Ukraine-EU link to raise border flows and trigger CEE market shift – DTEK

LONDON (ICIS)–Ukraine’s synchronisation with the EU’s electricity grid in 2023 will lead to increased cross-border flows and a reconfiguration of regional market dynamics, the CEO of Ukraine’s largest private electricity generator DTEK told ICIS in an interview.

Maksim Timchenko said the pending interconnection of the Ukrainian electricity system with the European Network of Transmission System Operators for Electricity (ENTSO-E) and its permanent uncoupling from the Russian grid was of critical geopolitical and economic importance to Ukraine.

He said Ukrainian transmission system operator (TSO) Ukrenergo was working to expand the throughput capacity, carry out preliminary tests this summer and winter and complete the certification of transmission operations in line with the EU’s third energy package.

Timchenko added that once the two systems are synchronous, annual cross-border flows between Ukraine and neighbouring EU countries could increase from 5-7TWh currently to 12-15TWh after 2023.

Ukraine is connected to neighbouring Hungary, Romania and Slovakia only via the isolated 2.4GW Burshtyn Island, operated by DTEK.

From 2023, the synchronisation would expand to the entire Ukrainian grid, which Timchenko expects to impact eastern European markets. The additional Ukrainian supplies could help increase regional competition and investment opportunities,

“DTEK is ready to increase its business activity in eastern European markets,” he said, adding that the company was also looking to boost the flexibility of the transmission system by launching the first energy storage system.

2030 STRATEGY

Timchenko explained the Ukrainian system was overloaded with baseload capacity, while the transmission grid was feeble, which meant it had to be stabilised through flexible generation, cross-border flows, storage systems and efficient demand response management.

This is where DTEK seeks to make a contribution.

Earlier in May, it teamed up with US-based conglomerate Honeywell to launch an industrial lithium-ion energy storage system with a capacity of 1MW at the Zaporizka thermal power plant in south-eastern Ukraine.

Timchenko said the project was a key part of the company’s long-term strategy to 2030, with plans to scale it up to 50MW.

DTEK is undergoing major transformations as it seeks to shift from a portfolio focused on thermal generation to one based on renewables.

In fact, Ukraine’s own energy transition and plans to decarbonise the economy hinges on DTEK’s transformation because the company owns most of the country’s 18GW of thermal capacity, of which 16GW is expected to be phased out within a decade.

DTEK, which plans to achieve carbon neutrality by 2040, has already invested $1.2bn to build 1GW of renewable capacity and said it reduced its greenhouse gas emissions by 2.5million tons in 2020 due to solar and wind generation.

The company also plans to double the renewable capacity in the long term, having already signed a contract with Danish firm Vestas for the construction of the 500MW Tiligul farm in the Black Sea Mykolaiv region. The plant is scheduled to come online in 2022.

HYDROGEN POTENTIAL

DTEK also sees growth potential in the development of the hydrogen sector in Ukraine, and is investigating options to export the fuel to the EU.

Timchenko said the current production costs for electrolysed hydrogen produced from renewable capacity would still be expensive, hovering around €6-€10.00/kg and added that at these values, it would be difficult to scale up production without grants or subsidies.

Nevertheless, he pointed out Ukraine was a strategic partner to the EU and expects to install as much as 10GW of electrolytic capacity by 2030, of which 8GW would be allocated for the export of green hydrogen.

“According to calculations, in order for Ukraine to achieve such production volumes, it is necessary to build up to 30GW of wind power capacity, so investments in the development of renewable energy sources are again becoming and important element,” he said, but stressed that such an objective could only be reached with strong political and financial support and interest from European partners.

He noted that any long-term energy transition strategies adopted by Ukraine would have to address critical issues such as resolving an ongoing debt crisis linked to feed-in tariffs, improving the country’s credit rating and sovereign borrower reputation as well as investing to improve the transmission grid.