of a comprehensive approach consisting of legal, economic, social and technical measures that must be implemented by the Government simultaneously and coordinated with the European Union, and only in this way, and in no other way, we will be able to build a sustainable, high-tech and low-carbon integrated energy system that will be a basic component for the development of the national economy of Ukraine in the post-war period.
Fragments of the speech at the Energy Freedom by Energy Club talk show, dedicated to the topic "Problems of the energy sector and ways to solve them in the conditions of war: a professional discussion based on the results of a sociological survey"
First, it concerns the regulatory and legal measures for the adaptation of the European Union's legislation in Ukraine in the field of energy and the energy industry. Of course, this includes the introduction of a new technical glossary on electrical engineering, adaptation of European industry standards, regulatory documentation in the energy sector, namely: codes of distribution system operators and transmission system operators, rules for the installation of electrical installations, rules for the technical operation of power plants and networks, technical safety rules, numerous SOPs, etc.
It is important to pay attention to the issue of liberalizing the rules for non-standard grid connection, as well as to the issue of state guarantees of investor protection. Thus, it should be a set of laws, industry norms and rules that guarantee investors security and realization of investments in the development of the energy sector.
Second, it is economic measures.
The country needs a post-war national plan for the economic development of Ukraine. Even today, amid the war, both forecast balances and redistribution of available capacity are being formed and adjusted accordingly, as production facilities and the population are being relocated from the war zone and the gray zone.
As a result, the current structure of electricity and gas consumption has undergone significant changes, so in the postwar period, all this should be reflected in the national plan in the form of a basic energy and resource balance and consider forecasts for the production and consumption of electricity and other energy carriers. Separate attention should be paid to water conservation, with the prospects for economic development of territorial communities considering the specifics of the region.
It is worth paying attention to the need to reform the electricity market model, as the market rules were imperfect even in the pre-war period.
Today, they simply do not function properly, effectively pushing all companies operating in the energy sector into bankruptcy. It's no secret that energy companies, which have always been potentially profitable, are now operating on the verge of bankruptcy.
A proper reform of the market model and market rules is one of the key components that is part of the energy security today and in the future.
Thirdly, it is the solution of socio-economic measures, such as the settlement of accumulated debts for previous periods in the energy markets, revision of the existing PSO model and abolition of cross-subsidization for the effective protection of the poor.
We must realize that in the post-war period, households will not be able to pay an economically reasonable price for energy for some time until the country's economy recovers.
All mechanisms of compensation for the cost of electricity or gas, including PSO, should be reviewed to ensure the sustainability and viability of the new model and market rules and should not lead to the destruction of profitable energy companies.
Fourth, it is a sector-wide technical policy. I will start with the structure of generating capacities in the energy balance to reduce manipulation of consumer opinion by various experts.
In the future, we will definitely have a major share of at least 50% of nuclear generation in the electricity generation structure. Whether we want it or not, it ensures an affordable price of electricity for consumers.
Hydroelectric power plants and pumped storage power plants will continue to operate in any case, as they, in addition to generating cheap electricity, also perform the function of regulating the power system and water balance.
As for renewable energy sources, they must be developed in a civilized manner to avoid the distortions that occurred in the pre-war period. This applies not only to the issue of balancing the power system, but also to maintaining a healthy financial balance in all segments of the electricity market, as the uncontrolled development of renewable energy sources has led to significant distortions in the normal operation of the power system. As a result, there were significant restrictions on the supply of power from RES to the grid with a simultaneous increase in the specific rates of raw material combustion per kW for TPPs whose power units participated in the regulation of the power system, and if we also recall the inefficient operation of the Guaranteed Buyer and imperfect market rules, all this together basically disrupted timely payments for electricity.
It should be noted that the operation of TPPs and CHPPs is important in our energy balance. These are the facilities that ensure the inertia and reliability of the power system. You have all heard about primary, secondary and tertiary regulation. It is TPPs that provide primary regulation. Without TPPs and CHPs, the development of renewables is difficult, as it is directly related to the physics of processes and, consequently, to the reliability of the grid, so the relevance of the issue of rotating capacities in the IPS cannot be canceled at will.
In any case, over the next 10 years, during and after the war, TPPs and CHPs will occupy a significant share in the electricity generation structure of our energy mix.
I would like to draw attention to the fact that in order to ensure the reliability of the energy system and the sustainable revival of the economy as a whole, we need to focus on distributed generation. This refers to the generation of small power up to 20 MW. It can be of different types: it is like all types of renewable energy sources such as solar, wind power plants, cogeneration including biomass and biogas, small hydroelectric power plants, thermal power plants, CHP plants, and GTU or GPU, etc.
Given the above, the formation of regional balancing groups that will be united regardless of the type and type of generation is an important step in ensuring energy security.
These groups should be managed by a certain regional dispatch center, ensuring their self-balancing, fulfilling mobilization obligations to guarantee power supply to critical infrastructure facilities and participating in demand management by involving large consumers. In this way, regional balancing groups will be able to provide services to the system operator in the ancillary services market and will be more viable themselves, being able to operate in all segments of the electricity market and outside the market.
Importantly, the basic rules of operation for balancing groups, regardless of whether they are regional or national, should be the same to avoid discrimination and ensure the viability of the new electricity market model and market rules. It is crucial to consider the experience of past mistakes in the future.
I would also like to emphasize that the development of trunk and distribution networks should be in line with the standards, rules and regulations of the European Union. This will further increase the reliability, flexibility, and security of the power system and reduce losses in the transmission and distribution of electricity. This means the construction of new interconnectors, implementation of measures to digitalize the operation of all networks and a mandatory transition to a voltage class of 500-400 kV instead of 750 kV for the transmission system operator, and a transition to 20 kV for distribution networks should be considered. Such measures will increase the reliability and safety of the grid, optimize losses and improve the quality of electricity, which is important for the end consumer, but it should be noted that not all distribution networks are optimally suited for switching to 20 kV.
Fifth, the last and most important measure is to ensure effective communication between the Government and the relevant EU institutions on the reform of the market model and rules. Today, the European market model and rules are being finalized, as Europe is facing complex challenges resulting from the pandemic and the war in Ukraine, and the main goal for the EU is to make them more resilient and adequate to the current economic and political conditions in the EU.
Proper communication with the European Union can give us confidence that we will be as prepared as possible for integration with the European electricity and energy markets after the mandatory transition period in the post-war period.
Why is it important to provide for a transition period? This is to ensure that large consumers and participants in all segments of the electricity and other energy or energy resources markets are as prepared as possible to operate under the laws, rules and regulations of the European Union.
Thus, with the introduction of a comprehensive approach consisting of legal, economic, social and technical measures that must be implemented by the Government simultaneously and coordinated with the European Union, and only in this way, and in no other way, we will be able to build a sustainable, high-tech and low-carbon integrated energy system that will be a basic component for the development of the national economy of Ukraine in the post-war period.
Fragments of the speech at the Energy Freedom by Energy Club talk show, dedicated to the topic "Problems of the energy sector and ways to solve them in the conditions of war: a professional discussion based on the results of a sociological survey"