At the end of the nineteenth century, then-president of Mexico Porfirio Diaz likely had never visited Ukraine when he supposedly said, “Poor Mexico, so far from God, so close to the United States!” More than a century later, his quote about the US's demand on its neighbor’s resources being an ever-present factor underpinning their diplomatic relations increasingly applies to Ukraine's relations with the European Union when it comes to the energy sector.
Over the past few years, a series of strategies, agreements and loans have brought the EU and its eastern neighbor into closer cooperation on perpetuating nuclear and carbon-intensive energy infrastructure and generation, with international financial institutions (IFIs) brokering the deals. An embodiment of this collaboration are plans for the construction of the so-called “second backbone corridor”, a major section of high-voltage transmission lines connecting three nuclear power plants and two pumped storage plants across Ukraine, with a planned capacity of a potential 12 GW. The estimated cost of the project is 1.2 billion euros. Ukraine is already a net electricity exporter. According to plans of Ukraine's government in 2030 the country plans to produce 25 TWh of excess electricity - close to Slovakia's total electricity generation in 2007. The most promising market for Ukraine's electricity is, of course, the integrated energy market of the EU. The planned "second backbone corridor" stretching from the East to the West of the country could perfectly serve export purposes.
Missing in all of this, however, are steps to first address the slew of problems that plague the Ukrainian nuclear industry, as well as proposals for alternative energy scenarios that will truly benefit the Ukrainian people.
A word about the nuclear industry in Ukraine.
While most notorious for the devastating accident at Chernobyl a quarter of a century ago, the Ukrainian nuclear industry is riddled with numerous problems and the longer such issues persist, the greater the cost will be to Ukrainian taxpayers in the future.
The nuclear industry continually postpones action to address unavoidable issues: Ukraine has not yet created a unified national system for final disposal of radioactive waste and spent nuclear fuel as required by nuclear legislation(*1). Neither is it currently investing in domestic infrastructure for the safe and long-term isolation of spent fuel and radioactive waste. Ukrainian nuclear plants annually produce about 150 tons of spent nuclear fuel and considering the government’s plans to extend reactor lifetime by 30 to 45 years, the total amount of spent fuel radioactive waste in Ukraine could reach 200 million tons. Estimates are that 'neutralizing' this hazardous waste will cost more money than the nuclear industry has generated in its entire existence. As Ukrainian nuclear power plants continue to age, the frequency of failures has increased, including minor emissions and leaks, cracks and short circuits. Almost every year from 2010 one nuclear unit in Ukraine will approach the end of its designed lifespan.
The recent extension of the first unit at the Rivne nuclear power plant is one example of the consequences of such inaction. Though the lifetime of reactor one had expired, in December 2010 its operation was officially extended another 20 years. Just two months later, after the nuclear industry spent about 215 million euros and declared that Rivne’s unit one was completely upgraded, in January 2011 an accident occurred and reactor one was subsequently taken down to 50 percent power output. The State Inspectorate for Nuclear Regulation later confirmed that the accident posed no radiation threat and the nuclear facility remained in a safe condition, but the situation demonstrates that even with upgrades, ageing plants cannot be guaranteed to operate safely.
So close to the EU.
To be sure, both the Ukrainian government and the EU have been clear about their respective priorities when it comes to Ukraine’s energy sector. Though Ukraine inherited from the Soviet Union an extensive nuclear industry that today only accounts for six percent of the total primary energy consumption in the country, nuclear still forms the core of Ukraine’s Energy Strategy till 2030 (*2). In addition, increasing the percentage of dirty coal in the energy balance from 22 to 33 percent by 2030 (*3), the strategy envisions life extensions of twelve operational reactor units and the construction of 22 new ones, thus more than doubling the number of nuclear power plants.
As for the EU, a recent Commission communication elaborates that, “A common EU energy policy has evolved around the common objective to ensure the uninterrupted physical availability of energy products and services on the market.”(*4) The EU estimates also that its energy import dependence will jump from 50 percent of total energy consumption to 65 percent by 2030 (*5). To satisfy this demand the communication specifies that, “the Energy Community Treaty should be implemented and extended to all those EU neighbors who are willing to adopt the EU market model.” (*6) Late last year Ukraine joined the European Energy Community with the goal of integrating into the common European energy market.
The handmaidens tasked with reconciling Ukraine's priority of expanding its nuclear energy capabilities with the EU's priority of ensuring a steady supply of cheap energy are the European Investment Bank (EIB) and the European Bank for Reconstruction and Development (EBRD). While the European banks will most likely not do anything as crass as financing the new nuclear plants themselves, in 2005 Ukraine signed a framework agreement with the EIB prioritizing “Trans-European Network projects connecting Ukraine and the European Union.” (*7, *8) In June 2010 Ukraine and the EIB signed a Host Country Agreement to set up EIB representation in the country. And a draft of the new EBRD country strategy for Ukraine specifies that, “all new public infrastructure and energy projects are prepared together with the EIB on a 50-50 basis and are expected to benefit from grant co-financing and technical assistance from the EU Neighbourhood Investment Facility.” Support to the tune of 10 million euros came from the Neighbourhood Investment Facility in 2009 to implement Ukraine’s Energy Strategy till 2030 (*9).
The EBRD and EIB together have invested more than one billion euros in Ukraine’s energy sector over the last five years. Most of this financial assistance has been provided to the state power company Ukrenergo, to both rehabilitate existing and construct new power transmission lines throughout Ukraine. While the EBRD remains coy in its intentions with these projects, having said that the loans are to increase the overall stability of the grid system and the quality, efficiency and reliability of the electricity supply, the EIB is more brazen about the transmission lines forming, “important components of the future connection to the Trans-European Energy Networks (TEN-E).”(*10)
The implementation of these transmission projects has been problematic. The level of public engagement in procedures like Environmental Impact Assessments has been abysmal. The routing for transmission lines has been slated for national parks and reserves and Ramsar sites, as well as directly through villages without compensation or prior agreement from local communities (Ramsar sites are wetlands of international importance). The situation resulted in violent clashes between locals and police in the village of Usatove in November 2009.
With the development of the second backbone corridor, designed to allow Ukrenergo to offer neighboring i.e. EU grids up to 4 GW of electricity by increasing the availability of base and peak generation mix, Ukraine is moving even further “away from God” and towards a nuclear-fuelled, export-oriented energy sector.
An analysis by Ukrainian NGOs (*11) demonstrates that the available capacity and possibilities to apply energy-saving technologies, and alternative and renewable energy sources provides an alternative to the nuclear option for the development of the Ukrainian power industry. These alternatives make unjustified the intention of the Energy Strategy till 2030 to construct 22 new reactor units and establish a closed nuclear fuel cycle in Ukraine.
One positive move is that preparations for a new draft Energy Strategy are underway. The new draft should be based on a study of actual energy losses in different economic sectors in order to assess the overall energy conservation capacity. Forecasts of consumption of primary energy sources in Ukraine in 2030 should be reassessed downward and account for assessments of GDP growth and the reduction of GDP energy intensity. The predicted share of renewables in the overall consumption of fuel and energy resources in 2030 should be reassessed to account for higher use of bio-energy and wind power.
Additionally Ukraine should reject the option of commissioning any new reactors, and all operational units should be decommissioned as planned. Cost estimates for reprocessing and storage nuclear waste, irradiated nuclear fuel and other costs of the nuclear power complex as currently unforeseen by the Energy Strategy need to be explained. Funds currently allocated for the construction of new reactors should be invested into the development of energy efficient technologies, alternative and renewable energy sources.
At the same time, EU energy policy needs reorientation to fully reflect obligations in the Treaty of the European Union to “help develop international measures to preserve and improve the quality of the environment and the sustainable management of global natural resources, in order to ensure sustainable development, with the primary aim of eradicating poverty” and to “ensure consistency between the different areas of its external action and between these and its other policies.”
As such EU energy policy should be subordinated to its development policy and contribute to achieving the aims above rather than aggressively promoting “energy security” through new interconnections with neighboring countries like Ukraine. For electricity transmission specifically, priority should be given to low-voltage local grid (below 110kV) modernization and the development of technical solutions to integrate state of the art renewable energy sources into the outdated design of the grid in in the region.
*1- Law of Ukraine "On radioactive waste management"
*2- Approved by its Council of Ministers in March 2006
*3- 43.5 million tons of equivalent fuel in 2005 to 101 million by 2030
*4- Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the regions: Energy 2020, A strategy for competitive, sustainable and secure energy, 10 November 2010 p.3
*5- Communication from the Commission to the European Council and the European Parliament: an energy policy for Europe 10 January 2007 p.3
*6- Energy 2020, A strategy for competitive, sustainable and secure energy, 10 November 2010 p.3
*8- http://www.eib.org/projects/regions/eastern-neighbours/index.htm?lang=-en In December 2009 the EIB set up the Eastern Partners Facility (EPF), a EUR 1.5 bn facility under which financing is extended at the EIB's own risk (i.e. without EC guarantee). This facility enables the EIB to provide loans that sector-wise go beyond the scope of the mandate and to help support EU investment in the region, notably through European corporations.
*9- NIF Operational Annual Report, 2009 http://ec.europa.eu/europeaid/where/neighbourhood/regional-cooperation/i...
*11- See http://www.necu.org.ua/wp-content/plugins/wp-download_monitor/download.php?id=100
Source and contact: David Hoffman, coordinator of new media CEE Bankwatch Network.
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