ENERGY
SECTOR BUDGET SUPPORT PROGRAMME June 2012
activities. In particular, five new compoWe are happy to present you the nents have been developed by the Projfourth issue of the Newsletter of the ect. This was achieved mainly due to the Energy Sector Budget Support Project numerous proposals presented by the (hereinafter ‘the ESBS Project’). Fol- Beneficiary, which proves the increase lowing our good tradition, our team pre- of need in support provided by our Project. Therefore, we hope to accomplish a pared many interesting news for you. lot of other important To begin with, As for the new Work Plan the and useful tasks withthe ESBS Project has scope of activity of the ESBS Proj- in the outlined scope scheduled a series of ect was considerably expanded, by the end of the workshops, consulta- namely: taking into consideration Project. And now we tions and two study proposals of the Beneficiary, five would like to prestours to the Czech new components were developed ent our report on the Republic and Greece in addition to the initial five ones progress of completo be held in the neartion of various tasks. est future. The main specified by the Project. One of the most objective of these events is the study of certain current is- significant components of the Project, sues, namely the development of laws in our opinion, is Support to the Impleand regulations on the improvement of mentation of the Protocol on Accession procedure of building power genera- of Ukraine to the Energy Community. tion capacities; discussion of the Energy This is the largest component in terms Community Regional Strategy, review of the scope of the planned activities. of legislation on natural gas under- “The Ukrainian membership in the Enground storage, study of experience in ergy Community undoubtedly will help unbundling and regulation of unbundled strengthening energy security in the reenergy industries, especially in electric- gion of South East Europe and, due to ity sector; study of experience of unbun- well-developed energy infrastructure dling of natural gas sector and function- and system of gas storage, will make a ing of liquefied natural gas (LNG) ter- major contribution to the development minals, etc. We believe that these activi- of the single energy market,” Natalia ties will make a significant contribution Boytsun, Director of the European Integration and International Cooperation to reforming Ukraine’s energy sector. Department, Ministry of Energy and We can proudly report that the new Coal Industry, said at the First Day of working plan allowed significant expan- Ukraine in the Energy Community held sion of the scope of the ESBS Project on 18 April 2012.
Dear reader,
Due to the need in proper fulfilment by Ukraine of its obligations under international treaties, namely regarding the harmonization of Ukrainian legislation in energy sector with the so-called acquis of the Energy Community, the Beneficiary set a high level of priority to the activities related to the accession of Ukraine to the Energy Community. Thus, mutual activities of the ESBS experts and MoECI resulted in the de-
This project is funded by the European Union
CONTENT: BB Ukraine plans its energy efficient future BB Integration of UPS of Ukraine into ENTSO-E BB Modernisation of the Ukrainian GTS – prioritized BB Ukraine: One Year in the Energy Community velopment of draft Declaration on Security of Energy Supply and Position Document “Development of Process of Adaptation of Generally Accepted EU Standards in Ukraine”, etc. Another extremely important news is that the preparation of tasks within the framework of the Second Energy Sector Budget Support Programme was started. Thus, the provision of technical assistance will continue. We are pleased to inform you that we will continue cooperation with our partners and provide them with all the necessary support for reforming the energy sector. The ESBS Project will continue informing the public about its activities and the scheduled events. We invite you to participate in these events. Keep up on our latest announcements on the Web site of the ESBS Project: www.esbs.kiev.ua. ESBS Project Team
This project is implemented by the Consortium led by KANTOR Management Consultants S.A.
Newsletter No4 This publication has been produced with the assistance of the European Union. The contents of this publication are the sole responsibility of the Consortium led by KANTOR Management Consultants S.A. and can in no way be taken to reflect the views of the European Union.
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Green Paper of Ukraine: Modern Discourse about Future One of the main targets declared in the Energy Strategy of Ukraine up to 2030 is an increase in effectiveness of energy policy and “creating favourable conditions for future development of national economy and improvement of living standards”. Ukraine has no detailed policy paper which would allow synchronizing current status of the national energy sector with existing possibilities taking into account the latest trends in the global energy sector development. On photo (from right to left) the authors of the Green Paper: Senior Consultant Dr.Theodor Goumas (Greece) and ESBS Project Expert Victor Lir
Thus, in response to the request by the main Beneficiary, the ESBS Project experts prepared the draft Green Paper “Energy Policy of Sustainable Development” and jointly with officials from the Ministry of Energy and Coal Industry conducted a round table meeting to discuss it. As the European Union is promoting the dissemination of information on the best practice cases in energy sector, the Project’s expert Mr. Goumas opened the round table with the presentation of international experience in drafting the White Paper on Energy Policy for Sustainable Development. The participants noted an important shift in public opinion on the most efficient energy sources that could be used to meet the needs of society. It was emphasized that the task of energy experts is to find an optimal configuration of possibilities under the existing economic, environmental and social limitations. It becomes a complicated task during the development of energy policy. Participants of the discussion identified three energy policy pivots, namely: competitiveness, sustainable development and security of supply which should form the basis for future planning. The Green Paper mainly focused on sustainable development of energy sector of
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Ukraine, which is undoubtedly linked to development of renewable energy sources and their availability on the market, strengthening the policy of energy efficiency and energy saving, combating climate change, and the respective area of scientific research. Whether Ukraine will share the European system of values related to support of competition, sustainable development and security of supply will also depend on constructive discussions with all important partners on the energy market as well as on finding the optimal configuration of public-private partnership. The priorities should become the traditional energy sector, alternative energy sources and energy savGreen Papers ing policy. are documents published by the European Commission (EC) to
The pro- stimulate discussion on given topics posed Green at European level and may give rise Paper is a platto legislative developments that are form for key then outlined in White Papers. market players to discuss and White Papers elaborate comare documents containing proposments to be conals of the European Union (EU) sidered in the action in a specific area. Once appreparation of proved by Parliament, the respecWhite Paper tive action programme for the EU in the said area is being developed. and the National Action Plan for Energy Efficiency and Renewable Energy Sources which will be approved by Ukrainian authorities as a main reference point for policy and actions on sustainable development of energy sector in the short and medium term. Moreover, there are reasons to believe that this document will make a useful input in the updating of the Energy Strategy of Ukraine up to 2030. The event was attended by representatives of various departments of the Ministry of Energy and Coal Industry as well as the State Agency of Energy Efficiency and Energy Saving of Ukraine. To view the presentation materials prepared for this round table, please visit the Project ’s Web site: www.esbs.kiev.ua.
Sector budget support programme
About 30 of our good friends who took part in the programme since autumn 2010 decided to continue improving their language and professional skills together with us. We also sincerely welcome 30 new participants who joined our educational programme and thus proved their aspiration for mastering English – language of international communication – that will undoubtedly contribute to cooperation of their institutions with international partners both within sectoral budget support and in the context of Ukraine’s further integration into the European community. Traditionally, the new participants took a test to determine their English knowledge. Based on the results, one new elementary English group was formed. The remaining representatives of Ukrainian ministries and agencies who took part in the testing joined their colleagues with higher English level who continue their education under the programmes arranged by the ESBS Project.
Business and Energy English / Professional Skills Train ing Programme is extended! We are pleased to inform that Business and Energy English / Professional Skills Training Programme recommenced this February. After a several-months break, we welcome again the participants of the programme on their way toward fluent English and hence personal and professional growth. This programme is based on successful experience of implementation and results of the first Business and Energy English / Professional Skills Train ing Programme. It turned out to be an effective instrument to build capacity for employees and managers of the relevant Ukrainian ministries and agencies. The programme facilitates the establishment of contacts between the specialists of various agencies who are involved in the implementation of sectoral budget support programmes and hence contributes to building up the potential for successful implementation of such programmes.
This time we decided to focus on beginners and those whose English is lower than intermediate. We believe that the task of the programme is to give impetus to Ukrainian civil servants to learn a foreign language. Knowledge gained during our classes will surely become the basis for further individual development and improvement. We are confident that the second Business and Energy English / Professional Skills Training Programme will be as successful as the first one. We wish its participants inspiration and success in gaining knowledge, establishing contacts, professional development and career advancement. We believe that it makes a significant contribution to the capacity building of Ukrainian ministries and agencies for achieving the national targets in the context of European integration and international cooperation.
On photo: BEEPS’ Participants study hard! Newsletter No4
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Integration of UKRAINIAN UPS into ENTSO-E One of the priorities of the Ukrainian Energy Strategy is integration of Ukrainian UPS into the European Power Grid (ENTSO-E, which is a new name for the former UCTE). This process has started 3 May, 2006 when Ukraine and the Republic of Moldova sent a joint application for integration of Ukrainian UPS and Moldovan IPS as a single regulating block to the synchronous zone of UCTE. The UCTE Steering Committee decided to set up a project group Ukraine – Republic of Moldova/ Igor Vovk UCTE headed by the Project Expert on Transelectrica (Romania), ENTSO-E which is composed of representatives of UCTE member companies: CEPS (Czech Republic), APG (Austria), PSE-Operator (Poland), MA VIR (Hungary), SEPS (Slovakia), as well as the representatives of the UE and Moldelectrica. The Steering Committee also approved the draft Terms of Reference to Interconnection of Ukrainian and Moldovan power systems to UCTE power system. Interconnection procedure consists of three stages: Stage A – Drafting a agreement which will be signed by UE / Moldelectrica and UCTE (ENTSO-E). It will include technical specifications and operational aspects, including the agreement between the UE and Moldelectrica on maintaining the control unit; separation conditions, congestion regime; legal/regulatory framework. At this stage, the research should be conducted and reports should be produced. Based on the results of research, the requirements for full accession of the Ukrainian and Moldovan power systems to the UCTE power grid should be specified (maximum term is 32 months);
Ukraine, as well as system operators (Moldelectrica, Transelectrica and Ukrenergo) discussed the progress of technical research on possibilities of the synchronous interconnection of the Ukrainian and Moldovan power systems with ENTSO-E and established the following: BB Ninety percent of all expenses to be incurred by the European Neighbourhood Policy and the Partnership Program by CBC Romania–Ukraine–Republic of Moldova for 2007–2013. The remaining 10% of the project cost should be split between the ministries of the Republic of Moldova, Ukraine and Romania. BB The Republic of Moldova will submit an application for funding on behalf of two other beneficiaries. Proposals were presented on 31 March 2011 to the Joint Steering Committee of the Joint Operational Programme which is located in the Ministry of Regional Development in Romania. BB The Steering Committee will be established consisting of representatives from ministries of the Republic of Moldova, Ukraine and Romania, three system operators (Moldelectrica, Transelectrica and Ukrenergo), ENTSO-E and the European Commission. The Steering Committee will be responsible for the monitoring of the project’s progress. In May 2011, the joint application (brief description of the project) was adopted. In October, preparation of all necessary documents to receive funding for “2007– 2013 Joint Operational Programme Romania–Ukraine– Moldova” started. Currently, both sides are holding the necessary consultations and preparing financial documents to sign the contracts between the Moldovan Ministry of Economy and interested companies. It is expected that these documents will be signed in the nearest future.
Stage В – Implementation of agreement between Ukraine and the Republic of Moldova. During this stage, all technical and organizational actions should be taken in order to meet the standards under the UCTE User Guide. The stage will result in a report produced for the UCTE Steering Committee and preparation of requests to switch to stage C (date to be specified); Stage С – Preparation and testing in a separate work mode and in a mode of connected power systems. Evaluation of test results. The next step should be testing using the synchronous interconnection of the area (within 26 months). A number of meetings have been conducted including General Meetings during which the central executive bodies of the Republic of Moldova, Romania and 4
Sector budget support programme
Modernisation of the Ukrainian GTS – prioritized Modernisation of the Ukrainian GTS will Strengthen the Energy Security of Europe One of the largest components of the ESBS Project in terms of the scope of the planned tasks is Support to Meeting the Provisions of Protocol on Accession of Ukraine to the Energy Community Treaty. The ESBS Project provides consultancy support to the Ministry of Energy and Coal Industry of Ukraine with regard to meeting the obligations in the context of membership of Ukraine in the Energy Community. The functions of experts of the ESBS Project include providing support to specialists of the ministry which is the main Beneficiary of the ESBS Project in preparation of recommendations, studies, and policy briefs concerning implementation of European acquis in energy as well as participation in events organized by the Energy Community.
significance for ensuring the energy security of the region and possibility of giving to its modernization the status of allEuropean priority.
Based on the results of the meeting the European Commission agreed with the conclusions of the Ukrain- Nataliya Boytsun The Energy On 23 March 2012, the Community Gas ian delega24th Permanent High Level Director of the Department Ring Concept is a joint tions that for European Integration and Group Meeting of the Enerdevelopment of the gas moderni- International Cooperation, MoECI gy Community Secretariat infrastructure both at zation of was held in Vienna, Austhe national level of the the Ukrainian GTS and improving its efficiency tria. Representatives of the contracting parties and at will contribute to strengthening and support to the level of connections to Ministry of Energy and Coal energy security of the region. Moreover, it gas pipelines. Industry of Ukraine and the was emphasized that modernization Energy Community expert of of the Ukrainian GTS and uninterthe ESBS Project participated in rupted energy supply are importhis event on behalf of Ukraine. “Gas Ring” tant factors for secure functiondefinition also includes The issues discussed at the meeting including of the single gas market the resource base and ed enhanced cooperation in the energy secthat can play a key role in the possibility to control the tor between Ukraine and the European Union implementation of the Energy entire gas system and and implementation of infrastructure energy Community Gas Ring concept regulate it in case of a projects, in particular, modernization of the (Source: Item 18 of the Conclucrisis or a threat to Ukrainian gas transportation system. sions of the 24th PHLG meeting security of supply. of 23 March 2012). During the discussion of the draft Regional Energy Strategy of the Energy Community, the delegation of Ukraine made the presentation of functioning of the Ukrainian gas transportation system, its
Participants also noted the significance of the Ukrainian GTS that has to be taken into account while setting the objectives of the Regional Energy Strategy in the context of energy security of the EU and Energy Community countries. Furthermore, the European Commission, EBRD and the World Bank confirmed their support to modernization of the Ukrainian GTS and the fact that the EC set an objective to rehabilitate such GTS by 2020 (Source: Items 19, 20 of the Conclusions of the 24th PHLG meeting of 23 March 2012).
Newsletter No4
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The First Year of Ukraine’s Membership in the Energy Community Treaty On 1 February 2011, Ukraine acquired the official status of the full Contracting Party of the Energy Community. Thus, Ukraine undertook to follow the main directions for the development of all-European energy market and to meet the requirements of the respective laws and regulations in the energy sector that also include environmental protection, energy efficiency and renewable energy sources. The status of the full Contracting Party Oleksii Shevchenko of the EnProject expert on Energy ergy ComCommunity munity Treaty for Ukraine is, first of all, the main instrument of the European integration which facilitates considerable deepening of participation of Ukraine in the development of common single energy and foreign trade policy both within the Energy Community and with countries of the European Union in general. After its accession to the Energy Community, Ukraine gradually becomes one of the main players in the development of the single all-European energy environment due to its powerful and developed fuel and energy sector and favourable geographical location. For the past year, Ukraine had been actively taking measures aimed at reforming the domestic energy sector, and the country already achieved certain results in this area. In particular, the following documents are developed: Plan for implementation of the Directive 2001/77/EC on the promotion of electricity from renewable energy
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sources in the internal electricity market; Plan for implementation of the Directive 2003/30/EC on the promotion of the use of biofuels and other renewable fuels for transport. National Action Plan on energy efficiency is being finalised. Drafting of the Laws “On Principles of Functioning of Electricity Market in Ukraine” and “On Efficient Usage of Energy Resources” is close to completion. A number of by-laws and action plans for harmonization of energy legislation which comply with the main EU regulations were drafted and adopted. The past year saw active measures concerning the preparation to transition from a “single buyer” market model to the model compliant with the target regional electricity market model that envisages direct contracts with gradual opening of this market to eligible customers. Moreover, the Government of Ukraine commenced the process of reforming the National Joint-Stock Company “Naftogaz of Ukraine” to attract investments in its subsidiaries. All these measures are part of considerable work for implementation of provisions of the so-called Second EU Energy Package and obligations of Ukraine stipulated in the Protocol on Accession of Ukraine to the Energy Community Treaty. It is necessary to emphasize that while Ukraine’s accession to the Energy Community opened new prospects, it also caused considerable responsibility for reforming the domestic energy sector. Adoption of laws alone is not a final point of activities of the Contracting Parties of the Energy Community. An example may be the work associated with the implementation by Ukraine of Directive 2001/80/EC related to large combustion plants, a number of provisions of which are currently put
into effect by instructions, and from the legal point of view they are, in general, harmonized. However, technical implementation of provisions of this Directive requires a lot of funds and time. Both electricity and gas sectors deal with similar problems. For example, the main part of the power system in Ukraine is not yet connected to ENTSO-E synchronous zone that makes impossible actual integration of the Ukrainian electricity market into the regional market of South-Eastern Europe (synchronization will require considerable financing). The countries of the Energy Community are closely linked with energy policy of the European Union, as they are members of its network, mainly through development and integration of regional market as well as infrastructure development. In this context, the Energy Community is influenced by energy strategies and plans approved in the European Union, in particular, in terms of integration of electricity and gas infrastructures as well as development of renewable energy. One of the priorities of the single European energy market is increased productivity of transmission between the countries of South East Europe, including those countries that are the Contracting Parties of the Energy Community Treaty in view of their further integration into energy markets of Central European countries. Two energy corridors considered as the priorities for development of the EU energy infrastructure (gas corridors “North–South” in Central Europe and “South–East”) are focused exactly on the integration of the Energy Community into the EU gas market.
Sector budget support programme
To achieve the main objectives of the European energy strategy and to develop the single all-European energy market by 2015, the European Union cannot leave without support the energy infrastructure projects beyond its boundaries as development of energy market of EU countries is impossible without development of energy markets of countries of South East Europe. Keeping in mind the experience in the implementation of the Second Energy Package, the proposals of the Contracting Parties regarding the formulation of general vision of Regional Action Plan related to integration of the Energy Community markets are being developed. In mutual opinion of the ESBS Project and the Ministry of Energy and Coal Indusry of Ukaine, several key issues must be taken into account: There is a need in the technical and financial support from the European Commission and European financial institutions to reform the existing energy markets of all Contracting Parties. Considering the potential of Ukrainian electricity, oil and gas sectors and their importance both for the Energy Community and functioning of a single all-European energy market, special attention should be paid to identification and selection of certain investment projects which could receive the status of “projects of all-European significance”. Support to modernization of the Ukrainian gas transport system by European partners and European financial institutions will contribute to reliability and uninterruptible supply of natural gas to European Union countries, strengthening of regional gas market and achieving the objectives of the allEuropean energy strategy. Aiming at taking into consideration the social issues, first of all, affordability of energy resources, especially to vulnerable consumers categories during the transition period of setting up the single energy market, Ukraine, on 4 October 2011 in Chisinau, Moldova, during the 4th Social Forum of the Energy Community, joined the Memorandum of understanding related to social
Newsletter No4
Membership of UKRAINE in the Energy Community Treaty Is about:
Protecting consumers, as the best practices of the EU will be implemented in the legal regulation of the energy sector Improving reliability of energy supply at reasonable tariffs within a single market and on competitive basis Creating conditions for attracting new investments into the Ukrainian energy sector Establishing a framework for lowering the energy intensity of the national economy Improving the ecological dimension of the energy sector and promotes introduction of energy-efficient production in industries. Strengthening the geopolitical role of Ukraine as a key player in providing energy security in the single European market. Promoting the creation of a single regulatory area for energy trade. Ensuring the highest possible levels of social protection for vulnerable consumers compatible with a sustainable and competitive market and contributes to implementing safeguards that limit the impact of social and economic change on specific sections of society. Stimulating technical assistance and expertise provided by the EU and other donors. Providing better quality of services and possibility to choose suppliers of energy products for all domestic consumers.
issues in the context of the Energy Community. The said Memorandum specifies the political intentions of signatories to take into account the social aspect as well as outlines the main principles and highlights the key points for social dialogue in the energy sector both at national and local levels. Thus Ukraine confirmed its intention to take necessary measures to address the most serious social consequences related to meeting the requirements of the Energy Community Treaty. It is envisaged that the first conclusions regarding Ukraine’s membership in the Energy Community will be summarized in annual Implementation Report of the Energy Community. But, in general, according to the Energy Community Secretariat, the first year of Ukraine’s membership in the Energy Community demonstrated positive changes toward reforming the Ukrainian energy sector and meeting the obligations assumed by Ukraine. Just within one year, Ukraine achieved considerable results in several areas compared to other Contracting Parties
(requirements of Articles 22 and 29 of the Energy Community Treaty were met; Action Plans for implementation of Directives 1999/32/ЕС, 2001/77/ ЕЕС, 2003/30/ЕС were drafted; drafting of the National Energy Efficiency Action Plan is being completed; number of by-laws for the implementation of acquis requirements on supply security in electricity and gas sectors were drafted). For the Ukrainian part, the activities within the Energy Community framework mean an actual start of implementation of concept of sectoral integration of Ukraine into the EU which was incorporated in the Association Agreement. Undoubtedly, introduction of provisions of the European energy legislation will facilitate creation of market conditions in fuel and energy sector of Ukraine that will positively influence upon attraction of investments to expand capacities and improve the existing energy infrastructure and further integration of Ukrainian power networks into the European power system.
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Ukraine plans its energy efficient future Methodological recommendations on drafting the National Energy Efficiency Action Plan for 2012–2020 were prepared in accordance with three EC Directives:
EC Directive on energy end-use efficiency and energy services; EC Directive on the energy performance of buildings; EC Directive on labelling of energy related products. In the context of fulfillment of the Project Component Providing Support to the State Agency for Energy Efficiency and Energy Conservation, from August 2011 to February 2012 the Project experts had been providing the methodological support to SAEE as regards drafting the 2012–2020 National Energy Efficiency Action Plan (NEEAP). In accordance with the definition set forth in Directive on Energy End-Use Efficiency and Energy Services, to calculate the planned energy efficiency targets, all states must use the data on the total energy consumption for the last five years prior to the implementation of the Directive. The member states should take economic, practical and substantiated measures to speed up achievement of this target. The ESBS Project involved CRES professionals (Greece) as well as Ukrainian experts in providing support to the SAEE. The activities related to preparation of recommendations were carried out in two stages. The first stage focused on preparatory work related to drafting NEEAP recommendation document. It included the review and analysis of regulatory and legal framework that regulates the issues of energy efficiency, guidelines/technical characteristics to prepare the NEEAP in accordance with the Directive on energy services, guidelines to adapt the model of energy planning of Ukraine in order to use their results when assessing the energy efficient scenarios as well as determining
Editors:
Angel Minev, Project Team Leader 8
and collecting the aggregate and individual data which are necessary to set the national energy efficiency target and to launch the national energy planning model. The second stage included the very activities related to drafting 2012–2020 NEEAP recommendation document in accordance with technical characteristics identified during the implementation of the first stage and was split into five sub-groups: BB Calculation of the 2020 National Energy Ef-
ficiency target according to the Energy Saving Directive.
BB Adaptation of the national energy planning
model (TIMES) aimed at further use thereof for the assessment of energy efficiency scenarios.
BB Analysis of scenarios and forecast of the final energy consumption.
BB Measures and policies to achieve energy saving targets.
BB Summary
document.
of
NEEAP
recommendation
At this moment, National Energy Efficiency Action Plan for 2012–2020 is being drafted.
‘Complementary Technical Assistance to the EU-funded Budget Support to Ukraine’s Energy Strategy Implementation’ Project
Svitlana Atamanenko, ESBS Project Information/ Communication Expert
48a, Volodymyrska Street, Office 23, 01601, Kyiv, Ukraine Tel.: +38 (044) 234 90 68 Fax.: +38 (044) 234 90 78 E-mail: esbs@esbs.kiev.ua Web site: http://www.esbs.kiev.ua Sector budget support programme