Ukraine prepares for launch of ENTSO-E commercial electricity flows

LONDON (ICIS)–Ukraine is preparing to start commercial electricity exports to the EU that could help replace more than five billion cubic meters of Russian gas in power generation annually.

The Ukrainian electricity transmission system operator Ukrenergo could offer as much as 100MW of cross-border capacity to neighbouring Hungary, Romania and Slovakia from the second half of June, subject to the implementation of several technical conditions, according to a source close to discussions.

If a month after the launch of the first commercial flows there are no low-frequency oscillations in the system, Ukrenergo expects to gradually increase exports to 1.5GW by the end of the year.

The TSO fully synchronised with the European Network of Transmission System Operators for Electricity (ENTSO-E) earlier in March and was due to launch commercial flows with neighbouring Hungary, Romania and Slovakia in 2023.

However, following negotiations, ENTSO-E said in a statement on 8 June that Ukrenergo and continental TSOs had agreed to implement a number of technical conditions to guarantee the stability of the system.

The commercial capacity offered under the ENTSO-E system will be auctioned in line with EU rules.

Ukraine already auctions 215MW for all hours on an isolated line with Poland and hopes to increase the total capacity on this interconnection to 1GW from 2023, the source said.

It also offers between 80-150 of border capacity per hour to neighbouring Moldova, which also fully synchronised with ENTSO-E in March.

LOW UKRAINIAN PRICES

The source said Ukraine’s total border capacity could increase to 2.5GW by the start of 2023, allowing European companies to buy significantly cheaper electricity from Ukraine and save gas in electricity generation.

Reducing dependence on Russian gas is a key aim for Europe, and imports of electricity generated primarily from Ukraine’s nuclear power plants would assist in this.

“Calculations show that around 2GW [worth] of Ukrainian electricity exports could save around 5bcm in Russian natural gas imports [annually],” the source said.

Although the capacity will be bidirectional, it is expected that flows would be from Ukraine to European countries as long as the former remains at a discount to the latter.

Ukrainian demand has plummeted since the start of the war, with many consumers being disconnected from the grid as Russia is bombing and shelling buildings and civilian infrastructure.

This has pressured prices, which are now at a significant discount to European equivalent contracts.

The Ukrainian spot baseload price for 9 June settled at €70.80/MWh on the day-ahead market while the Hungarian equivalent contract was assessed by ICIS at €204.00/MWh.