State-owned electricity grid operator Ukrenergo announced on Oct. 25 that it would use a special procedure to get around a court decision stopping it from holding auctions for the export and import of electricity.
Kyiv’s District Administrative Court on Oct. 22 issued a decision preventing Ukrenergo from holding auctions for the sale of electricity across national borders, despite a coal shortage in Ukraine.
The decision would have effectively interrupted the import and export of electricity in November because companies have to win an auction to do either.
The court made the ruling in a case brought by DTEK Zakhidenergo, a subsidiary of DTEK, Ukraine’s largest private energy company, which produces a quarter of all the electricity in the country. DTEK is owned by Rinat Akhmetov, the country’s richest man.
The company had complained that a recently-introduced procedure that regulates the distribution of electrical throughput is discriminatory to DTEK and non-compliant with EU regulations.
In a statement to the Kyiv Post, DTEK said its lawsuit has nothing to do with limiting import auctions.
In response to the court decision, Ukrenergo said it would hold a physical auction on Oct. 27 using its reserve procedure, designed for when the electronic auction system is down. The court did not ban the use of this procedure.
Ukraine enters the cold season with perilously low coal reserves. According to the Ministry of Energy, as of Oct. 25, power plants and heating stations had just 710,000 tons of coal in their stockpiles, a quarter of the amount that the government planned to have by this date.
Due to the coal shortage, 24 blocks at thermal power plants with a combined capacity of 8.5 gigawatts have stopped generating electricity, Ukrenergo reported on Oct. 25.
“The situation with the accumulation of coal is deteriorating,” Ukrenergo warned. “Coal reserves in thermal power plants warehouses are extremely low.”
Coal shortage
Wholesale electricity prices have shot up over the last six months due to a global energy crisis. The average combined index of the main wholesale electricity markets went from $54 per megawatt hour in April to $115 in October.
Meanwhile, coal stocks at power plants have dwindled to 21% of their target level for this time of year, Ukrenergo warned on Oct. 25.
The cause of the shortage is the skyrocketing global price of coal caused by a deficit in China and a wider spike in fossil fuel prices. According to online publication Business Insider’s index, the price of coal has grown 230% since mid-April, when the heating season ended in Ukraine.
Despite having the eighth-largest proven coal reserves in the world, Ukraine has been a net importer of fossil fuel for years due to the deteriorating quality and high cost of coal being dug up by badly run, unprofitable mines.
Ukraine now imports almost half its coal, and 70% of that comes from Russia, according to the U.S. Energy Information Administration.
In the fall of 2020, D.Trading, another part of DTEK, sold coal to state-owned electricity producer Centrenergo for 10-20% more than what DTEK’s own plants were paying.
In March 2021, three DTEK companies, including Zakhidenergo, were each fined the maximum amount of $61,000 by the energy regulator for not having enough coal in reserves at their power plants.
While the lack of coal threatens Ukraine energy security, the country’s four nuclear power plants are stepping into the breach. Nuclear energy accounts for more than half of the country’s electricity, according to the Energy Ministry.
