Infographic report "Energy industry in Ukraine"

Š Top Lead. All rights reserved

Introduction How to read this guide

What this guide demonstrates

Energy is measured in different ways. Most sources of energy are measured in physical terms: coal in tons and gas in cubic meters.

Energy itself has additional units of measurement: heat – J, electricity – kWh.

This guide reflects three things: the state of the energy market, the potential of the sector, and the areas that need reform. In this guide, we focus on each energy sector while looking at overall potential and the next steps.

In this guide, each source and type of energy is represented in traditional units of measurement. However, to ensure comparability, we have indicated tons of oil equivalent as the reference fuel on pages featuring energy balance and energy history.

We explain the third energy package — these are the laws regulating the energy market of Europe. The Ukrainian energy industry needs to reform in line with this framework. This is crucial for Ukraine’s energy sector development.

It is important to distinguish sources of energy (coal, oil, gas and solar) and types of energy (thermal, electric, fuel).

Each source and type is represented by a corresponding color, for example, gas is blue and thermal energy is orange.

It is worth remembering that volumes of energy production differ from volumes of consumption, as part of the energy is lost in the process of its transformation on the way from manufacturer to end user.

Energy sources

Initial transformation

uranium

Nuclear energy

Energy production�

(secondary transformation)

Sources Wholesale delivery

Retail delivery

Trunk Lines

Regional transmission lines

Electricity

coal

water

City thermal pipelines thermal energy

wind

The purpose of the handbook is to demonstrate not only production figures, but also to highlight economic efficiency. This is vital for Ukraine’s energy independence.

The task of this guide is to reflect the economic side of production and consumption. We wanted to make the guide as easy and understandable as possible, so in some cases we have departed from generally accepted professional terms and definitions.

Special thanks to Lilia Zubareva, Marina Polyakova, Tetyana Temnyuk, Alyona Osmolovska, Yulia Chervonooka, Inna Surzhok and Alexander Karpenko.

2

ENERGY: FROM SOURCE TO CONSUMER

Gas trunk line

sun

Regional gas pipelines

gas

oil

Oil refining

Association of Gas Producers of Ukraine Ukrainian Wind Energy Association State Inspection on Energy Supervision of Ukraine State Treasury Service of Ukraine State Service of Geology and Subsoil of Ukraine State Statistics Service of Ukraine State Fiscal Service of Ukraine State Enterprise “Energoatom National Nuclear Energy Generating Company” SE “Ukrenergo National Power Company” DTEK Renewable Energy Institute of the National Academy of Sciences of Ukraine Ministry of Energy and Coal Industry of Ukraine Naftogaz of Ukraine Gazprom Ukrhydroenerho Ukrtransgaz National Energy Security Fund Razumkov Centre Aequo British Petroleum Eurostat International Energy Agency Nuclear Energy Agency REN21 The Guardian The World Economic Forum U.S. Energy Information Administration World Bank Group World Nuclear Association

Why did we create this report?

Ukraine’s energy independence depends on a healthy industry governed by market forces at every stage from extraction to energy supply to consumer delivery. To achieve this, the energy sector requires reform. The nature of reform is already clear - the energy sector will develop to fit the rules established elsewhere in Europe.

When calculating the role of energy in GDP we took into account data in the following areas: - extraction of stone and brown coal, crude oil and natural gas - production of coke and coke products, oil refining products - supply of electricity, gas, steam and conditioned air

Ukraine and World Energy

UKRAINE AND WORLD ENERGY

ENERGY INDUSTRY — A HUGE PART OF THE ECONOMY OF THE COUNTRY Energy industry data for 2016.

bln UAH

133

8%

25%

162

Energy sector No1 in terms of taxes paid.**

bln UAH

3%

of paid taxes**

Share in GDP*

450

thsd people

of employed population

In 2015, the energy industry ranked fourth in terms of GDP share.

What energy sources Ukraine imports % of total usage

4

19%

27%

33%

77%

100%

Oil and gas condensate

coal

gas

Oil products

Nuclear fuel

*for 2015 year

**Calculation based on rating of the largest taxpayers according to figures from the State Fiscal Service of Ukraine

Sources: State Fiscal Service of Ukraine, Naftogaz of Ukraine, calculations based on statistics from the State Statistics Service of Ukraine

UKRAINE AND WORLD ENERGY

UKRAINE RANKED 28TH FOR ENERGY CONSUMPTION The largest consumers of energy in the world and their structure of energy consumption in 2016 (%)

6

4 28

canada

Russian Federation

ukraine

5%

0,7%

2%

52% 22%

31% 27% 27%

13%

30%

7%

21%

6%

11%

7%

2%

6%

1%

3%

2

36%

usa

9

17%

7

germany

brazil

8

36%

Republic of Korea 2%

2%

32%

43% 29%

16%

2%

8% 4%

14%

35%

13%

23%

3%

2%

23%

47%

12%

29%

6%

11%

1%

6% 6% 1%

world

10

5% 3% 7%

33%

iran

3

india

2%

Oil

1

china

5

japan

23%

5%

3%

Natural Gas Coal

13 276

Nuclear Energy

mln tons o. e.

Renewable energy

24%

Hydropower 1

china

Position of country for energy consumption

23%

Share in world energy consumption

28%

Source: British Petroleum

Despite high consumption of energy, Ukraine takes 60th place in terms of economic volume. This suggests low energy efficiency (see slide No. 10).

67% 31% 1% 1% 1%

57% 29% 6% 4% 2% 1%

62% 19% 9% 6% 3% 2%

41% 27% 22% 4% 4% 1%

5

UKRAINE AND WORLD ENERGY

UKRAINE HAS SUFFICIENT ENERGY RESOURCES Top five countries by volume of energy reserves at the end of 2016

Ukraine ranks No. 7 in the world in terms of coal reserves, No. 12 for uranium, and No. 29 for natural gas.

Russian federation

27.6

3

509

10%

105

1

33.5

165

36

4

21.8

94

9%

Oil, bln tons

5

Natural gas, trln cubic m.

251.6

381

22%

8.7 5%

12

Coal, bln tons

7

18%

3%

115.8

29

0.6

9%

Kazakhstan

56

3

160.4

417

4

508

17%

2%

0,3%

115

745 13%

14%

iraq 5

4

20.6 9%

94

17.5 9%

262

30

2

china 244.0

5

india 94.8

5

33 Saudi Arabia 2

36.6 16%

169

9%

Turkmenistan

834

Reserves Share of world reserves

Number of years for which there will be enough reserves at current production 1

ukraine 34.4

12

Uranium, thsd tons 47.0

18%

2

usa 1

32.3

IRAN

canada 3

2

21%

8%

72

137

59 Qatar

Place in the world ranking by volume of confirmed reserves

1

Venezuela 47.0 18%

24.3

3

341

134

13%

Australia

Share of TOP-5 countries of world reserves

62% of 241 bln tons

6

62% of 187 trillion m3

66% of 5 718 thsd tons

79% of 1 139 bln tons

1

1 664

4

144.8

29%

13%

264 294

Republic of South Africa 5

322 6%

658

Source: British Petroleum, World Nuclear Association

UKRAINE AND WORLD ENERGY

UKRAINE CAN BECOME ENERGY INDEPENDENT Confirmed amount of energy resources in Ukraine at the end of 2016 and their location

volume gas

591 000 mln m3

CHERNIHIV LUTSK RIVNE

33

ZHYTOMYR KYIV

LVIV

coal

34 000 mln tons

POLTAVA

834

TERNOPIL IVANO-FRANKIVSK

uranium

0.1

mln tons

KHARKIV

LUHANSK

CHERKASY

VINNYTSIA

DNIPRO

KROPYVNYTSKYI

115

DONETSK

ZAPORIZHIA

oil

55

mln tons

25 ODESSA

KHERSON

Oil and gas fields Lack of investment in exploration, processing and energy efficiency, as well as complicated bureaucratic procedures, impede the development of Ukraine’s energy sector.

Uranium deposits Coalfields Number of years for which there will be enough reserves at current production levels

Source: British Petroleum, World Nuclear Association, U.S. Energy Information Administration, Naftogaz of Ukraine

7

UKRAINE AND WORLD ENERGY

ENERGY BALANCE OF UKRAINE 2015, million tons of oil equivalent

ENERGY SOURCES

GENERATION

22.9

CONSUMPTION 3.2

NUCLEAR

23.0 39.8

27.3

1.1

0.1

1.0

1.0

0.2

1.9

0.8

0.1

0.3 16.6

2.8 29.5

2.2

0.1

0.1

0.3

3.3

Non-energy consumption

8.8

Transport

1.4

2.3

10.3

0.7

HEAT 1.0

2.9

0.6

0.3

1.6 6.6

10.6 network losses

electricity — 74% heat — 27%

8

Other kinds of consumers

0,3 8.5

Oil and oil products

5.8

1.8

26.1

2.7

Industry

4.3

2.8

Renewables

16.4

3.2

5.6 1.9

gas

POPULATION

9.1

ELECTRICITY

19.8

coal

0.3

16.6

32.4

Coal, gas and atomic energy are traditionally the main sources of energy in Ukraine. The share of renewable sources is insignificant.

Source: State Statistics Service of Ukraine

UKRAINE AND WORLD ENERGY

DURING 19-20 CENTURIES UKRAINE WAS ONE OF THE LEADING ENERGY STATES OF THE WORLD History of the Ukrainian power industry

!

Start of industrial oil production at Sloboda-Rungurska in today’s Ivano-Frankivsk region

1771

Launch of the first gas plant in Ukraine in Lviv

1858

Lviv hosted the first World Oil Congress!

1877

The opening of the Dashava gas field – the largest at that time in Europe

1921

The beginning of gas industry development in Ukraine – the development of the Dashava field

1924

Launch of the first hydroelectric unit at the powerful Dnipro hydroelectric power station

The first industrial wind farm (Crimea)

1931

1932

For the first time in the world gas is exported – from Ukraine to Poland

1945

1

Ukraine is the third in the world in terms of gas consumption – 118.8 bln m3 (76% provided by imports)

1990

Gas production at its peak: 68.7 bln m3

1975

Launch of the powerful Zaporizhzhia CHPP

Oil and gas condensate production at their peak: 14.5 mln tons

1973

1971

1972

Peak gas extraction in independent Ukraine: 24.4 bln m3

Peak gas transit through the territory of Ukraine: 141 bln m3

1998

1991

Ukraine’s first nuclear power plant begins work – the Chornobyl Nuclear Power Plant

250

0% 8%

200

92%

Construction of the powerful Dashawa-Kyiv gas pipeline (509 km)

The beginning of gas supply from Ukraine to Russia

1948

1951

Since 25 November, Ukraine has ceased importing gas from the Russian Federation

2015

2011

In Ukraine there is a clear tendency towards reduction of energy consumption and imports.

Economic turbulence, inflation reaches 10,000%

6.8 times decrease in metal production compared to 1990

150

Consequences of the global financial crisis and a sharp rise in the price of Russian gas

55%

1%

Domestic production share

2%

15% 84%

100

The beginning of uranium ore production

1946

Ukraine became a full member of the European Energy Community

2001

1991-2015, mln tons of o. e.

54%

1964

Launch of the first storage facility for spent nuclear fuel in independent Ukraine

Primary energy supply in UKRAINE 300

Ukraine’s first underground gas storage facility at Olishivske (Chernihiv region) becomes operational

18%

Crimean annexation and the beginning of the Anti-Terrorist Operation

3% 26%

80%

50

68%

71%

0

1991

1992 Fossil fuels

1993

1994 Nuclear fuel

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

Renewable energy sources

Source: State Statistics Service of Ukraine, Naftogaz of Ukraine, International Energy Agency, The Guardian, SE “Energoatom National Nuclear Energy Generating Company”, Razumkov Centre, Ukrhydroenerho, Nuclear Energy Agency

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

9

UKRAINE AND WORLD ENERGY

UKRAINE IS AN ENERGY-INEFFICIENT COUNTRY Rates of energy efficiency in the Ukrainian economy

Losses of energy during transportation and distribution

Comparison of electricity costs

2015 (% of total produced)

3.3%

romania

52

Switzerland

98

poland

(World Economic Forum, March 2017)

4.8%

ukraine

kg of o. e./ thsd US dollars GDP per purchasing power parity

Increasing the efficiency of electricity consumption is more profitable than its additional generation

5.4%

moldova

Energy intensity of GDP

USA Cents/kWh

1.6%

poland germany

1.2%

Lithuania

1.2%

Ukraine is among the top 20 least energy-efficient countries in the world. For each $1,000 of GDP, Ukraine spends three times more on energy than Poland.

12

5

3

Nuclear generation

Wind generation

Increasing energy efficiency

canada

177

(decrease in consumption)

Energy intensity of GDP

kg of o. e./ thsd US dollars GDP per purchasing power parity

ukraine

282

700 600 500 400 300 200 100 0

1991

10

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

Source: World Bank Group, Eurostat, The World Economic Forum

UKRAINE AND WORLD ENERGY

THE STATE IS THE MAIN PLAYER IN THE ENERGY SECTOR OF UKRAINE The largest companies in the energy markets of Ukraine in 2016 (%)

natural gas

Electricity (production)

Regional gas company*

Naftogaz of Ukraine Gas production

21%

79%

Gas distribution to the population

46%

energoatom 64%

26%

74%

Naftogaz of Ukraine 100%

Transit

Production of gas and condensate

9%

91%

Use of coal

mines

100%

Shakhtoupravlinnia

import

State

Storage

52%

48%

coal

oil Import

electricity production

Pokrovske

29%

27% 6% 9%

29%

Pavlogradvugillya

The slow pace of reforms complicates the development of the energy sector and reduces the investment attractiveness of the industry.

Gas wholesale

32%

68%

Main players

others

Source: Naftogaz of Ukraine, SE “Ukrenergo National Power Company�, Ministry of Energy and Coal Industry of Ukraine, censor.net.ua. * - calculations according to Ukrtransgas, site

11

Energy production

Electricity

Thermal energy

ENERGY PRODUCTION

ELECTRICITY BALANCE 2016, bln kWh

Zaporizhia NPP

consumption for production (needs of power plants) 13 Electricity

More than half of Ukraine’s total electricity is produced in the Zaporozhia, Donetsk and Mykolaiv regions

South-Ukraine NPP

Rivne NPP

Khmelnytskyi NPP

Zakhidenergo Dniproenergo Centrenergo Skhidenergo* Donbasenergo* Pumped storage and hydroelectric power plants Heat plants and isolated generating plants

Wind power station Solar power stations Biomass

costs for transportation in distribution networks and for the needs of suppliers at the regulated tariff 13 Electricity

31

17

29 Metallurgical industry

15

4

15

13

10

9

32

81

NPP

9

13

4

Food and processing

4

Fuel

0.5

Electricity production

50

Thermal power station

Electricity consumption (netto)

3

Chemical and petrochemical

4

Other

15 Municipal consumers 50

119

Building materials

36 Population

Expanses

155

0.9

7 Transport

Industry

6 consumers

Other non-industrial

36

Population

4 Farming 1 Construction

33

24

Other

Other

* Source: SE “Ukrenergo National Power Company”

Machine building

2

3

0.2

20% of Ukrainian electricity is spent on its own generation and transportation.

costs for transportation in trunk and interstate networks 4 Electricity consumption of PSP in pumping mode 2 Electricity

17

Without taking into account production volumes

4

Electricity export

13

ENERGY PRODUCTION

PLANS ENVISAGE A SIGNIFICANT SHARE OF NPP IN POWER PRODUCTION

There are plans to increase the share of renewable energy sources in Ukraine to 12% by 2020

Structure of electricity production

12%

2016, %

eu

ukraine 44%

It is difficult to determine the optimal structure of electricity generation. Energy issues in each country have their own characteristics and advantages In Malta more than

In France

90% 77%

41%

TPPs and CHPPs 27%

of electricity is produced from fossil fuels.

52% npp

11%

6% hps

of electricity is generated by nuclear power plants.

18%

1%

Renewable energy power plants

Volume and structure of electricity generation in UKRAINE bln kWh 300 250 200 150 100 50 0

1992

1994

1996

1998

2000

2002

2004

2006 TPP and CHPP

14

2008

2010 NPP

2012 HPP and PSP

2014

2016

2018

2022

2026

Renewable energy power plants

Source: International Energy Agency, State Statistics Service of Ukraine, Eurostat, Plan of development of the United Energy System of Ukraine for 2017-2026 (project)

ENERGY PRODUCTION

UKRAINIAN ELECTRICAL GRIDS ARE OBSOLETE AND DETERIORATING United Energy System of Ukraine as of the end of 2016

State of transmission networks lines as of December 31, 2016, years in operation, %

CHERNIHIV LUTSK

8%

<25

SUMY RIVNE

KYIV ZHYTOMYR

6%

25-30

>40

KHARKIV

LVIV

22%

30-40

POLTAVA

64%

TERNOPIL IVANO-FRANKIVSK

CHERKASY

KHMELNYTSKYI VINNYTSIA

LUHANSK

UZHHOROD

The key problem of the electric power industry is the high level of wear and tear of electric power equipment, the bulk of which went into operation in the 1960s-1970s and was designed in accordance with the norms of the 1950s.

KROPYVNYTSKYI CHERNIVTSI

DNIPRO DONETSK ZAPORIZHIA

MYKOLAIV KHERSON ODESSA TYPES OF ELECTRIC POWER PLANTS

ELECTRIC POWER LINES AND SUBSTATIONS Current

NPP

Perspective ±400 kV

TPP, CHPP

±750 kV ±400-500 kV

HPP, PSP

±330 kV

SIMFEROPOL

±220 kV

HPP, PSP, under construction AR Crimea

ATO Zone

Source: Ministry of Energy and Coal Industry of Ukraine, SE “Ukrenergo National Power Company”

15

ENERGY PRODUCTION

THE NUCLEAR POWER INDUSTRY IN UKRAINE IS FULLY DEPENDENT ON IMPORTED FUEL Data of nuclear sector

Purchase of nuclear fuel

RIVNE NPP

mln of US dollars

"Westinghouse" (usa)

2012

"tvel" (rf)

45

555

2013

601

2014

39

589

2015

33

611

CHERNIHIV

2 835

Ukraine holds 2% of the world’s reserves of uranium, so it could independently meet its needs.

1

1980 2010 2030

2

1981 2011 2031

3

1986 2017

4

2004 2035

LUTSK

SUMY RIVNE

KHMELNYTSKYI NPP

TERNOPIL IVANO-FRANKIVSK

UZHHOROD

KHARKIV

2 000

KHMELNYTSKYI

LVIV

KYIV POLTAVA

1

1987 2018

2

2004 2035

CHERKASY

LUHANSK

KROPYVNYTSKYI

DNIPRO

DONETSK

CHERNIVTSI

2016

162

387

SOUTH-UKRAINE NPP Total capacity, MW

Termination of the design life of most power units

Problems

1

Dependence on the import of nuclear fuel

Dependence on the storage of spent nuclear fuel in other countries

2015

Coming into service

2025

Date of expiration of the lifespan according to the project

ZAPORIZHIA NPP

3 000

№ of power unit

1984

ZAPORIZHIA

Date of expiration of extended lifespan

1

1982 2013 2023

2

1985 2015 2025

3

6 000 1

1984 2015 2025

2

1985 2015 2025

3

1986 2017

4

1987 2018

5

1989 2020

6

1995 2026

ODESSA

1989 2020

Work on extending service life

SIMFEROPOL

energy production on npp bln of kWh 100

Share in total electricity production

48%

80

27%

52%

45%

36%

60

47%

53%

40

20

0

1991

16

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2017 as expected by the Ministry of Energy and Coal Industry of Ukraine

2010

2011

2012

2013

2014

2015

2016

2017

Source: International Energy Agency, SE “Ukrenergo National Power Company”, SE “Energoatom National Nuclear Energy Generating Company”, State Statistics Service of Ukraine

ENERGY PRODUCTION

THERMAL POWER PLANTS PROVIDE FLEXIBILITY OF ELECTRICITY PRODUCTION The main indicators of thermal power plants and combined heat and power plants

The ТPP of the Donetsk region produces 28% of the total electricity production at the ТPPs.

CHERNIHIV

The chart of electricity consumption in Ukraine on the example of two days LUTSK

SUMY RIVNE

DOBROTVIRS’KA

20000

2 275

ZHYTOMYR

KYIV

1960

KHARKIV TRYPIL’SKA

LVIV

17500

TERNOPIL

IVANO-FRANKIVSK

2 279

1960

8 499

1965

VINNYTSIA

2 991

4 049

CHERNIVTSI

2 670

1958

10000

15.01.2017

1972

1972

ZAPORIZHIA

STAROBESHIVS’KA

1963

ZAPORIZ’KA

TPP

MYKOLAIV

Generation in 2016, mln kWh

15.06.2017

1962

ZUIVS’KA

KURAHIVS’KA 5 986

4 879

DONETSK

DNIPRO

1970

5 019

3 338

VUHLEHIRS’KA

KRYVORIZ’KA

Electricity is a product which is both produced and consumed at the same time. ТPPs provide the required flexibility in production at peak hours.

LUHANSK

1957

PRYDNIPROVS’KA

KROPYVNYTSKYI

00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23

LUHANS’KA

SLOVIANS’KA

CHERKASY

LADYZHINS’KA 12500

ZMIYIVS’KA 1969

POLTAVA

BURSHTYNS’KA

UZHHOROD

15000

2 700

KHMELNYTSKYI

5 217

1972

KHERSON

ODESSA

Year of commissioning of the

SIMFEROPOL

Production of electricity at ТPPs and СНPPs bln kWht 200

Share in total electricity production

69%

160

120

58% 46%

48%

80

46% 41%

38%

40

0

1991

1992

1993

1994

1995

1996

1997

Source: International Energy Agency, SE “Ukrenergo National Power Company”, State Statistics Service of Ukraine

1998

1999

2000

2001

2002

2003

2004

2017 as expected by the Ministry of Energy and Coal Industry of Ukraine

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

17

ENERGY PRODUCTION

HYDROENERGETICS ACCOUNTS FOR THE BIGGEST SHARE OF RENEWABLE ELECTRICITY IN UKRAINE The main rates of HPPs and PSPs in Ukraine

41%

The world’s largest hydroelectric power plant – The Three Gorges Dam – has a capacity equal to

9 out of 10

CHERNIHIV

of the power of all power plants in Ukraine.

KYIV PSP

LUTSK RIVNE

SUMY

144

KYIV HPP

ZHYTOMYR

KYIV

538

KHARKIV LVIV

of the most powerful power plants in the world are hydroelectric power plants.

UZHGOROD

KANIV HPP

KHMELNYTSKYI

TERNOPIL

DNISTER PSP

688

CHERKASY

VINNYTSIA

444

KREMENCHUK HPP

SEREDNYODNIPROVSKA HPP

DNISTER HPP

CHERNIVTSI

POLTAVA

DNIPRO

1 079 DONETSK

903

1 288

LUHANSK

ZAPORIZHIA

TASHLYK PSP 201

KAKHOVKA HPP

Most of the hydroelectric power plants in Ukraine were built in the second half of the 20th century. Their share is 11% of the total power generation in the country.

HPP, PSP

1 052

DNIPRO HPP ODESSA

Generation in 2016, mln of kWh

2 575

KHERSON

SIMFEROPOL

Production of electricity by HPPs and PSPs bln of kWh 20

Share in total electricity production

15

4%

5%

10

7%

7%

7%

6%

6%

5

0

1991

18

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2017 as expected by the Ministry of Energy and Coal Industry of Ukraine

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

Source: International Energy Agency, SE “Ukrenergo National Power Company”, Ukrhydroenerho, State Statistics Service of Ukraine, U.S. Energy Information Administration

THE PACE OF DEVELOPMENT OF RENEWABLE ENERGY IN UKRAINE IS INSIGNIFICANT COMPARED WITH GLOBAL TRENDS

ENERGY PRODUCTION

Potential and key rates of renewable energy in Ukraine and the world

Potential of renewable energy in Ukraine

Increase in renewable energy capacity in the world 2006-2016, %

solar power

+4 950%

+558%

Available power

303 GW

wind power

49%

bioenergy

22%

Major hydropower

17%

Minor hydropower

7%

Solar power

5%

wind power

as of 2016

487 GW

Total

121

Renewable sources in Ukraine can potentially meet 78% of electricity generation needs.

Electricity generation in Ukraine in 2016

bln kWh/year

155

bln kWh/year

The relation of produced electricity from RES to consumed energy in some countries in Europe in 2015, %

Active development of renewable energy sources in Ukraine began in 2009 after the introduction of a green tariff.

106% norway

*

52%

43%

33%

15%

6%

latvia

romania

turkey

estonia

ukraine

Source: Eurostat, Renewable Energy Institute of the National Academy of Sciences of Ukraine, SE “Ukrenergo National Power Company”, Renewables 2017 Global Status Report

As of 2016

19

ENERGY PRODUCTION

SOLAR ENEGRY IS THE YOUNGEST AMONG RENEWABLES IN UKRAINE The main rates of solar energy in Ukraine

Installed capacity of SPSs

Distribution of specific solar radiation in Ukraine during the year

MW

530.1

Since the end of 2014, the capacity of solar power stations of private households in Ukraine has increased by 371 times (as of the end of the third quarter of 2017).

431.1

411.1

Inland Ukraine

748

CHERNIHIV LUTSK

SUMY RIVNE ZHYTOMYR

407.9

371

407.9

KHARKIV

188

POLTAVA

LVIV

total

TERNOPIL

crimea 2011

2012

2013

2014

2015

KYIV

407.9

UZHHOROD

IVANO-FRANKIVSK

KHMELNYTSKYI CHERKASY

VINNYTSIA

LUHANSK

2016 DNIPRO

KROPYVNYTSKYI

CHERNIVTSI

Generation of elegtricity at SPS

ZAPORIZHIA

bln of kWh

Solar Power Station

Share in total electricity production 600

0.4%

0.29%

400

0.3%

KHERSON

bln kWh/м²

0.24%

945

0.3%

1000 1055 1110

0.16%

300

1220

100

1335

1250

1390

0.02%

1445 more

2011 20

SIMFEROPOL

1170

200

0

MYKOLAIV

ODESSA

500 190

DONETSK

2012

2013

2014

2015

2016

The annexation of Crimea has slowed down the development of solar energy in Ukraine, as it is the most promising region for its development.

2017 2017 as expected by the Ministry of Energy and Coal Industry of Ukraine

Source: Renewable Energy Institute of the National Academy of Sciences of Ukraine, SE “Ukrenergo National Power Company”, State Statistics Service of Ukraine, Ministry of Energy and Coal Industry of Ukraine

ENERGY PRODUCTION

WIND POWER IS ONE OF THE CHEAPEST SOURCES OF RENEWABLE ENERGY IN THE WORLD The main rates of wind energy in Ukraine

Installed capacity of wind farms

Regions of Ukraine by intensity of wind flows

MW

437.8

426.2

409.5

CHERNIHIV LUTSK

SUMY RIVNE ZHYTOMYR

371

KHARKIV

LVIV

inland ukraine

275.5

KYIV POLTAVA

TERNOPIL 151.1 90

87.8

87.5

87.8

87.8

2010

2011

2012

2013

2014

2015

LUHANSK

KROPYVNYTSKYI

CHERNIVTSI

crimea 2009

CHERKASY

VINNYTSIA

IVANO-FRANKIVSK

DNIPRO

2016

DONETSK

ZAPORIZHIA

Average wind speed m/s (at an altitude of 30m)

Generation of elegtricity at wind farms mln kWh

KHERSON

V = 4.5 V = 5.0

share in total electricity production

1200

0.62%

0.66% 0.56%

190

0.57%

SIMFEROPOL

0.33%

600 400

The greatest potential for wind energy is concentrated in the Carpathians. The development of this region will increase the energy independence of the western region of the country.

0.14%

200 0

0.02%

2009

0.03%

2010

0.05%

2011

2012

Botievska wind farm Provided 66% of wind energy production in 2016

ODESSA

V > 5.5

1000 800

MYKOLAIV

INSTALLED WIND FARMS

V < 4.5

2013

2014

Source: Ukrainian Wind Energy Association, Renewable Energy Institute of the National Academy of Sciences of Ukraine, SE “Ukrenergo National Power Company”, State Statistics Service of Ukraine, Ministry of Energy and Coal Industry of Ukraine

2015

2016

2017 as expected by the Ministry of Energy and Coal Industry of Ukraine

2017 21

ENERGY PRODUCTION

SINCE 1991, THE POPULATION HAS SIGNIFICANTLY INCREASED THE EFFICIENCY OF HEAT CONSUMPTION Production and consumption of heat in Ukraine

Heat consumption by the population

The structure of heat production in Ukraine

MJ/person

2016, %

12 000

Heat plants (boilerhouses) 61%

10 000 8 000

tps 30%

190

6 000

disposal plants 5%

4 000

chpp 2%

2 000

Natural gas produces more than 70% of heat in Ukraine.

99

mln gCal

NPps 2%

0 1991

1995

2005

2010

Other plants 1%

2015

Heat production mln of MJ

Transportation losses

25%

1600 1200

25%

800

10%

400 0 1991

22

1995

2000

2005

2010

2012

2014

2016 Source: Eurostat, State Statistics Service of Ukraine

ENERGY PRODUCTION

DNIPROPETROVSK REGION IS THE COUNTRYâ&#x20AC;&#x2122;S BIGGEST ENERGY CONSUMER Consumption of electricity and thermal energy in 2016

Consumption of energy by the population

Energy consumption by regions

2015, kWh/per capita

8.8 times

7 187

820

1.7 times 470

2016

Norway has the highest electricity consumption per capita in Europe, but this is not due to low efficiency but rather to the structure of consumption. The volume of heat per person in Norway is one of the lowest.

VOLYN OBLAST

CHERNIHIV OBLAST RIVNE OBLAST

SUMY OBLAST

KYIV OBLAST ZHYTOMYR OBLAST KYIV

norway

ukraine

moldova

LVIV OBLAST

KHARKIV OBLAST TERNOPIL OBLAST

ZAKARPATTIA OBLAST

at consumption by population 2015, MJ/per capita

Similar situation in Ukraine: energy consumption by region does not reflect the level of energy efficiency since it does not take into account the return on this consumption.

1.6 TIMES

POLTAVA OBLAST

KHMELNYTSKYI OBLAST

IVANO-FRANKIVSK OBLAST

KIROVOHRAD OBLAST

CHERNIVTSI OBLAST

28 11

LUHANSK OBLAST

CHERKASY OBLAST

VINNYTSIA OBLAST

ODESSA OBLAST

DNIPROPETROVSK OBLAST

DONETSK OBLAST

ZAPORIZHIA OBLAST

MYKOLAIV OBLAST

9 7

4 278

2 665

5 3 2 1

3.7 TIMES

720

Electricity, bln kWh Thermal energy, mln gCal

POLAND

UKRAINE

KHERSON OBLAST

AR CRIMEA

NORWAY

Source: State Statistics Service of Ukraine, Eurostat, State Inspection on Energy Supervision of Ukraine

23

Oil and gas industry

NATURAL GAS

OIL

OIL AND GAS INDUSTRY

GAS BALANCE 2016, bln m³

11.9 More than 50% of gas is used in the domestic sector. Given the low efficiency of heating appliances, this indicates significant potential to reduce the volume of use.

Population directly

31.12.2015

14.0

5.7

UGS*

Gas thermal plants for the population

9.9

Industry

2.0

Other

17.6

11.1

2.0

Population

1.7 Ukrtransgas 1.0 Distribution networks

Import

33.2

2.0

UGS: offtake-injection spread

Gas inflow

8.2

20.1

Naftogaz

33.2 Gas use

0.5

Ukrgazvidobuvannya

0.3

Ukrnafta

0.1

Other

9.9

Industry

Production

2.9

Budgetary and religious organizations

2.0

Other

Private importers

3.6

OTN**

1.6

Oil and gas production

1.3

Ukrnafta

2.6

31.12.2016

Others

12,0 *UGS – underground gas storage **OTN – technical needs

Source: Naftogaz of Ukraine

14.6

UGS*

Ukrgazvydobuvannya

25

OIL AND GAS INDUSTRY

WORLD NATURAL GAS MARKET Leading countries in the natural gas market

Net importers

Net exporters

183 183

108

russia

japan 124

gas bln m3

80

quatar

germany

116 production

72

norway

china 91 (2

Norwa

di

Ara

.1%

Rus

sia

5 7 9 (1

6.3%

)

53 Algeria

202

.1%)

Qua

tar

a ad

(5.7%

1 8 1 (5

2

(21

world

Iran

15

3 (4.

749

3 552

ina .9%) Ch

%)

canada

bia

y

n Ca

60

US

a

) Sau

ria

44

lge

138 (3

turkey

)A

117 (3.3%)

1%

A

6%

ustrali

(2.

italy

(3.

)

.6%) A

91 109

65

)

Other countries 1 140 (32.1%)

26

Source: British Petroleum

OIL AND GAS INDUSTRY

UKRAINE REDUCES GAS IMPORT AND INCREASES PRODUCTION Production, import and use of natural gas, bln mÂł

QUANTITY OF PRIVATE IMPORTERS At the end of the relevant year, number

35

Ukraine has successfully lost its gas dependence on the Russian Federation and has the potential to fully meet its needs with its own resources.

The volume of gas consumption in Ukraine has significantly decreased over the years of independence. First of all, this is due to a decrease in the volume of industrial production.

18

5

2014

2015

2016

import 91.6

24.4

production

57.0

59.3

20.8

18.1

20.1

11.1

use

Source: Naftogaz of Ukraine

118.2

73.4

73.9

1991

2000

2006

Infographics do not reflect the volume of gas reserves

33.2

2016 27

OIL AND GAS INDUSTRY

UKRAINE PLANS TO END IMPORTS OF GAS AFTER 2020 Production of natural gas in Ukraine

Structure of special permits issued

38%

62%

other companies

Structure of confirmed natural gas reserves

45%

55%

other companies

Ukrgazvydobuvannya

Structure of natural gas production

Extraction of natural gas

Total

bln m3

73%

27%

other companies

Ukrgazvydobuvannya

including Ukrgazvydobuvannya

Ukrgazvydobuvannya provides 73% of gas production in Ukraine, although it holds only 45% of all licenses for gas extraction.

In order for Ukraine to meet its natural gas needs via domestic gas production, the extraction sector needs further liberalization and additional investment .

Ukrgazvydobuvannya

forecast

30 25 20 15 10 5 0

1991

28

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

Source: Naftogaz of Ukraine, Concept of development of the gas production industry of Ukraine, State Service of Geology and Subsoil of Ukraine, Association of Gas Producers of Ukraine

OIL AND GAS INDUSTRY

WORLD OIL MARKET Key countries of the global oil market

net importers

net exporters

380

375 saudi arabia

china

oil

369

273

mln tons

usa

russia

production

212

177 iraq

india

%)

(13.4

razil

3.5

Saud Arab i ia 5 8 6

.1%) B

3( Ku

%)

135

it

(4.2

wa

182

%)

137 (3

15

168

UAE

japan

canada

4 382

200 (4.6%) China

Russia

554 (12.6%)

world

da ana

.4% )

219 (5.0%) Iraq

)C 0%

12

(5.

122

3(

218

54

Republic of Korea

%

A

144

(4.9

US

216

n ) Ira

United Arab Emirates

Other countries 1 374 (31.4%)

Source: British Petroleum

29

OIL AND GAS INDUSTRY

VOLUME OF OIL EXTRACTION AND PROCESSING REACHED HISTORICAL MINIMUM Oil industry of Ukraine

Oil refining by Ukrainian refineries

Oil refineries of Ukraine

mln tons

CHERNIHIV

15

LUTSK RIVNE

12

ZHYTOMYR

KYIV

190

DROHOBYCH OIL REFINERY (HALYCHYNA)

9

8.7

2012

SHEBELINKA GAS PROCESSING PLANT (GPP)

KREMENCHUK OIL REFINERY

LYSYCHANSK OIL REFINERY (LYNYK)

1.0

18.6

TERNOPIL

6

7.0

LUHANSK

CHERKASY

2012

VINNYTSIA

NADVIRNA OIL REFINERY 3

DNIPRO

KROPYVNYTSKYI

2011

2.6

DONETSK

ZAPORIZHIA

0 1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

2014

KHERSON OIL REFINERY

2016

Own oil production in Ukraine is not enough to meet the needs of the refineries for raw materials.

ODESA OIL REFINERY

Primary total power

2005

1.1

mln tons per year

2014

2.8

Closed/Active

Extraction of crude oil and gas condensate

Year of shutdown

mln tons 6 5 4 3 2 1 0

1991

30

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

Source: Naftogaz of Ukraine, Ministry of Energy and Coal Industry of Ukraine, SE “Energoatom National Nuclear Energy Generating Company”

OIL AND GAS INDUSTRY

THE PRODUCTION OF OIL PRODUCTS OVER 25 YEARS HAS DECREASED BY A FACTOR OF 12 Production, import and consumption of oil products, mln tons

Capital investment in the oil refining sector mln US dollars, in accordance with purchasing power parity

This investment dynamic excludes the possibility of an increase in the volume of oil refining in Ukraine.

200

150

100

50

0

2010

33.7

15.3

8.1

4.8

39.1 use

1991 Source: calculations based on information from the State Statistics Service of Ukraine and Eurostat

2014

2016

In 2001-2006, Ukraine was a net exporter of fuel.

production

import

2012

Infographic does not display export

4.0

Ukraine produces only 25% of its demand for oil products.

14.1

8.5

9.3

11.6

11.0

2000

2006

2016

2.7

31

OIL AND GAS INDUSTRY

UKRAINIAN GTS IS THE MAIN TRANSIT ROUTE FOR THE RUSSIAN FEDERATION TO EUROPE Transportation of oil and natural gas through the territory of Ukraine

Share of Ukrainian GTS in the transportation of Russian gas to europe

Ukrainian GTS

GTS capacity at the entrance BRYANSK

bln m3/year

KOBRYN

287.7

MAZYR

1996

95% SUMY

KYIV

2002

81%

2006

70%

2012

At 90% of transit capacity in 2016, Ukraine could provide 72% of Russian gas supplies to Europe, but in fact provided only 45%.

56%

2016

UZHHOROD

45%

OLEKSIIVKA

The planned construction of surplus transit capacities by the Russian Federation will completely exclude the Ukrainian gas transportation system from the transit of Russian gas.

BEREHOVE

178.5 The capacity of the GTS at the outlet

bln m3/year

ORLIVKA

Transportation of natural gas

total

bln m3

100

200

80

150

60

100

40

50

20

0

0

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

2014

total

mln tons

250

1991

32

Transportation of oil

including transit

2016

1991

1994

1996

1998

2000

2002

2004

2006

including transit

2008

2010

2012

2014

2016

Source: Naftogaz of Ukraine, Ukrtransgaz, Gazprom, National Energy Security Fund, Ministry of Energy and Coal Industry of Ukraine

Coal industry

COAL INDUSTRY

COAL BALANCE 2016, mln tons

1.6 Other 11.7 Final consumption

63

0.8 Reserves

Coal supply

17.3

63 Coal use

0.2

49.7

Import

0.6

Own energy sector consumption

Non-energy use

0.8

Transformation into other types of fuel and energy

Export

11.1

Industry

0.6

Population

44.9

Production

28.8

Power stations

13.4

46% of all coal is used in electricity production.

Coke production

4.5 2.5 0.5

Blast furnaces

TPS and heat plants

Other transformation

34

Source: own calculations based on information from the State Statistics Service

COAL INDUSTRY

WORLD COAL MARKET Key countries of the global coal market

net importers

net exporters

247

389

china australia

coal

199

* 367

mln tons

india indonesia production

189

147

japan

ola

stan

R

83

ia

donesia alia

7 460 world

76 692 (9.3%) India

)U .9%

1 (8 66

colombia

China 3411 (45.7%)

SA

Austr

any

SA

.6%)

)R uss

erm

%)

66

%) G

3.4

434 (5.8%) In

(6 493

Chinese Taipei

2%

.8%) P

(2.4

1(

republic of korea

(5.

102 (1.4%) Kazakh nd

131 (1

176 25

385

134

russia

sar Other countries 723 (10%)

Source: International Energy Agency, British Petroleum

*

preliminary data

35

COAL INDUSTRY

UKRAINE DOES NOT FULLY MEET ITS NEEDS WITH ITS OWN COAL Production, import and use of coal, mln tons

Domestic coal production meets 71% of Ukrainian needs.

production

137 * 13

80

import

80 *

*

11

7

45

17

use

135

1991

36

*

83 *

88 *

2000

2006

63

2016 Infographics do not show transitional balances and exports

Excluding coke and brick fuel

Source: calculations based on information from the Eurostat, Ministry of Energy and Coal Industry of Ukraine, British Petroleum

Reforms and perspectives

REFORMS AND PERSPECTIVES

INVESTMENTS IN THE ENERGY SECTOR Dynamics in Ukraine and the situation in the world

Capital investment in the sector of the extraction of fuel and energy minerals

In 2015, the world invested 45% of total energy investment in the oil and gas sector and only 4% in coal.

bln US dollars in accordance with purchasing power parity

Extraction of crude oil and natural gas

In 2015, every eighth dollar of global energy investment was aimed at improving energy efficiency.

4.1

0.9

1.7

2010

2012

1.5

2014

2016 0.7

1.1

1.8 2.3

Extraction of stone and brown coal

Expenditures from the Consolidated Budget of Ukraine on Research and Development in the Fuel and Energy Sector bln US dollars in accordance with purchasing power parity 40

21

20

7

13

12

25

20

18

9

9

13

15

9 1,6

0

2002

38

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

1 2015

0,8 2016

Source: State Statistics Service of Ukraine, State Treasury Service of Ukrain, International Energy Agency

3 REFORMS AND PERSPECTIVES

ENERGY STRATEGY

3

ua

3

Ukraine Energy Strategy 2035: “Safety, Energy Efficiency, Competitiveness”.

ua

Approved by the Government of Ukraine on 18 August, 2017.

STRATEGIC GOALS

300

SolvingНАСЕЛЕННЯ energy security issues

300

3

import

<33%

12

1.6

150

3

Промисловість

7

ua

100

STAGES OF IMPLEMENTATION

25

<0.13

150

13

60

e

!

63

63

64

e

3

ua

87.6

ua-2020 2017

3

85

87.6

Неенергетичне споживання

OPTIMIZATION AND INNOVATIONS

2020

Market reforms and stimulation of competitive relations.

1.6 150

7

12 12

9 10

Creation of attractive investment 67.5 60 environment.100

Транспорт

13

63 67.5

25

12

9 13

25

13

13

12

50 91 87.6

0 2025 NPP

Reconstruction of nuclear and thermal power units.

2015 2030 HPP and PSP

SUSTAINABILITY HPP and PSP

63 in the energy mix.

Achievement 63of 25% of RES

64

60

50

87.6

HPP and PSP

150

94

91

91

85

2020 TPS and CHPP

NPP

12

7

9 10

12

67.5

60

64

87.6

85

91

2030 HPP and 18PSP

2035 25 Renewables

13

13

63

63

91

94

50

0 2015

Renewables

0 2015

2025

100

Development of the intellectual network.

Movement towards EU ecological standards.

2020 2035 2025 2030 2035 NPP

2020

12

Creation of mechanisms to100 attract investment 94 94 91 for 85new construction projects.

91

Efficient heat supply.

1.6

Renewables

Achievement 18of the planned 25 levels of SO2, emissions. 13 12NOx and dust13

Implementation of the National Plan for 10 1.6 Reducing Emissions from Large Combustion 63 63 63 9 150 7 64 60 10 Plants.

Renewables TPS and CHPP

2015

TPS and CHPP 2035

Creation of new generating capacities.

300 18

67.5

0

TPS and CHPP

7

18

100

91

NPP

Synchronization with ENTSO-E. 1.6

150

64

Implementation of the third 50 energy package.87.6 85 Implementation of the system of 2015 2020 stimulating tariff formation.

300

2030

94

91

0

94

91

91

2025

TPS and CHPP 300

63

e

91

85

2026-2035

2015

300

13

>25%

in generation 63

64

!

up to 2035, bln kWh

02021 - 2025

MARKET REFORMS Транспорт

60

FORECAST OF ELECTRICITY GENERATION 50

Інші види споживачів

Неенергетичне споживання

67.5

13

12

Increasing share of RES

100

50

3

9 10

Промисловість

Інші види споживачів

3

7

tons of o. e./thsd US dollars

13

12

9 10

67.5

!

Reducing energy 18 intensity of GDP

НАСЕЛЕННЯ

25

18

12

1.6

2025 NPP

2030 HPP and PSP

2035

2020 TPS and CHPP

2025 NPP

2030 HPP and PSP

2035 Renewables

Renewables

Gas self-sufficiency.

Source: DTEK

39

ЕННЯ

REFORMS AND PERSPECTIVES

FULFILLMENT OF UKRAINE’S OBLIGATIONS UNDER THE ENERGY COMMUNITY TREATY Being the Contracting Party to the Energy Community Treaty, Ukraine undertook to implement EU energy legislation

OBLIGATIONS CONCERNING GAS MARKET ARE PRESCRIBED BY: DIRECTIVE 2009/73/EC concerning common rules for the internal market of natural gas and repealing Directive 2003/55/EC

REGULATION (EC) No 715/2009 on conditions for access to the natural gas transmission networks and repealing Regulation (EC) No 1775/2005

Directive 2004/67/EC concerning measures to safeguard security of natural gas supply

THIRD ENERGY PACKAGE

НАСЕЛЕННЯ

НАСЕЛЕННЯ

Unbundling

Промисловість

Obligation to create an independent regulator

Промисловість access Third-party

Неенергетичне споживання НАСЕЛЕННЯ

Security of supplies

Промисловість

e

!

НАСЕЛЕННЯ НАСЕЛЕННЯ

НАСЕЛЕННЯ

НАСЕЛЕННЯ

Customer Protection and Protection of Vulnerable Customers

Obligation to ensure the natural gas market !opening and market pricing

Інші види споживачів

Неенергетичне споживання

Неенергетичне споживання

НАСЕЛЕННЯ

GENERAL PROVISIONS OF THE INDICATED OBLIGATIONS IMPLEMENTED BY THE LAW OF UKRAINE “ON THE NATURAL GAS MARKET” Транспорт

Транспорт

ПромисловістьCMU

Resolution No. 496 of Промисловість Промисловість Промисловість July 1, 2016 “On Unbundling of Gas Transmission and Storage (Injection, Withdrawal)”

Інші види споживачів

CMU Resolution No. 801 of ІншіІнші види “On the Інші види November 9,види 2016 споживачів споживачів споживачів Establishment of Public JointStock Company “Main Gas Pipelines of Ukraine” etc.

Law of Ukraine No. 1540-VIII Промисловість of September 22, 2016 “On the National Commission for ! and State Regulation of Energy Utilities” Інші види споживачів

ргетичне вання

Неенергетичне споживання

Неенергетичне Неенергетичне споживання споживання

Неенергетичне споживання

Неенергетичне споживання

порт

Транспорт

Транспорт Транспорт

Транспорт

Транспорт

40

Obligation to introduce new balancing regime

Інші види споживачів

Інші види споживачів

иди вачів

Implementation of a new model of tariff formation

e

!

словість

НАСЕЛЕННЯ

NCSREU Resolution No. 2493 of September 30, 2015 “On the Approval of the Gas !Transmission System ! Code” NCSREU Resolution No. 2494 of September 30, 2015 “On the Approval of the Gas Distribution System Code” NCSREU Resolution No. 2495 of September 30, 2015 “On the Approval of the Code of Gas Storages and criteria according to which a contractual access regime or a regulated access regime applies to a certain gas storage”

Транспорт

!!

NCSREU Resolution No. 2517 Промисловість of September 30, 2015 “On the approval e of the !Methodology e for determination and calculation of ! tariffs for the service of natural gas transmission for entry and Інші види споживачів exit points based on long-term incentive-based regulation” NCSREU Resolution No. 3158 of December 29, 2015 and NCSREU Неенергетичне споживання Resolution No. 348 of March 28, 2017 on setting tariffs for the service of natural gas transmission for entry and exit points (by crossborder pipelines and for consumers Транспорт in Ukraine)

NCSREU Resolution No. 2493 of September 30, 2015 “On the eApproval of the Gas e eTransmission System Code”

e

Ministry of Energy and Coal Industry of Ukraine Order No. 686 of November e 2, 2015 “On the Approval of the Rules for Safe Natural Gas Supply”

CMU Resolution No. 187 of March 22, 2017 “On the Approval of the Regulation on special functions of subjects of! natural gas market to safeguard public interests in the operation of the natural gas market”

e Pending implementation

Benefit and subsidy schemes Implemented

Source: AEQUO

REFORMS AND PERSPECTIVES

KEY CHANGES IN THE UKRAINIAN ENERGY MARKET 3

3

3

3

ua

3

ELECTRICITY

ua

3

12 12

9 10

balancing market; 67.5

25

13

13

bilateral contract market;

retail market.

300

0 2015

2020

unbundling of electricity distribution and transmission 3 activities from other types of activity;

3

2025

new entering ua the electricity market - traders 3 parties 3 (business entities that purchase electric energy solely for the purpose of its resale, except for sales under contracts for the supply ua of electric energy to consumers);

2030

3

TPS and CHPP

1.6

NPP

HPP 150 and PSP 7

ua

3

64

10

67.5

60

2025

3

ua 3

1.6 7

100 150

91

2020 TPS and CHPP

67.5

12

2030 18

NPP

HPP and PSP 13

12

9 10

7

2025

150

25

Renewables

150

300

BASIC REGULATIONS AND DOCUMENTS

13

60

12

64

63

18

25

63

12

60

64 150

7

100

3

150

7

3 100

67.5

12

25

13

13

2015

ua

60

2020

85

TPS and CHPP

0

91

2025

2030

94

2020

2025

2030

25

13

13

63

63

300

91

TPS and CHPP

94

91

18

25

13

13

2025

64

85

2020

91

NPP

63

HPP and PSP

67.5

100

2030 HPP and PSP

2030

2035 Renewables

50

300 0

2035

2015

94

1.6

Renewables

150

91

91

NPP

HPP and PSP

100

94

Renewables

63

63

64

50 2020

91

2025

3

85

2030 HPP and PSP

2020

Renewables

TPS and CHPP

2030

3

94

TPS and CHPP

2015

NPP

HPP and PSP

ua

91

2035

91

2035

87.6

Renewables

0

94

2015

Law of Ukraine No. 1540-VIII of September 22, 2016 “On 2030 the2025 National Commission for 2035 State Regulation of Energy and Utilities” NPP HPP and PSP Renewables

2035 300

50

TPS and CHPP 87.6

NPP

HPP and PSP 91

91

85

Renewables 94

1.6

2015

150

300

0 2020

2025

2030

2035 1.6

300

Source: AEQUO

TPS and CHPP

1.6

150

12

7

9 10

12

67.5

60

64

NPP

HPP and PSP 18

25

13

13

63

63

Renewables

150

100

12

7

9 10

12

67.5

60

64

7

67.5

2035

13

13

TPS and CHPP

7

25

2025

12

1.6

150

87.6

2030

63

18

12

63

63 9 10

0 NPP

2025

0

2025

2035

85

60

87.6

2020

2020 25

94

91

13

50

2015

60

2015

91

85

TPS and CHPP Law of 63Ukraine No.63329-VIII of April 9, 2015 “On the NPP and PSP Renewables Natural Gas HPP Market”

91

64

18

2015

0

10

87.6

2015 87.6

13

2020

91

12

10

87.6

87.6

64

85

09

7

67.5

94

91

91 18

12

0 9

50

2015

ua

85

3

1.6

3

50

13

2015

12

50

100

63

63

64

18

18

12

60

87.6

13

100

60

18 12 Regulator’s decisions to be no requirement for the 50 13 13 12 9 2035 3 approved10 by bodies other than the Antimonopoly 91 87.6 85 Committee of Ukraine that is in charge of competitive 63 63 64 60 business environment; 0 25 ua 3

0

13

13

12

9 10

1.6 67.5

9 10

87.6

Law of Ukraine No. 2019-VIII of April 13, 2017 “On the Electricity Market”

67.5

100

12 300

7

12

9 10

increased salaries for the Regulator’s members and Chairman.

63 NPP TPS63 and CHPP

50

50

1.6

7

ua

12

1.6

2035

150

9 10

7

300

50 67.5

7

67.5

67.5

2015

100

150

Renewables

1.6

94

91

3

financing of the Regulator by means of regulatory fees 3 of the payable to a special fund State Budget 64of Ukraine 67.5 60 by entities operating in the energy sector and public 100 94 utilities;3 ua

300

3

63 introduction64 of new balancing rules;63

85

1.6

150

63

2030

300

150

63

3

300

appointment of the Regulator’s members following an open competitive selection process; 12 1.6

HPP and PSP300

NPP

0

300

13

100 87.6

consumer’s free choice of electricity supplier. ua

25

13

25

50

300

18

1.6

transition ua to market pricing model.

3

Legislative framework for measures to ensure the Regulator’s ua 3 independence:

91

91

0 introduction of a new system of third-party access to 3 ua market, in particular, 25introduction 2035 2015 thenatural gas of 2020 18 12 13 13 system; 12 Renewables 9 сapacity allocation TPS and CHPP

100

implementation of system of special functions to safeguard 3 public interests in the operation of the electricity market;

3

91

91

85

12

implementation of a new model of tariff setting (setting ua 3 tariffs for the service of natural gas transmission for 50 94 87.6 85 entry and3 exit points);

50 87.6

12

1.6

9 7 from unbundling of transmission of natural150gas 10 ua 3 production, distribution, supply of natural gas, activities 63 67.5 60 of wholesalers;3 100

63

64

60

18

100

market of auxiliary services;

REGULATOR

Creation of a new model for the natural 300 gas market, in 3 particular:

1.6 segmentation of the electricity market into 6 markets: 3 150 7

intra-day market;

ua

3

Plans are in place to create a new model for the electricity 300 market by the end of 2019, involving in particular:

day3 ahead market; ua

NATURAL GAS

18

25

13

13

63

63

7

67.5

100

4150 87.6

3

3 REFORMS AND PERSPECTIVES

3 ua

НАСЕЛЕННЯ

The new market model is set for introduction from July 1, 2019.

НАСЕЛЕННЯ

THE ESSENCE OF REFORM3 3

Промисловість

Unbundling

Промисловість

Промисловість

3

3

ua

Separation of oblenergos into supplier company 3 and ! distribution network operator 1.6

3

Інші види споживачів

Інші види споживачів

150

7

Інші види Інші види споживачів

споживачів uaFUNCTIONING SCHEME 3 WHOLESALE MARKET

67.5

ua! e 9 10

1.6

100

Неенергетичне споживання

existing model market Неенергетичне споживання

Until 1 July, 2019

Неенергетичне споживання Неенергетичне

споживання

regulator (ncsrepu) 3 Has the authority to set tariffs for all market 50

participants

3 Транспорт

Транспорт

ua

Electricity generation

Транспорт

Транспорт

12 12

60

64

7

67.5

60

2015

85 12 12

2025

50

se "energorynok" market operator

87.6

Trunk Networks

0 2015

13

94

3

18 13

25 91

ua

63

2030

NPP

HPP and PSP

HPP and PSP

2035

2035

91

internal market

2020

2025 NPP

2030

balancing marketRenewables HPP and PSP

67.5

60

NPP

64

60

0

12

202012

64

60

Distribution of electricity

100

13

63

63

300

91

25

18

2015 2030 management 91 of restrictions 85

1.6

150

13

13

91 2035 2020

67.5

64 The procedure for access to interstate crossings 0

HPP and PSP

Renewables

Code accounting 2015 of commercial 2020 2025

TPS and CHPP

NPP

2030 HPP and PSP

100

2025 13

Renewables

501.6 150

300

NPP

HPP and PSP

Testing 63 operations

2035

150

consumers of electricity household and commercial

87.6

consumers of electricity

Renewables

87.6

67.5

100

60

0 2015

50 94

87.6

85

Implementation of the new market

household and commercial 0 2015

2020 TPS and CHPP

42

91

85

9 10

50

UNBUNDLING

from 1 91 july 2019

2015

7

Supplier of last resort 50

87.6

1.6

63

Provider of universal services

7

067.5 100

2030 13

HPP

300

2035

25 The procedure for the purchase and sale by guaranteed buyer 18

from june 2018

7

2025

94

63

Rules of the retail market

9 10

67.5

25

13

94 join 91 The 91procedure for payment of the fee to

85

2015

7

18

50

63

TPS and CHPP

Electricity suppliers

64

harmonization of91secondary legislation 94 87.6 85

2025Rules 87.6

0 1.6

150

60

Code of distribution systems

87.6 Trunk Networks

300

2035

63

Rules of the day-ahead market 50

50 94

67.5

Code of transmission system TPS and CHPP NPP

day-ahead market

85

TPS and CHPP

12

100

12

Renewables

Renewables

91

67.5

Integration with ENTSO-E

12

Rules of the market

9 10

2020 100

91

9 10

7

12

7

2015

94

13

Electricity generation

2025 2030

150

9 10

12

1.6

150

1.6

13

MAIN STAGES OF REFORM

3

0

12

7

100

300

63

63

63

64

NPP

TPS and CHPP

Distribution and supply of electricity

91

2020

TPS and CHPP

TPS and CHPP

25

13

e

63

64

300 ua 85 regulator (ncsrepu) 3 87.6 3 retains the function of monitoring the implementation

0

2020 100

18 63

91

87.6 9 10

1.6

ua

60

of market rules by market participants

91

50

Creation of the e retail market

25

1.6

13150

12

9 10

50

From 1 July, 2019

0 2015

67.5

63 9 10

new market model 85

e

3

18

12

100

64

7

67.5

150

!

13

100

300

87.6

18

150 7 Changing the eof the structure 25 ! wholsale market 13

300

150

3

1.6

Consumer is in the !

12 the middle, not regulator12

60

300

300

ua

3

deregulation

300

direct agreements market

Промисловість

CREATION OF ELECTRICITY MARKET

ua

Signed by the President of Ukraine on June 8, 2017.

The Law of Ukraine “On the Electricity Market” НАСЕЛЕННЯ of April 13, 2017 No 2019-VIII.

НАСЕЛЕННЯ

3

ua

3

2025 NPP

Transition period — NPPs and HPPs are finincing0 high tariffs for RES 2030 2035 2015

FREE MARKET

HPP and PSP

Renewables

2020

TPS and CHPP

Source: DTEK

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АСС

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chamber.ua

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