Panel discussion «integration of the ukrainian energy system into entso e key challenges and tasks»

PANEL DISCUSSION
“Integration of the Ukrainian energy system into
ENTSO-E: key challenges and tasks”
Within XV International Forum “Fuel and Energy
Complex of Ukraine: the present and the future”
Kyiv, International Exhibition Center, 8 November,
2017.

INTEGRATION OF THE UKRAINIAN ENERGY
SYSTEM INTO ENTSO-E:
PERSPECTIVES FOR UKRAINE

2020 2025
New Energy strategy “Safety, Energy Efficiency, Competitiveness” is a principal document
highlighting strategic horizons of the energy and coal industry of Ukraine until 2035, approved
by the Government on 18 August 2017.
Implementation of the most actions to
integrate the IPS of Ukraine into ENTSO-E
by 2020.
Integration of the Ukrainian power system
and ENTSO-E continental Europe zone in an
operational mode by 2025.
ENERGY STRATEGY OF UKRAINE UNTIL 2035
1

WHY DO WE NEED CHANGES?
4% 96%
A complete synchronization of the Ukrainian power system with the ENTSO-E one as well as its separation from the
interconnected operation with the Russian and Belarussian power systems are the only ways to change the current situation.
The Ukrainian energy system is technologically connected to the power systems of Russia, Belarus and Moldova;
they operate in parallel as well.
It means the power systems operate in a common mode and the frequency is similar. An actual control of the
system is carried out by Russia as an owner of the greatest generating facilities.
2

AGREEMENT ON INTEGRATION OF THE UKRAINIAN ENERGY
SYSTEM INTO ENTSO-E
New energy market implementation is possible only within integration of the IPS of Ukraine to ENTSO-E
Advantages of synchronization:
• Strengthening of the reliability and resiliency of the IPS of Ukraine by means of facilities modernization according to the EU
standards within Agreement Action Catalogue implementation
• Diversification of the energy sources and transparent terms of the mutual assistance
• Introduction of the auxiliary services market (frequency control, ensuring the energy reliability and quality properties)
• Demonopolization of the domestic energy market by means of a competition right after ENTSO-E membership
• Increase the electricity trading by 4 times- up to 18-20 bln kWh/y
The Agreement on Conditions for Future Interconnections of the IPS of
Ukraine and PS of Moldova with the ENTSO-E energy system of the
Continental Europe was signed on the 28th of June 2017 in Brussels
The Agreement entered into force
on the 7th of July 2017.
3

BUSINESS BENEFITS FROM INTEGRATION WITH ENTSO-E
Transparent electricity pricing and stable
price for a long period of time
30 % decrease in the wholesale
electricity price in the long-term
perspective.
New options for electricity
trading
Choice of the energy supplier
Investor in the Ukrainian energy sector
gets an opportunity for free electricity
export
More than 85% of the electricity will be sold
under direct agreements between the energy
producer and supplier/consumer
4

This would increase the energy price by about 25-30% (similarly to the
European countries experience). The following process is inevitable.
Integration into ENTSO-E and free electricity trade with the EU
countries are the only ways to decrease the price.
5
The Law “On Electricity Market” was adopted as of 11 June 2017
NEW MARKET MODEL AND IMPACT ON THE ECONOMY
The Law stipulates a sector deregulation, direct agreements (energy producers may sell
the electricity directly to the consumers), market pricing within transportation and
distribution.
The industry of Ukraine consumed up to 41,46
(bln kWh) in 2016. Energy costs amounted to
UAH 71,17 bln
The industry shall additionally pay about UAH 18
bln within new market model.

IMPACT OF SYNCHRONIZATION: INDUSTRY
6
Synchronization with ENTSO-E will have a positive impact on the industrial complex of Ukraine
Electricity consumption within industry
(thousand kWh)
Industrial sectors to get the positive impact from the integration:
• Fuel industry
• Ferrous metal industry
• Non-ferrous metal industry
• Machine-building industry
• Chemical industry
• Food and processing industry
It is expected that the industrial enterprises as the electricity consumers will benefit after a general
decrease in the energy prices as the production process will be less costly.
Due to the Ukrenergo estimations the “day ahead” market energy prices will be 30% lower after the
synchronization.
The practical effect of similar processes regarding electricity cheapening due to the synchronization
with new energy markets may be observed in the Baltic states, especially in Latvia.
Total 41,469
Sector:
Coal 2 390 622 6%
Steel 24 063 787 58%
Chemical 1 583 170 4%
Machine-building 2 956 106 7%
Gas 453 056 1%
Others 10 022 900 24%
6%
58%4%
7%
1%
24%

Synchronous operation with ENТSO-E allows to increase the electricity trading with the EU-countries using the
production facilities more efficiently (including NPP).
IMPACT OF SYNCHRONIZATION: ELECTRICITY TRADE
7
Scope of electricity trade with the EU countries will increase from
the current 4-5 bln kWh/year ($250 mln) to 18-20 bln kWh/year
($1,5 bln)
4-5
bln kwh/y
18
bln kwh/y
Taking into account the trader`s
operation profitability marginality (5 % on
average), the total income of the
electricity traders amounts to USD 75
mln/year

Free trade between Ukraine and the ENTSO-E countries will
strengthen the investment attractiveness of the energy sector of
Ukraine.
IMPACT OF INTEGRATION: NEW INVESTMENTS
8
There are three main producers of the conventional
energy in Ukraine:
• PJSC “Tsentrenergo”
• PJSC “Donbasenergo”
• “DTEK”
1 producer within hydro generation
• PrJSC “Ukrhydroenergo”
1 producer within nuclear generation
• SE “NNEGC “Energoatom”
• 180 producers within “green” generation
• The investments may be attracted not only in the
“green” sector but in the conventional energy
generation as well as it is demonopolized.
• There are new prospects for the energy export and
import.
Before integration into ENTSO-E After integration into ENTSO-E
Up to USD 700 mln of investments in the “green”
energy were attracted for the last three years.

Synchronization of Ukraine into ENTSO-E ensures the European norms of
consumer protection as well as service quality.
Ensuring the consumer with the right to choose is a key element of a free
market which is possible only via integration to ENTSO-E.
IMPACT OF SYNCHRONIZATION: CONSUMER PROTECTION
9
Any synchronization with ENTSO-E: new power market model may not come into force given a high probability of the
monopolists influence on the competition to preserve their excess profit.
Market coupling with the other countries allows to reduce the cost of electricity drastically. European power markets liberalization
proves a tendency of lower prices (Baltic countries). Ukrainian business and production in particular will become more competitive
on the foreign and domestic markets owing to the expected lower cost of prices.

 Technologically the synchronization with ENTSO-E will strengthen the stability
of the Ukrainian energy system and minimize the dependence on the coal
supply to the thermal units in Ukraine.
 Ukraine will have the opportunity to get the emergency aid from the ENTSO-E
countries power systems on commercial and competitive terms.
 Total technological level of the power system exploitation and the supplying
security level will be higher due to the ENTSO-E strict requirements for the
synchronization preparation.
IMPACT OF SYNCHRONIZATION: SECURITY ASPECT
10

KEY RISKS
Lack of proper coordination
Lack of funding
Lack of commitment from key stakeholders
Agreement execution requires a coordinated work of the market players on
the implementation of specific steps to modernization according to the
ENTSO-E rules.
Power units of the generating companies should be dramatically
modernized. Such actions should be funded by the market players.
Key stakeholders may be against the synchronization with ENTSO-E as they
are not interested in the power market demonopolization.
EXTERNAL RISKS
INNER RISKS:
11

Panel discussion «integration of the ukrainian energy system into entso e key challenges and tasks»

Key aspects of cooperation with ENTSO-E
Within XV International Forum
“Fuel and Energy Complex of Ukraine: the Present and the Future"

Confidence building
Canada (Alberta)
Ukraine made several attempts to integrate into ENTSO-E Continental Europe power system during 2006-2014, however
they were not successful. For the first time Ukraine expressed its willingness in 2016.
The situation started to change in 2015, when Ukrenergo accelerated the action within this domain.
Ukrenergo performed a great scope of systematic work to restore confidence. One of the core element of such work was
building of partnership with countries whose experience was useful for Ukrenergo. Global standards and principles as well
as proactive position on the world stage made the Company more predictable and clear for foreign partners.
As a result, Vsevolod Kovalchuk, CEO at Ukrenergo signed the Agreement on Conditions for the Future
Interconnection of the power system of Ukraine and Moldova with the power system of Continental Europe
on 28 June 2017 in Brussels.
Visits to:
Austria (APG) Finland (Fingrid) Poland (PSE) Slovakia (SEPS) Latvia (AST) USA (PJM)
2

Close cooperation
• First phone workshop of the Ukrenergo and ENTSO-E
representatives held in February this year. We`ve approved the
strategic goals of future cooperation and shaped the primary
tasks.
• Large ENTSO-E delegation visited Ukrenergo to perform the 2nd
workshop. Up to 60 representatives of different competencies
and directions from the European and Ukrainian parties
established the cooperation strategies as well as perspectives of
the Ukrainian energy system synchronization with ENTSO-E.
As of today the integration of the Ukrainian energy system into ENTSO-E is a key priority of the Company
development. In order to achieve set goals Ukrenergo works closely with the ENTSO-E Secretariat and
attends regional and project groups meetings. Moreover, we have performed 2 joint workshops:
3

ENTSO-E Observer Member status
I. Unbundling– according to the Directive 2009/72/EC and the Regulation (EC) No 714/2009. The process
needs a political decision of the country`s governmental authorities regarding distribution of the main
energy assets (within gas and power industries).
II. Candidate should be defined as a transmission system operator (TSO) – due to the current legislation of
the country of origin (certification by the Regulator in accordance with the rules and procedures of the
Energy Community; it envisages the Ukrenergo unbundling and corporatization as well as possession of
Ukrenergo own grids).
III. Candidate should be interconnected with the ENTSO-E countries – due to the electricity market
conditions; as well the candidate should possess a direct contact with the interconnectors of the grid origin
country.
4
Ukrenergo aims to get the ENTSO-E Observer Member status.
It previews the implementation of the following actions:

Where are we heading?
Power generation units testing in early 2018. The output of the frequency and capacity primary regulation
will form a database for the upcoming analysis of the dynamic stability.
Active preparations for the testing are being performed at the power generation units as of today
(November-December 2017).
Establishment of the ENTSO-E TSOs consortium is previewed in the early 2018 to carry out the necessary
investigations of the Ukrainian energy system.
It is justified by the ENTSO-E legislative regulation prohibiting the involvement of the external investigation
models. We are currently working on the attraction of the companies as well as approval of the consortium
work area.
The Action Catalogue of the Agreement on Conditions for Future Interconnection of the power system
of Ukraine and Moldova with the power system of Continental Europe provides for:
5
1
2

Requirements to the
additional calculations of
steady states and
dynamics of the power
system to ensure the EU-
integration

NECESSARY CALCULATIONS:
1. Steady state calculations for a synchronous
interconnection of the grids of Continental Europe
and Ukraine/Moldova using the present network
2. Dynamics calculations for a synchronous
interconnection of the grids of Continental Europe and
Ukraine/Moldova using the present network
1

Execution plan:
2
Estimated cost of work
(performed by the
ENTSO-E
representatives, end of
2017)
Conclusion of contract
with ENTSO-E TSOs
consortium
Calculations
performance (until
2nd quarter of 2019)
Receipt of the
approved technical
specifications (received
in October, 2017)
1 2 3 4

1. The calculations are to be performed at the verified models of grid due taking into account current
state of the generating and grid equipment;
2. The calculations are to be performed within synchronous and isolated operational activity of the
continental Europe, Ukraine and Moldova networks.
3. Calculation of steady states is to confirm the absence of grid elements overload as well as
maintenance of the voltage levels for the power systems of Europe, Ukraine and Moldova within
parallel and isolated operation in the modes of min and max loads;
4. Generating equipment testing involving the local and external consultants should be performed to
verify the dynamic models; the tests should be conducted within excitation and checking of
engagement in frequency and capacity regulation;
5. Dynamics calculation is to show the capability of the power systems of Ukraine and Moldova to
operate in an isolated mode to pass the Trial Operation Mode; as well as the absence of dynamics
failures (vibrational, angular and frequency stability) within parallel operation of the power systems
of Ukraine, Moldova and Europe.
REQUIREMENTS:
3

As of today part of the power system of Ukraine, namely the “TPP Burshtyn island”, successfully
functions within the continental Europe regional group complying with almost all Operation Handbook
requirements.
To implement the measures provided by the«Catalogue of Measures» (Annex I "Operation Handbook
Requirements"), defined in the «AGREEMENT ON THE CONDITIONS FOR FUTURE
INTERCONNECTION OF THE POWER SYSTEM OF UKRAINE WITH THE POWER SYSTEM OF
CONTINENTAL EUROPE» the SE “NPC “Ukrenergo” fulfills the following technical and organizational
measures:
COMPLIANCEWITHTHEOPERATION HANDBOOK:
4
Investigations on automatic frequency load shedding compliance with the OHP requirements
Participation in «European awareness system»
Connection to Electronic Highway
Participation in the DACF process

Units testing
WORKINGGROUPS:
5
Additional
investigations
Implementation of the
requirements of Catalogue
measures related to the
compliance with Operation
Handbook

Generation and other participants within
implementation of the Catalogue of
measures

INTEGRATION INTO ENTSO-E IMPLIES SELF-SUFFICIENCY OF UKRAINE WITHIN:
• Frequency maintenance reserves (primary regulation);
• Frequency restoration reserves (secondary regulation),
• Replacement reserves (tertiary regulation);
• Voltage and reactive power control;
• Power system back-up after system breakdowns.
1

REGULATION SCOPE DISCRIMINATION DEPENDING ON THE UKRAINIAN POWER
SYSTEM OPERATIONAL MODE:
2
Isolated Interconnected operation
with the European power
system
Interconnected
operation with ENTSO-E
Primary -500;+1000* ±120 ±190
Secondary -500;+1000 -500;+1000 -500;+1000
Tertiary No less
(-500;+1000)
No less
(-500;+1000)
No less
(-500;+1000)
UKRAINIAN POWER SYSTEM OPERATIONAL MODES
MW
REGULATION
*without disconnecting the consumers via the automated emergency system

MEASURES TO ENSURE THE GENERATION READINESS FOR THE
OPERATION WITHIN ENTSO-E:
3
• HPPs involvement in the Ukrainian power system Automated frequency and power
control system;
• Technical reequipping and reconstruction of the TPPs to ensure the primary and
secondary frequency and active power control;
• Implementation of the modular control systems at the TPPs energy units;
• Implementation o the station control systems at the TPP;
• Connection of the TPP to the central Automated frequency and power control system
regulator of the Ukrainian power system and setting of the Ukrenergo Automated
frequency and power control system regulator in order to connect the power stations
control system to it.
• Involvement of the NPP energy units in the frequency primary regulation
• Installment of the reactive power compensatory equipment as well as voltage
regulation (controlled shunt reactors, static VAR compensators, etc.)
• Reconstruction of the Automated frequency and power control system at the NPP
energy units
• Transient states monitoring system creation within the Ukrainian power system.

THE UKRAINIAN ENERGY
SYSTEM GRID
DEVELOPMENTWITHIN
PARALLEL OPERATION WITH
THE ENTSO-E.

CONDITIONS OF INTEGRATION :
Key condition for the integration of
the Ukrainian Energy System into
ENTSO-E is the physical separation
from parallel operation with the
Energy System of Russia and
Energy System of Belarus:
1
Agreement on the physical
separation between Ukrenergo
and other European system
operators - members of
ENTSO-E.
Absolutely disabling in all
electrical communication with
the energy systems of Russia
and Belarus
Installation of monitoring and
indication devices on switches and
disconnectors

Ukrainian energy system “bottlenecks” elimination in case of integration:
2
 Instalment of the second 750/330 kV auto-
transformer 1000 MVA at the 750 kV
Substation "Kyivska “
 Construction of the 750 kV Substation
"Kakhovskaya" with approaches of the
overhead line 330-750 kV
 Construction of the 330 kV Overhead line
Zakhindo – Bogorodchany
 Reconstruction of the existing 750 kV
substations "Zaporizhska" and "Dniprovska",
330 kV "Novokyivska" and "Adzhalyk"
including autotransformer capacity
increasing

Key projects to ensure reliable operation of the Ukrainian Energy System
in case of separation from the energy systems of Russia and Belarus:
KEY PROJECTS:
3
construction of the 330
kV Substation
Slobozhanska with
approaches of the
overhead line 330 kV
construction of the 330 kV electric
power transmission line from
Substation 330 kV "Kupyansk" to
500 kV substation "Kreminska"
using the existing line of 500 kV
Donbas-Donska
construction of the 330 kV
overhead line Kurakhovskaya
TPP - Bilitska

 Reconstruction of the connection scheme AT-1,2 at the Zaporizska TPP
 Increase of the autotransformer capacity of Vuglegirskaya TPP or switching one of the power units
1,2 from the 110 kV switchgear to 330 kV switchgear
 Realization of the regime measures on the 110 kV network or the operation of the 100 MW unit of
the Slavyansk TPP for 110 kV bar
 Additional AT-connection at Luhanska TPP, as well as reconstruction of the overhead line at
Luhanska TPP 220 kV - Yubileina
“Bottlenecks” elimination within generation switchgear devices :
4
Necessary development of the
35-110 kV distribution grids at the
border areas of Kharkiv, Sumy and
Chernihiv regions
Grid measures cost
EUR mln
130,9

Projects to ensure the fiber-optic lines communication at the OHL
220-400kV to provide the flexibility, control and monitoring of the
Ukrainian energy system.
Overhead lines digital communication development:
5
about
95 EUR mln
Estimated cost

Financing of actions
within integration into ENTSO-E

2COST OF ACTIONS WITHIN INTEGRATION INTO ENTSO-E
Actions to ensure the generation state for the operation within ENTSO-E
Organization of communication channels for the technological control of the Ukrainian energy system
Additional investigations on the static and dynamic stability
Implementation of the Operational Handbook ENTSO-E
Operation of the Ukrainian energy system in the “island” mode
TSO certification
Grid 131,6 mln EUR
129,5 mln EUR
94,8 mln EUR
5 mln EUR
2,4 mln EUR
374 thousand EUR
160 thousand EUR
352 MLN EUR
total cost of integration into ENTSO-E
138,4 mln EUR
financing for the cost
of the IFIs

Articles in detail
3
Grid
131,6 mln EUR
Generation
129,5 mln EUR
Communication channels
94,8 mln EUR
RecommencingoftheOHL750kVBKhmelnytskaNPP-
Rzeszów(Poland)
RecommencingoftheOHL220kVLviv-Striy
Definingthescopeofstrengtheningthegridsoftheborder
regionswhiledisconnectionoftheUkrainainenergysystem
fromBelarusandRussia
ConstructionoftheOHL330kVBilytska-KurakhivskaTPP
ConstructionoftheSS330kV“Slobozhanska”
ConstructionoftheOHL330kVKupiansk-Kremenska
(includingshareoftheOHL500kBDonska-Donbaska)
Ensuringpowersupplytothe“tail”regionsofthe
distributionsystem.
Technicalreequippingandreconstructionofthethermal
powerplantsoftheUkrainianenergysystemtoensure
primaryandsecondaryfrequencyandactivepowercontrol
AdjustmentoftheUkrenergocentralregulatortoconnect
tothepowerstationscontrolsystems.
Ensuringthenecessaryscopeoftheprimarycontrolwithin
theUkrainianenergysystem(Nucleargeneration)
Other
Instalmentofthecompensatingequipmentwithareactive
powerandvoltagecontrol
Reconstructionoftheautomaticcontrolsystemswitha
reactivepowerattheNucleargenerationplants
Other
Constructionofthe"SouthernRing"FOL
ConstructionofFOLintheareaTrypillya-Kaniv-
Kremenchug-Poltava-ZmiivTPP
OHL750kVZaporizhzhyaNPP-KakhovskafromSubstation
750kVKakhovskaandapproachesoftheOHL330kV
ReconstructionofcommunicationlayingfiberopticcableviaOHLonthe
Substation330kV«LvivPivdenna»-Substation220kV«Split»-Substation220kV
Stryi-Substation220kV«Boryslav»-Substation220kVVolovets-Substation
400kVMukacheve"-Stateborder
ReconstructionofthetrunkFiberopticlineconnection
Kyiv-Vinnytsia-Lviv
ReconstructionoftheOHL330kVDnistrovskaHPP-Bălţito
thestateborderwithMoldova
Other
€6,3mln
€628
thous
€31thous
€34,2
mln
€71mln
€11,4mln
€7,2mln
€66mln
€534
thous
€12mln
€4,5mln
€24mln
€21,4mln
€879
thous
Frequency and
active power control
Voltage and reactive
power control
€57mln
€8,3mln
€8mln
€8mln
€9,4mln
€1,4mln
€2mln

Analysis of the costs and benefits
4
Costs related to ENTSO-E
TOTAL
Recommencing of the OHL 750kV Khmelnytska NPP – Rzeszów (Poland)
Recommencing of the OHL 220 kV Lviv-Striy
Additional investigations on the static and dynamic stability
on request of ENTSO-E
Implementation of the Operational Handbook ENTSO-E
Operation of the Ukrainian energy system in the “island” mode
6,4 mln EUR
640 thousand EUR
5 mln EUR
2,3 mln EUR
384 thousand EUR
14,7 mln EUR
EUR 1,2 bln/ EUR 1,3 bln/year
year
Benefits*
EUR 352 mln
Costs
Security aspect Economic aspect Institutional aspect
• Strengthening of the reliability and
stability of the Ukrainian energy
system, minimizing the dependence
on the primary energy sources;
• Diversity of the energy sources̈;
• Transparent conditions to get the
emergency mutual aid from the
ENTSO-E members.
• Possibility to increase the energy
exchange with Europe up to 4 times
to 18-20 bln kWh/year;
• Containment of price increase in line
with energy quality improvement;
• Increase in the investment
attractiveness of the Ukrainian
energy system.
• Strengthening of the
competitiveness and
demonopolization of the
Ukrainian energy inner market;
• Lower dependence of the
customers on the suppliers-
monopolists.
Benefits of the integration into ENTSO-E
*in case of free energy exchange if the
carrying capacity amounts to 4 GW

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