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Heating season 2021-2022: new challenges

11/26/2021 04:07:07 pm
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The issue of energy security for Ukraine has become aggravated against the backdrop of enchanting rise in energy resources and approaching winter cold.

The government is taking certain measures to overcome these challenges. But their effectiveness can be assessed only by fait accompli. That is, when the frost hits for real.

This is not a very good scenario for ordinary Ukrainians. They better hope that the coming winter will be warm. So it will come out much cheaper.

 

Tariff "miracles"

Gas prices in the European Union (to which the "reformers" tied the cost of Ukrainian gas for its population a few years ago) broke away just before the start of the next heating season.

The absolute record was set on October 6, when the $1969/1000 m3 mark was taken on the Dutch TTF gas hub.

Power plants and industrial enterprises in the EU began to shut down earlier: after the price exceeded $800/1000 m3.

Ukraine managed to avoid such a scenario thanks to its own gas production and gas reserves in storage facilities.

But the question with price for the population remained – since it is obvious that it will not be possible to sell it at such crazy prices.

The "reformers" began to calculate tariff for the population exactly according to the quotations of TTF during the premiership of Volodymyr Groysman. And then it suddenly turned out that "miracles" are possible.

President Volodymyr Zelensky, who previously argued that utility tariffs are the executive discretion, stated at the end of September that heating and hot water ("tied" to the cost of gas) for the population would not rise in price this season – despite the price storm in the EU.

A little earlier, on September 24, Prime Minister Denys Shmyhal made a similar statement – he had earlier assured that utility tariffs were the responsibility of local authorities and the Cabinet of Ministers could not influence this in any way.

On September 30, the presidential office signed a memorandum with the government and local authorities to prevent an increase in utility tariffs. According to the document, the price of gas for the population should not exceed UAH 8000/1000 m3, for budgetary institutions (schools, hospitals, etc.) – no more than UAH 13600/1000 m3.

Energy Minister Herman Halushchenko, Chairman of the Board of NJSC Naftogaz of Ukraine Yuriy Vitrenko and Head of the Association of Ukrainian Cities Andriy Sadovyi sign a memorandum on "freezing" tariffs in the current heating season.

It suddenly turned out that the government has mechanisms to compensate local budgets for the funds that will be spent on tariff containment.

In particular, local authorities will receive an additional 4% of income from personal income tax (this is about UAH 11 billion, according to the Ministry of Finance) and 13.44% of the fuel excise tax (about UAH 2.6 billion), previously credited to the central budget.

The Cabinet of Ministers also reduced the price of gas for household consumers who do not have contracts with regional gas and gas sales companies twofold, to UAH 7960/1000 m3.

In accordance with the current scheme, they receive gas from NJSC Naftogaz of Ukraine, which in this case acts as a "supplier of last resort".

The "miracles" did not end there. It turned out that the International Monetary Fund does not object to the government regulation of gas prices and utility tariffs, although the country's leadership has always explained extortionate increases in tariffs and gas prices with the requirements of the IMF – allegedly, this is a condition for a new loan, without which we cannot live.

So, gas prices and tariffs for heating and hot water in Ukraine are "frozen" – for the first time in several years.

But it seems that "thanks for that" should be said not to V.Zelensky – because such measures were not taken last year. We should thank… President of the Russian Federation Vladimir Putin. Since the cosmic rise in prices in the EU began due to a decrease in gas supplies by Gazprom in the European direction.

The Russian state concern refused to seasonal increase in transit not only through the Ukrainian gas transportation system, but also through the Yamal-Europe gas pipeline passing through Belarus.

The only route for increasing supplies was Nord Stream 2. This is exactly why Gazprom "froze" transit through Ukraine and Belarus – to show the importance of this project to the Europeans. Of course, this could only be done on the personal instructions of the Russian leader.

Well, if such a cosmic rise in gas prices in the EU did not occur (they increased 8 times compared to April, when the previous heating season ended): tariffs for Ukrainians would most likely be raised by 10-20% again. Under the traditional cause – bringing to the "market" level at the request of the IMF.

 

Coal attacks

For the second year in a row, heating season in the country turns into a drama series, where the main intrigue is answer to the question "will there be rolling blackouts?" At the same time, each episode has its own plot in the series.

Nothing spelled trouble a year ago, there were record coal reserves in the warehouses of thermal power plants (TPPs) before the onset of cold weather.

This time, problems with coal supplies began in the summer and grew as winter approached:

- As of July 19, stocks in TPP warehouses were 12.5% less than the plan approved by the Ministry of Energy – 1.047 million tons.

- As of August 5 – 803 thousand tons, 3.2 times less than on the same date in 2020.

Cherry on top: The largest deficit in coal from the gas group, its volumes are 3.9 times less than last year's – 548 thousand tons.

Only anthracite, which is mined in CADLO, was lacking in previous years. And it was at least clear why it was in short supply.

But coal of the gas group is mined in mines on the controlled territory of Donbas, as well as in the Dnipropetrovsk, Lviv and Volyn oblasts. Therefore, there are no objective reasons for this situation.

The drop in coal production in Ukraine and at the state-owned mines above all cannot be regarded as the cause of the deficit. This is a consequence of many years of corruption problems in the coal industry.

Speaking of the drop, we mean the general trend of recent years. Since coal production increased by 16.6% just in January-June of this year, to 15.33 million tons. Therefore, there is no reason for the shortage of coal in this case whatsoever.

The explanations of the Ministry of Energy – allegedly, the nuclear power units were under repair, so the TPPs had to work at full capacity and they burned all the reserves – look unconvincing. Because repairs at nuclear power plants are carried out regularly. But there has never been such an acute shortage of coal in the past years.

Let us go back to the chronicle of preparations for the heating season.

- As of September 1, the storage reserves of coal were 720 thousand tons. This is 1.7 times less than the plan for gas coal, 2.4 times – for anthracite.

- As of October 18 – 753 thousand tons instead of 2.896 million tons according to the plan.

- As of November 1 – 543 thousand tons. Only 4 out of 12 TPPs have more coal than is necessary according to the calculations of the Ministry of Energy.

At the same time, the Ministry of Energy, to put it mildly, did nothing at all to "settle" the coal crisis.

Back in late July, Energy Minister Herman Halushchenko assured that his department sees how to increase coal production and overcome the deficit.

In addition, according to him, the possibility of coal imports from Poland, South Africa and Kazakhstan was being considered.

The figures show that things did not go further than encouraging statements.

As a result, deputy head of the Ministry of Energy Oleksiy Kurakov, who was directly responsible for the coal industry, lost his position for the failure of work on creating warehouse stocks at TPPs.

The Cabinet of Ministers made the decision to dismiss him on September 29. But again, the data on coal reserves in early November prove that the problem is not with the individual official.

At least it is definitely not in O.Kurakov. But the fact that the head of the Ministry of Energy remained in office after the failure of preparations for the heating season looks quite strange.

Once again, a huge coal shortage arose in the middle of summer. H.Halushchenko has not been able to close this issue over the past 4 months (!). At least even due to the import of coal, as he himself said.

The minister named the high price of coal on foreign markets as the reason for the failure of foreign purchases. It is true, it soared to unprecedented heights. But not up to $ 300/ ton, as H.Halushchenko stated on November 5, answering the questions of the deputies in the Verkhovna Rada (VR).

A strange "late start" was also demonstrated by the National Energy Regulatory Commission (NERC), which announced on November 5 its intention to check the companies DTEK, Donbasenergo and Centrenergo, which manage thermal power plants. The NERC indicates low coal reserves as the reason for the unscheduled inspection.

So, there are practically no reserves since the summer, but the Commission decided to somehow react to this only at the beginning of November.

 

"Brother's" tripping

In addition to the rise in world coal prices due to developments in the Chinese market, the actions of the Russian Federation have become another external challenge on the coal "front".

Its government has stopped coal supplies to Ukraine since November 1, according to deputy chairman of the VR energy committee Andriy Herus. At the same time, the Russian Federation accounted for about 70% of all coal imports.

Another rhetorical question: how could such dependence on coal on the aggressor country was allowed? Did not the officials of the Ministry of Energy really understand what the consequences could be?

Actually, the termination of coal supplies at the start of the heating season – these are the very consequences. Which could have been easily avoided.

Simultaneously, the Russians stopped coal transit to Ukraine from Kazakhstan.

This was also easy to foresee, given that the Russian Federation has been blocking oil and gas supplies from Kazakhstan to Ukraine through its territory for many years.

It is obvious that when deciding on the purchase of coal, this factor had to be taken into account. Because energy resources from the Central Asian region to Ukraine cannot be delivered otherwise than through the Russian Federation.

A major political mistake was made in relation to neighboring Belarus.

At first, Ukraine joined the European sanctions against Belarus in November 2020. A year later, on November 2, the Ministry of Energy of Ukraine officially turned to its Belarusian colleagues with a request for emergency supplies of electricity due to its shortage in the Ukrainian energy system.

The reasons for the shortage were mentioned above: Ukrainian TPPs cannot fully cover the demand for electricity, which increased with the onset of cold weather. They do not have coal in the required quantities. Which is not present due to the stoppage of supplies from Russia and Kazakhstan (due to the fault of Russia). Russia and Belarus are being integrated into a single union state today and the Lukashenko regime has become for the Kremlin as puppet as, for example, the "DNR"-"LNR" "authorities". It is clear that if Moscow launched an energy attack on Ukraine from its side, then it can easily turn on an energy blockade on the part of the "union" Belarus at any moment.

It turned out not very nice from the point of view of the international image as well: at first, we impose sanctions against the Lukashenko regime, and then we ask him for help.

Why is it important to say this now? In order to learn the necessary lessons from mistakes and not repeat them in the next heating season.

 

Vitaliy Krymov, OstroV