Ukraine’s spare energy can help itself and Europe

3 minute read

A Ukrainian flag is seen outside a destroyed house, as villagers return to Moshchun village, amid Russia’s invasion, Kyiv region, Ukraine May 19, 2022. REUTERS/Edgar Su

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MILAN, May 20 (Reuters Breakingviews) - Ukraine has an in-built weapon against the destruction wrought by conflict. With 55 gigawatts (GW) of installed power capacity, the war-torn nation can produce more electricity than it currently needs. That presents an opportunity for both Kyiv and the energy-starved European Union.

Fearing that Moscow might use energy as a weapon, Ukraine has since 2017 been working to extricate itself from the Russian power grid. Vladimir Putin’s invasion unsurprisingly accelerated that transition. On March 16 Ukraine became fully synchronised with the EU’s energy network.

This creates an attractive imbalance. Ukraine’s energy demand has halved since the conflict, and it is unlikely to go back to full capacity even with a ceasefire. The opportunity is for the country to export excess electricity to its EU neighbours, and use the proceeds to speed up its costly reconstruction. Exporting 1 GW of electricity could bring Ukraine 1 billion euros per year, energy traders say.

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The EU, meanwhile, may be interested in importing carbon-free energy produced by Ukraine’s 15 nuclear reactors, which can generate around 14 GW when running at full tilt. Countries like the Baltic republics are still connected to the Russian grid, so they need alternative electricity to cut their Moscow ties. The EU is also desperately seeking to diversify away from Russian gas.

The catch is the power lines that connect Ukraine to the likes of Poland, Slovakia, Hungary and Romania. Right now, they are few and far between. Ukraine’s cross-border export capacity is a paltry 700 megawatts (MW). And the country only exports about 200 MW to Poland, Petro Kotin, chief executive of Ukraine’s nuclear power operator Energoatom, told Breakingviews.

That can be fixed with investments. Reactivating a Soviet-era power line through Poland would cost about $30 million, Kotin says. Building new lines from scratch requires $500 million per line. Ukraine clearly does not have the money. Neighbours like Poland are sceptical, and private investors are balking at the idea of venturing into a conflict area. That leaves funding from multilateral organisations such as the European Bank for Reconstruction and Development, the European Investment Bank or the European Commission.

Helping Ukraine bolster electricity exports would support its economy and alleviate Europe’s energy headache.

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- The European Union on May 18 fleshed out its strategy to diversify energy supplies to reduce its dependency on Russian imports.

- The EU and Ukraine linked their electricity grids on March 16. The move had been planned since 2017 but was accelerated due to the Russian invasion.

- Ukraine cut its power connection with Russia and Belarus on Feb. 24, the first day of war.

- Ukraine has transmission links with Poland, Slovakia, Hungary and Romania. It currently only exports 200 megawatts to Poland, but could increase its export capacity to at least 2.5 gigawatts (GW), nuclear power operator Energoatom Chief Executive Petro Kotin told Breakingviews.

- Ukraine has an installed generation capacity of 55 GW, of which about 14 GW are from the country’s 15 nuclear reactors, according to industry sources and Energoatom. The EU had about 950 GW of installed capacity in 2021, according to Deloitte.

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Editing by George Hay and Oliver Taslic

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