Ukraine state hydro producer targets capacity expansion as energy transition, ENTSO-E deadline loom

LONDON (ICIS)–Ukraine’s state-owned hydro generator is expecting to expand its installed capacity and build critical battery storage as the country prepares for the energy transition and integration with European markets.

Speaking to ICIS, Ihor Syrota director general of Ukrhydroenergo, said the company was looking to build 2.2GW of new capacity in the short-term, which would bring the total installed capacity of its portfolio to 8GW when complete.

The new capacity would be critical to helping balance the system, especially when the Ukrainian grid synchronises with the European transmission system in 2023.

It would also be critical to meeting green hydrogen production targets, which are due to be outlined in a national strategy later this year.

HYDROGEN POTENTIAL

The EU has singled out Ukraine as a possible major hydrogen exporter to the bloc as the country could establish 10GW of electrolysed hydrogen capacity by 2030, enough to cover one eighth of Europe’s requirements by that date.

Some of the capacity needed to produce it could come from offshore wind and solar power plants but hydro production is also likely to make a contribution.

Ukrhydroenergo is the largest hydro power generating company in Ukraine, operating ten large power plants on the Dnieper and Dniester river, with a total installed capacity of 5.8GW.

The new 2.2GW of generation capacity that is likely to be added could help Ukraine replace some of the 16GW of coal-fired capacity that is expected to be phased out and partially meet electrolysed hydrogen production targets.

“The cost for hydrogen electrolysis in Ukraine is continuously fluctuating,” Syrota said. “However, Ukraine is focused on a price of approximately €2.40/kg of hydrogen as calculated by the EU in the hydrogen strategy for a climate-neutral Europe,” he said.

NEW CAPACITY

Over the last 15 years, Ukrhydroenergo has invested in rehabilitating and upgrading 48 hydro units.

In the first half of 2021, it has been carrying out reconstruction works on 16 hydro units at a cost of Ukraine hryvnia 466.2m, of which UAH273m (€8.5m) came from the European Bank for Development and Reconstruction (EBRD) and the European Investment Bank (EIB).

In parallel, Ukrhydroenergo has also been investing in battery storage in a bid to create hybrid systems for electricity generation by 2024.

“In total, the project includes 197MW of storage batteries for the joint operation mode of storage batteries and hydro power plants (HPPs) and pumped storage power plants (PSPPs) in hybrid operation mode,” Syrota said.

“[Ukrhydroenergo also has plans for] 63.9 MW of solar photovoltaic power plants as a source of power supply for HPPs and PSPPs common services and for charging storage batteries.”

ENTSO-E SYNCHRONISATION

The new additions and upgrades will help Ukrhydroenergo play a critical role in stabilising the system once Ukraine connects its electricity grid to the European system.

The synchronisation with the European Network of Transmission System Operators for Electricity (ENTSO-E) is scheduled for 2023 , with Ukraine having access to more than 2GW of bidirectional capacity on its borders with Hungary, Poland, Romania and Slovakia.

“Using the units of HPPs and PSPPs, the transmission system operator of Ukraine [Ukrenergo] will be able to ensure high-quality balancing of interstate power flows with [the] ENTSO-E system.

“I would like to emphasise that from a technical point of view, Ukrhydroenergo is in full readiness to integrate the Ukrainian power system into ENTSO-E and I do not see any problems along the way,” Syrota said.

He added that once Ukraine is synchronised with the ENTSO-E system, Ukrhydroenergo could become active on the ancillary service market, providing services of frequency and active power regulation, as well as on the balancing market where it would ensure enough volumes are available to balance the system.

IMPROVING MARKET CONDITIONS

Much of Ukraine’s long-term plans such as the development of a hydrogen market of scale and the transition from coal to renewables hinges on establishing a functional electricity market.

Currently, the market is distorted by cross-subsidies, ineffective green tariffs and high levels of debt.

Syrota said there should be a clear separation between the balancing market and the spot market. This separation would help to prevent price distortions that may occur if companies seek to take advantage of arbitrage between the two.

One of the reasons the Ukrainian electricity market was deregulated was to close loopholes that have allowed payment defaults, he said.

“However, due to tariff distortions and the lack of mechanisms to prevent defaulters from participating in the electricity market, debts, primarily in the balancing market, are growing rapidly.

“Another problem is cross-subsidisation, when state-owned companies [such as Ukyrhydroenergo] are asked to compensate [the shortfall] between tariffs to end consumers and ultra-high green tariffs,” he added.

Addressing these inefficiencies would be critical to Ukraine’s energy transition, he said.