Ukraine continues to build energy castles in the air
The latest and clearly not the last gas crisis with Russia has once again demonstrated our country’s shaky position in the energy sector. Despite the measures taken by state officials, the problems in the fuel sector are showing no signs of disappearing. Why then does the only branch of the Ukrainian economy that has a cabinet-approved development strategy continue to go downhill?
There are at least seven reasons why the domestic energy sector is in the position it is now. First, it is not moving in accordance with the Energy Strategy approved in 2006, but rather in the opposite direction, which is proved by the curious conclusions made by the incumbent authorities’ favorite Western analysts (who actually build their forecasts solely on this strategy). Secondly, the said document was prepared when there was no strategy for the development of the national economy as a whole (and there still isn’t one, incidentally). Thirdly, the documents approved by the government (and this concerns not only the energy strategy) ignored European experience in developing and implementing such programs. Fourthly, the proposed projects had no clear figures (at least to the fourth digit) for the volume of production and, most importantly, sources of financing. Fifthly, the calculations were based not on the stable years in 2002-2004, but on the crisis-hit 1990s when market-oriented relations in Ukraine looked like Chicago in the Prohibition Era, when the shadow economy was flourishing, and households’ income was on the decline. Sixthly, the adoption of numerous state programs that are required for the successful implementation of the strategy is being dragged out, and those already approved are not in line with it, to put it mildly. Seventhly and finally, all the approved documents lack clearly outlined principles, guidelines, mechanisms and targets for the fulfillment of state policy in the energy sector, which deprives it of a systemic approach, while regional differences in production and consumption of different types of fuel and energy are simply left out.
The last reason could be the subject of long debate, and there are more than enough illustrative examples of the systemic approach. For example, in 1981, Sweden used four main sources of energy, including natural gas accounting for the lion’s share (85% of consumption), to generate heat. However, over the past 25 years, the situation has changed. The range of the sources has tripled, and the share of natural gas used in heat generation plunged by 14 (!) times.
One could say that Sweden is a different universe, so instead let’s take Belarus as an example. Minsk has approved not only a concept for energy security and measures to enhance energy independence (by the way, with the evaluation criteria of the latter), but also hammered out mechanisms for its implementation – five-year comprehensive national programs to modernize the major facilities of the Belarusian power grids, facilitate energy efficiency and increase the share of local fuel and energy in that country. In particular, the concept of energy security of our northern neighbor (which depends on Russia for 96% of its oil and gas supplies! – which could look like a nightmare for Ukraine) foresees the following by 2020:
- the maximum possible involvement (from economic and environmental points of view) of the country’s own fuel resources in the fuel and energy balance – crude oil and associated gas, peat, firewood (!) and wood waste, renewable energy, waste energy – this should be up to 25% of the total consumption of boiler and furnace fuel;
- the commissioning of new generating capacity using fuels alternative to gas and boiler oil (nuclear, hydroelectric, thermal, and combined generation facilities with the use of local types of fuel);
- the substitution of natural gas with coal in industry in a volume of one million tonnes of equivalent fuel per year;
- an increase in strategic reserves of basic energy resources, including through accumulated stocks of natural gas stored in underground storage facilities;
- the modernization and upgrading of facilities using existing energy sources, including the introduction of steam and gas technologies;
- the creation of electricity generation facilities on the basis of industrial, housing and utilities sources of heat, bringing the installed capacity at these facilities to at least 400 MW.
Can anyone appreciate the difference?
You can read full article in journal «Terminal: Oil Review» №4 (590) 30 Jan 2012
