24 October 2016

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Opinion"Rotterdam plus" minus nuclear energy

Nuclear generation has always been and remains the core of Ukraine's electric power production, and that’s a known fact. Production of electricity is also the foundation of support of the life of Ukrainian citizens and the entire Ukrainian economy in general. The growth of prices for electricity is dispersing this foundation.

It is no secret that over the last two years, the share of nuclear power plants (NPPs) in the Energy Market structure remained at nearly 55%, rising to an astonishing 70% at the peak of consumption in autumn-winter period and dropping to 51-52% in summer where nuclear reactors are being refueled. Anyone slightly familiar with the electric power industry is also well aware of the fact that 1 kWh of electricity produced by NPPs costs the state-owned Energorynok company half the price of electricity generated by thermal power plants (TPPs). It is obvious that the preservation of the high proportion of nuclear power generation in the overall balance of electricity production is the main thing that prevents the price of kWh from growing for all categories of consumers. Especially, when it is done under the pretext of a "Rotterdam plus" formula, allowing coal-fed power plants to raise even more the cost of electricity with reference to the increase in coal prices.

We know that it’s the National Energy and Utility Regulation Commission (NEURC) that sets electricity tariffs, with a trend to inflating them for the population and other consumers, as well as the rates for the sale of all kinds of power. It also calculates the wholesale market price (WMP) per kilowatt. All of these facts are easy to grasp, even for a person without some special knowledge in the field. So who could have predicted that they are not so obvious, to put it mildly, to the current NEURC head, Dmytro Vovk?

His position laid out in an interview with, published September 13, is rather surprising. Concealing the true causes of the growth of electricity prices for consumers, he says: "... The growth of WMP in general has another cause, which is a change in production structure in terms of types of generations. The main cause is a significant drop, due to the delay of repairs, of electricity generation by Energoatom. Their original plan was at 88 billion kWh, while now their plan is 80 billion kWh. This effect is very significant, and it’s what led to an increase of WMP…" That is also hiding the fact that the root cause of long-term repairs of nuclear reactors was chronic underfunding of these repairs for many years. Only after a problem emerge is the funding considered, not to mention the problems of tenders, with so many articles written on the issue.

Nevertheless, the share of Energoatom in Ukraine’s energy market structure over eight months of 2016 remained at 53%, which is 8.4% more than over the eight months of a pre-war 2013. Indeed, in real terms, the production of electricity at NPPs decreased compared with 2013. Certain fluctuations are really present in the share of nuclear power generation from year to year, but the overall trend is clear – it has grown over the past three years. Moreover, neither in 2013, nor before (when the share of nuclear power fluctuated around 47%), did it occur to anyone to tie the increase in electricity prices with nuclear generation. It has always been clear to everyone that it’s due to the nuclear industry that the tariff growth was somehow constrained, as electricity generated at NPPs is the cheapest.

Stating "delays in repairs" at NPP power units, Dmytro Vovk naturally does not hide from the public the fact that Energoatom has repeatedly drawn the NEURC’s attention to the lack in NPP electricity sale tariffs of the money aimed for the purchase of equipment needed for timely repairs. At the insistence of the NEURC, the ministry in the beginning of the year artificially inflates generation target plans for NPPs, so that the NEURC could adopt a minimum tariff for the company. And only when the equipment is out of order and the power unit is shut for repairs or stays idle due to lack of equipment and spare parts to ensure the safety and reliability of its work in the process of extending its service life, the NEURC is forced to allocate the sum required for its replacement or restoration. Besides, there is that problem with tenders… At this, he [NEURC chief] allows himself to give comments to the media, claiming that it’s the NPPs which are to blame.

And finally, it is clear that, by blaming the nuclear industry, the head of the NEURC simply pulls the public's attention away from the price of imported coal, formed by the so-called "Rotterdam plus shipping" formula. Otherwise, what could explain the fact that an official of such level claims that it’s the nuclear power generation industry which is to blame for the tariff growth.

The Ukrainian nuclear scientists do not expect congratulations and do not plan to hold large scale celebrations, as they are, as usual, preparing to survive a load in the periods of peaking electricity consumption in the autumn - winter season. Reliable and safe operation of NPPs, as in the previous years, will provide consumers with clean electricity, two times cheaper than that produced at TPPs.

Energoatom’s team hopes that the media and the public will be able to adequately assess the nuclear industry efforts to maintain social and economic stability in the country and that the public is savvy enough to figure out who organized the uncontrolled growth of tariffs and is now speculating on the issue of lowering the standards of living of ordinary Ukrainians.

Volodymyr Bronnikov

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