A Renewed Focus on Ukraine's Nuclear Power Sector

Mykola Voytiv, Head of energy projects at the Kyiv-based NGO “New Generation Management”

Ukraine is the eighth country in the world in terms of nuclear power plant capacity. The country is now in the process of repairing, modernising and finding new technologies to meet the electricity demand. However, a focus on management and transparency is still necessary in order to have a safe, effective and publically profitable nuclear power sector.

Poland has announced intentions to start building its first nuclear plant. According to Stefan Taczanowski, a leading energy expert from Kraków’s University of Science and Technology: “The plan to build six power plants/reactors with a total capacity of six gigawatts can be considered. In addition, it must not be forgotten that the consequences of this choice will last for at least 80 years and, given the construction and decommissioning time of power plants, may exceed the mid-22nd century.”

In Ukraine, meanwhile, the forecast balance of electricity of the United Energy System of Ukraine (UES) for 2021 was presented at the ministry of energy. The president of the state enterprise National Nuclear Energy Generating Company Energoatom (Energoatom) confirmed that the expected production will be on the level of 75.233 billion kilowatt hours. This is exactly 50 per cent of all electricity generation of which is planned for 2021.

Energoatom is in fact the most important player on the electricity generation market, though legally it is not. The main problems of the market in Ukraine have been accumulated over the past 25 years: cross-subsidisation, growth of debt, low investment attractiveness, high regulation, and a monopoly in generation and supply markets. However, Ukraine has recently adopted a new law on the electricity market (in 2017), which changed the market formation mechanism and introduced new mechanisms. In particular, it makes Energoatom an independent player in the electricity generation and trading sector. Energoatom operates four nuclear power plants: Zaporizhzhya, Rivne, South-Ukraine, Khmelnytsky with 15 power units (as of December 30th, eleven units are operating and four are under reconstruction). All reactors are Russian VVER types. The total installed capacity is 13,835 megawatts.

Energoatom has attracted financing from European institutions including the European Reconstruction Bank and Development (EBRD) and Euroatom. According to agreements signed back in 2013, the EBRD has provided a 300 million-euro loan to Energoatom. Another loan agreement for 300 million euro was signed with Euroatom (also in 2013). All the agreements were ratified by the relevant laws of Ukraine.

The goal of the financing consists of two pillars: first, the implementation of the complex (consolidated) safety upgrade programme with the purpose of the further improvement of nuclear safety, ensuring efficient and reliable performance in the energy branch, bringing safety of Ukrainian nuclear power plants to the level that meets international standards; and second, the corporatisation of Energoatom in compliance with the roadmap developed by the corporatisation consultant in compliance with best international practice.

According to the agreements, corporatisation is defined as “the transformation of the Borrower [Energoatom] into a fully state-owned joint-stock company, including the creation of a management structure that is suitable for such a company. For the avoidance of doubt, the term ‘corporatisation’ does not mean the privatisation of the borrower.” It was important to stress the definition as the issue of Energoatom’s corporatisation in political and professional environment is very sensitive.

Despite the fact that the Energoatom’s corporatisation is still being discussed in Ukrainian society, such a process should take place as soon and as transparently as possible. Messages that corporatisation will contribute to the privatisation of Energoatom are weak as counter-arguments, as the Ukrainian people, represented by the Cabinet of Ministers of Ukraine, will be the sole owners of the newly created state joint-stock company (probable as public joint-stock company).

As for transparency, the supervisory board of Energoatom should be created with the most meticulous approach to its members, as it involves an army of 34,000  professional and highly skilled workers who need to be protected and always motivated by market wages, it is also one of the pillars of energy independence and security in Ukraine and one of the main budget-forming enterprises of the domestic economy.

The criterion of many years of experience in the nuclear energy sector should not be the main one when selecting candidates. First, it is necessary to pay attention to which private or state-owned companies, and in what countries, potential candidates have worked in. Under no circumstances should people be allowed to covertly lobby the interests of influential owners of private companies or countries that are in open, or hidden, unfriendly relations with Ukraine. This should be the basis for selection.

A preference should be given to Ukrainian citizens (with detailed verification of the person, place of birth, acquisition of citizenship and jobs), who will be able to justify the importance of their mission to the supervisory board. All this will help to form an appropriate controlling collegial body that will contribute to the sustainable development of the nuclear sector of Ukraine and will clearly comply with the legislation and specific the interests of Ukraine.