State and economic prospects of developing potential of non-renewable and renewable energy resources in Ukraine

Renewable and Sustainable Energy Reviews 52 (2015) 217–226

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State and economic prospects of developing potential of non-renewable and renewable energy resources in Ukraine T. Kurbatova a,n, H. Khlyap b a b

Sumy State University, Department of Economics and Business Administration, 2, Rimsky-Korsakov street, UA-40007 Sumy, Ukraine TU Kaiserslautern, Gottlieb-Daimler-Strasse, D-67657, Kaiserslautern, Germany

art ic l e i nf o

a b s t r a c t

Article history: Received 2 October 2014 Received in revised form 23 May 2015 Accepted 21 July 2015

The paper reports the state-of-the-day for non-renewable and renewable energy in Ukraine and state policy of its development in the long-term perspective. Despite total dependence on imported energy resources and complex natural conditions to develop new own deposits of fossil fuels; the state does not pay enough attention to RE development. The article investigates the advantages and usefulness of the development of renewable energy sources, which are considered along with analysis of the most economically profitable directions of their use. The key obstacles, which reduce the effectiveness of RE deployment and barriers to the realization of RE projects by investors are analyzed. Considering Russia's military intervention, we paid attention to the peculiarities of the functioning of green power plants in the occupied Crimea and the loss of Ukrainian renewable energy sector from the annexation of the peninsula. & 2015 Elsevier Ltd. All rights reserved.

Keywords: Renewable energy Non-renewable energy Ukraine

Contents 1. 2.

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 217 Non-renewable resources in Ukraine . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 218 2.1. Nuclear energy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 218 2.2. Coal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 218 2.3. Gas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 219 2.3.1. Natural gas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 219 2.3.2. An alternative gas (shale gas, gas of deep Black sea shelf, tight gas, coal bed methane). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 219 2.4. Oil. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 219 3. Renewable energy sources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 219 3.1. Solar energy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 220 3.2. Wind energy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 220 3.3. Bioenergy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 221 3.4. Hydropower energy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 223 4. Renewable energy on the annexed Crimean peninsula . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 223 5. The barriers to effective development of renewable energy in Ukraine . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 224 6. Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 225 Acknowledgment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 225 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 226

n

Corresponding author. E-mail address: [email protected] (T. Kurbatova).

http://dx.doi.org/10.1016/j.rser.2015.07.093 1364-0321/& 2015 Elsevier Ltd. All rights reserved.

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1. Introduction Ukraine has considerable potential of renewable energy sources (RES) development of which can provide significant economic, ecological, and social benefits [1]. However, at its current stage, the degree of its use remains low. Despite the significant dependence on energy resource exports, none of the policy documents, which determine the energy sector development of Ukraine, include ambitious targets for renewable energy (RE) deployment. The Energy Strategy of Ukraine for the period until 2030 (ESU) [2] provides the change of energy consuming structure: reducing the consumption of imported natural gas, diversification of its supplies, increasing nuclear and carbon components. RE development assigned a secondary position in that document. The National Action Plan for RE development (NAP RE) [3], which currently is a key document for RE development in long-term perspective, aims to develop of RES for providing only 11% part of total energy balance in 2020. It should be noted that the figure in NAP RE for 2009–7.1% of RES in the electricity balance includes 7% of the electricity generated by large hydropower plants, which were built 60–80 years of the 20th century; therefore Ukraine plans to increase the share of modern RES only 4% in the period from 2009 to 2020. Unlike Ukraine, in regard to member states of the European Union, the key emphasis is placed on RE development and energy efficiency. Sweden plans to achieve 49% RES to 2020, Latvia – 40%, Finland – 38%, Austria – 34%, Denmark – 30%, Estonia – 25%, France – 23%, Germany – 18% [4]. In December 2011, the EU Commission had presented «Energy Road Map 2050» with energy development perspectives up to 2050. In reducing carbon emission up to 54% in 2030 in comparison with 1990 and it is to up to 80% in 2050; this aim needs considerable changes of energy balance: the part of renewable energy is to be 49%, the part of nuclear energy should be no more than 17%, and part of nonrenewable sources is to be no more than 34% [5]. It is likely that these intermediate figures of RES in NAP RE are influenced by minor requirements for Ukraine relative to reducing CO2 emissions (20% from 1990). Economic decrease in Ukraine was about 60% in first 10 years of independence, and CO2 emissions also significantly decreased. Beginning from 2001, CO2 emissions started to increase and at the end of 2012, they were 47% (lower than the figure of 1990) [6,7]. Thus, the official goal to reduce CO2 emissions does not forbid their increase. However, at the end of 2013 and despite the fulfilment of CO2 emissions' requirements, Ukraine was ranked 21st among member states – the biggest CO2-contaminators due to using fossil fuel resources and cement production, and Ukraine also has the 1st place in CO2 emissions per unit of gross domestic product [8]. So, the setting of more ambitious targets for green energy generation also would be logical to reduce anthropogenic influence on the environment. The aim of this paper is to study the available potential of RES in Ukraine, development of which can and should be the basis of achieving energy independence of the country, when taking into account ecological benefits.

2. Non-renewable resources in Ukraine Ukraine belongs to the group of nations having stocks of all kinds of primary energy resources such as crude oil, natural gas, coal, etc., but their production level provides only 47–50% of necessary hydrocarbons. 2.1. Nuclear energy Nuclear energy of Ukraine plays a key role in stable energy supplying of the nation. Fifteen power units of nuclear power plants

(NPP) are producing energy in total capacity 13,107 MW, 2 power units of Khmelnitsky NPP with total capacity 1900 MW are under construction (as of 1 July 2014 [9]). Besides that, it is foreseen to prolong exploitation terms of 13 acting power units up to outside design term. At the end 2013 the part of nuclear energy in energy balance of Ukraine is 19% [10], allowing to meets about 48% demand of electricity. Despite the fact that the accident at the Chernobyl NPP remains one of the hardest disasters in the human history the ESU defines the developing of nuclear power in Ukraine as a priority in the future. It should be noted overcoming the consequences of the disaster appeared as additional burden on the budget (according to various estimations, direct losses in exclusion zone were about 1.4 billion USD), expenses for the weakening of the consequences of the disaster were about 6 billion USD and in some years were 8– 10% of the nation budget [11]. According to [2] it is planned to use nuclear energy generation as a half of total annual electricity generation up to 2030. Unlike some nations in Europe (Germany, France, and Switzerland) after the Fukushima Daiichi disaster had decided to reduce the part of nuclear power in their total energy balance [12]. The decision about further development of nuclear energy in Ukraine was caused by the following factors: – high efficiency of NPP. Comparative analysis of power plants using different types of energy resources shows that the efficiency of NPP is 2.7 times higher than the efficiency of hydropower plants and 2.9 times higher than the thermal plants and the profitability of Ukrainian “Energoatom” is over 100% [13]; – low costs nuclear of electricity generation (20.6 USD/MW h); – availability of domestic uranium resources. Ukraine has good uranium stock (10th place in the world and 1st place in Europe), – explored reserves are 200,000 ton [14]. Despite the 30% providing of needs for domestic nuclear energy generation, the uranium stocks in Ukraine allow for more than 100 years of NPP functioning at the present. Based on the above, the nuclear energy has one of the main positions in the electricity sector of Ukraine. 2.2. Coal Ukraine is the world's 12th largest producer of coal and has the world's 10th largest reserves – 16.8 billion tons. [15]. However, 80% of the stocks are in beds with seam thickness of occurrence 1.2 m. Ukraine's coal is characterized by high gas content, the propensity to spontaneous combustion. Ash content of Ukraine's coal is more than 40%. Coke import is about 25% of domestic production of Ukraine [16]. Complex nature conditions of the development of new deposits and low technical level cause the lack of competitiveness of this sector. Lack of investments in the coal industry in Ukraine resulted to trend of reducing coal production. In 1991–2012 the production of coal mines decreased from 192.8million ton/year to 86 million ton/ year (almost in 2.2 times). The concept of the reform of the coal sector accepted in 2008 foresees further privatization of coal mines while the profitability index of privatized mines is higher than that of state mines. In 2012 the privatized mines produced 71% of coal; 29% of coals were produced by the state mines. In general, the acting mines are working with 3 billion tons coal, 24 reserve plots with 4.6 billion tons of stock of coal. According of ESU it is planned to increase the volume of coal production up to 1.1 billion tons/year by the end of 2020. However, at the beginning of the heating season in 2014–2015, the first time in the history of independence, Ukraine was in a situation of acute

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shortage of coal due to military aggression of the Russian Federation in the Donbas region. Only 37 mines left on territory controlled by Ukraine, the rest 83 is controlled by terrorist groups (it is 55% of the total number of working mines in Ukraine). The problem is compounded by the fact that 40% of thermal power plants Ukraine configured for coal, which is mined in the Donbas region. In order to overcome the deficit at the present stage Ukraine imports coal from South Africa [17]. At present the coal complex remains one of the most problematic sectors in the energy of Ukraine and needs considerable budget support.

2.3. Gas 2.3.1. Natural gas Natural gas in the Ukraine has a priority in supplying primary energy (37.2% in 2013). However, domestic production in the nation is only about one third of the total needs. The lack of domestic production is compensated by gas import from the Russian Federation. The price of these supplies for Ukraine was higher than that for other European nations: 332 USD/1000 m3 at the end of 2014. Currently, Ukraine is trying to diversify its natural gas supply. It is planned to start reverse gas supplies from Europe to Ukraine. So for the past year Ukraine imported 19.6 billion m3 of natural gas, including 14.5 billion m3 from Russia and 5.1 billion m3 from Europe. According to «Ukrtransgaz» Ukraine imported 4.1 billion m3 of gas, including 2.3 billion m3 from Europe and 1.8 billion m3 from Russia for January–February 2015. In addition, due to the significant decrease in oil prices in the world, Ukraine could significantly reduced the cost of Russian gas, which in the 2nd quarter of 2015 was 250 USD/m3. In general it can be argued that there are currently relatively good conditions for a successful geographical diversification of gas supplies to Ukraine by expanding infrastructure for gas supply to Ukraine from the territory of the Member States of the European Union [18]. Domestic resources of natural gas are about 0.9 trillion m3. However, more than 75% of gas deposits have initial production resources lower than 10 billion m3, and only four of them have resources more than 100 billion m3. About 15% of gas resources belong to the difficult produced ones, their production requires high-tech and high-cost technologies. According to [2] natural gas production in Ukraine will be increased up to 44.4 billion m3 in 2030 (90% gas consumption) providing decrease of gas imports.

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the Ukraine will be started not earlier than in 2022. Production potential up to 2030 may be about 6–11 billion m3. Gas of the deep Black sea shelf. This stock is estimated to 4–13 trillion m3. In case of successful exploration its production can be started in 2022. The predictable production in 2030 may be 7–9 billion m3/year. Tight gas. These resources are about 2–8 trillion m3. A significant part of resources is at depth of 4.0–4.5 km. Under positive scenario industrial production of tight gas may start in 2017. The predictable production in 2030 may be 7–9 billion m3/year. Coal bed methane. Potential stock of this resource is about 12– 25 trillion m3. However, technical possibility of the production is doubtful because of considerable depth (500–5000 m) and small thickness (up to 2 m). Production potential in 2030 may be 2–4 billion m3 [20]. 2.4. Oil Regardless, the excess of oil refineries Ukraine has considerable oil product deficit covering by import supplies. Ukraine needed about 22 million tons of oil and oil products in 2012. The domestic production meets national requirements at 10% only. Other oil products are imported fundamentally from the Russian Federation [21]. In recent years production of oil products in Ukraine tends to reduce. The main reasons are the following: absence of oil supply diversification, orientation of Energy strategy of the Russian Federation to unprofitableness of crude oil exports outside the State (RF). These reasons cause reduction of volumes of crude oil supplies [22]. Improvement of the situation with oil refining is possible by new supplies of crude oil from Azerbaijan, Kazakhstan and Turkmenistan. The pipeline Odesa-Brody of 14.5 million tons/year capacity and sea oil terminal «Pivdennyi» in the port «Yuzhnyi» create technical possibilities for import of Caspian oil, oil from the countries of Persian Gulf, Nord and West Africa. Proven reserves of oil in Ukraine were 395 million of barrels in 2013 (about 60 million tons). Approximately 70% of them belong to stocks with complete geological structure, low well productivity, and considerable depth. Development of these oil stocks requires use of special equipment and cost-based technologies causing high costs of oil production. Considerable potential of oil stocks increase in Ukraine is possible by not yet discovered fields, especially on the Black sea shelf.

3. Renewable energy sources 2.3.2. An alternative gas (shale gas, gas of deep Black sea shelf, tight gas, coal bed methane) Today the exploration of all kinds of alternative gases in Ukraine is at the initial stage. There are no precise geological data about potential gas resources and production costs. Realization of exploration and production projects will fundamentally depend on economic payback and alternative costs of other energy resources. Shale gas. Shale gas resources in Ukraine are about 5.5 trillion m3, technical production is possible only for 1.8 trillion m3 [19]. Largest gas reserves are located in Yusivs’ke field (2 trillion m3) and Oles’ke field (1.5 trillion m3). At present, according to the actual agreement between the government of Ukraine and Shell company about shale gas production at the «Yusivs’ka area» Shell has started exploration activity at the area of Kharkiv region. It caused an ambiguous assessment of the society due to potential ecological risks. There are some obstacles to production of shale gas: the need in the alienation of considerable land in populous regions, absence of necessary drilling equipment, requirement of reducing ecologic risks. The forecast says that industrial production of shale gas in

The total annual technically available energy potential of RES is 98 million toe or 548.5 billion kW h (without large hydroenergy), which is more than twice exceeding present volumes of energy production (according to the Institute of RES of Ukraine). Among of them bioenergy is 31 million toe (178 billion kW h), energy stored in environment is 18 million toe (146.3 kW h), geothermal energy is 12.0 million toe (97.6 billion kW h) wind energy is 28 million tons (79.8 billion kW h), solar energy is 6.0 million toe (38.2 billion kW h) small hydroenergy is 3.0 million toe (8.6 billion kW h) [3]. Effective use of available potential may be an impulse for economic development allowing considerable enhancement of energy independence and reduction of the lag in the energy intensity of production relative to the leading countries of the world. It is worth noting that, at the present stage dynamically developed RES are only solar, wind, biomass and hydropower. The state of deployment of these types of RES will be discussed in more detail in other sections. The dynamic growth of the RE sector of Ukraine began in 2009 following the introduction of the state authorities of a number of

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economic mechanisms to stimulate the generation of energy from RES. The main of them are as follows: 1. Feed-in tariff is a special price for the purchase of electricity generated by plants using RES. According to the Law of Ukraine «On Electric Power Industry» [23], the guaranteed minimum feed-in tariff set for wind, solar, small hydropower (with power no more than 10 MW) and biomass power plants. Regarding encouragement of green electricity generation from RES by the private households, feed-in tariff applies only for solar energy. So, since 1.01.2014 the owners of the private houses, who installed PV solar systems on their roof with a capacity no more than 10 kW can sell non-consumed electricity to the licensed energy suppliers for the feed-in tariff. Feed-in tariff rates are reviewed by recalculating into euros relative to the exchange rate for euro as of 01.01.2009. Thus, fixing the rate of feed-in tariffs converted into euro protects investors against possible inflation. It should be noted that, it is mandatory to purchase goods and services of Ukrainian origin for realizing projects claiming to get feed-in tariff. The specific weight of the local share for plants starting after 2014 is 50% of the total construction price. The requirement regarding the local content does not apply to generating facilities for private households, as well as micro, mini and small hydropower plants. The scheme of the state economic stimulation of electricity generation with the help of feed-in tariff is being set up till January 1, 2030. The government guarantees purchases of the whole volume of the electricity generated from the renewable sources, during the term of order of stimulation validity and the payment of such energy in the total volume. 2. Tax and custom benefits:  exemption from value added tax payment and customs payments for imported equipment, which are used for renewable energy generation in the event of identical equipment with similar quality characteristics not being produced in Ukraine;  75% lowering of land-tax for territories used for constructing plants, which generate energy from renewable energy resources;  income from operating activities of the companies, which produces electricity from RES temporarily exempt from income tax for ten years, since 1.01.2011 [24]. Despite the above mentioned economic initiatives promoted the rather swift dynamics of RE development for the last few years, at the end of 2013, the share of RES in the total energy balance of Ukraine was only 1%. The largest share in the total energy balance owned natural gas – 38%, the share of coal was 31%, the nuclear power plants supplied 19% of the primary energy production, oil contribution was 10%, hydro – 1% [10]. These figures indicate that today the potential of RE is not completely used, and RE plays insignificant role in the energy sector of Ukraine. Further we consider in detail perspectives of using potential of the most promising kind of RES, the present state of their development and main barriers to effective deployment RE plants. 3.1. Solar energy Solar energy is one of the leading and most dynamically growing areas of RE development in Ukraine. The average number of annual total solar radiation that falls on 1 m2 of surface on the territory of Ukraine is in the range from 1070–1400 kW h/m2 depending on the region, which gives good possibilities for effective use of solar power plants on its territory.

Mainly solar energy potential is concentrated in the southern regions of Ukraine with descending by movement in North direction. Horizontal solar irradiation on the territory of Ukraine is shown (Fig. 1) [25]. The most attractive regions for the use of solar energy is the southern coast of Crimea, the Black sea and Azov lowland, Kiev, Donetsk and Dnieper upland, Carpathians and Crimean mountains [26,27]. According to the Institute of renewable energy of Ukraine, the maximum possible annual technically available energy potential of solar energy in Ukraine is 6 million toe, or 38.2 billion kW h. From them 4 million toe/year (32.5 billion kW h/year) is a part of the thermal energy, the rest is the part of the electricity. The special feature of Ukrainian photovoltaics sector development for the last years is the significant expansion of installations geography; besides that, there is a large number of Ukrainian and foreign companies appearing on the market which implement investment projects of different scales. The solar energy is used mainly to generate electricity. The installed capacity of solar plants to generate heat at the end of 2013 was only 0.8 MW. Electricity from solar energy is generated by solar photovoltaic power plants. The Table 1 shows dynamics of solar energy development for electricity generation in Ukraine 2009–2013 [28]. So, the Austrian company «Activ Solar» had commissioned in 2011 a powerful 105.56 MW solar plant «Perovo» in Crimea which occupied the territory of 200 ha. This fact was estimated as a sensation in the Ukrainian photovoltaics. According to values of installed capacity the Park «Perovo» has the 5th place among the largest operating photovoltaic parks in Europe and allows reducing CO2 emissions to 105 thousand tons per year. Sunny Park «Okhotnikovo» with capacity of 82.65 MW commissioned by the same company in October 2011 in Saksky area of Crimea Peninsula also ranked among the 10 largest solar plants in Europe [29]. It should be noted that after of 2013 the commissioning of solar power plants was slowed significantly. The requirement of local content poses questions about the fast implementation of most projects unfinished till now. Today the only company which is able to meet the requirement of 50% local content is the Austrian «Activ Solar», which domestic in Ukraine a plant for photovoltaic polysilicon production (Zaporozhsky semiconductor plant). Other companies implementing projects in the Ukrainian market will be forced to look for partners–producers in Ukraine (the most notable representatives of the market of domestic production of monocrystalline silicon ingots and wafers is JSC «Pillar» and JSC «Kvazar» (Kiev), the annual capacity of about 150 MW), or they will have to attempt developing a new direction of Ukrainian solar energy, namely, the market of small power plants located on the roofs of private households. From January 1, 2014, this market segment receives a feed-in tariff and the requirement for mandatory local content did not apply to it [23,30]. 3.2. Wind energy Today wind power is the second largest sector of RE in Ukraine, and implementation of wind energy projects is one of the most perspective directions of RES development on the territory of Ukraine. Ukraine has good wind power potential, which is mainly concentrated on the coast of the Black and Azov seas, Crimean southern coast, the tops of Ukrainian Carpathians and Crimean mountains, Donetsk hill, Azov and the Black sea lowlands (Fig. 2) [31]. Wind energy sector develops dynamically for the past 5 years. However, 2012–2013 is peak for the completion of large wind energy projects installation, which started in 2009 under feed-in tariff. It is connected with the specifics of the industry: the need of a long period (not less than 1 year) monitoring wind potential of a prospective wind farm, as well as the challenges of designing and building megawatt-class wind turbines. If in the past, the main part of state

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Fig. 1. Horizontal solar irradiation on the territory of Ukraine [25].

Table 1 Dynamics of solar energy development for electricity generation in Ukraine 2009– 2013 [28]. Year

Number of solar plants

The available power of solar plants (MW)

Electricity generation from solar energy (million kW h)

2009 2010 2011 2012 2013

– 3 17 41 88

– 2,5 188.2 371.6 811.4

– 0.5 30 334 562.8

wind power plants in Ukraine was constructed with wind turbines the rated power 107.5 KW, the new wind power plant, which built under feed-in tariff by private investors create demand for modern wind turbines the rated power 2–3 MW. It should be noted the sector of offshore wind plants with higher efficiency coefficient (in comparison with that of terrestrial wind plants) is not developed in Ukraine today. The most significant factors are high connection cost and lack of the necessary high-technology equipment for the installation. The Table 2 shows dynamics of wind energy development for electricity generation in Ukraine 2009–2013 [28]. Production, installation and service of megawatt-class wind turbines on the Ukrainian market are mostly provided by UkrainianGerman enterprise «FuhrländerWindtechnology» (Kramatorsk). 3.3. Bioenergy Good climatic conditions, large resources of high-quality topsoil create favorable conditions for the development of bioenergy directions. Today Ukraine produces solid and liquid biofuels and

biogas. This sector has a huge potential on the territory of Ukraine, the value of which varies on years and mainly depends on the yield of crops. Heat energy from biomass is generated only by boiler plants. As of the end of 2013 there were 531 boiler plants with total capacity 1.1 GW. The dynamics of bioenergy development for electricity generation and are given in Table 3 [28]. Further we consider in detail state of development and perspectives of the available bioenergy potential. Solid biofuel. Potential energy of solid biofuels is distributed approximately evenly throughout the territory of Ukraine. The main components of capacity are agricultural waste and wood biomass. In total balance of solid fuel production considered by the end of 2013 81.8% are the pellets from sunflower husk, 17.5% – pellets and briquettes from wood, and 0.7% of straw. The main disadvantage of this segment of solid-fuel production is lack of export supplies diversification. Due to the high demand for Ukrainian biofuels from Polish thermal power plants and less strict requirements to its quality almost 90% of the total volume of products manufactured in 2012 was exported to Poland. But at the beginning of 2013, because of reducing state support for co-financing of Polish power plants, biofuel consumption in the country has been cut in half. As a result the manufacturers in Ukraine have serious problems with selling their products, which in turn triggered a decline in prices. Demand for pellets and briquettes from wood remains high both on the domestic and European markets leading to a tendency of some increase in prices by 5–10% in 2013. Under the dominant Polish export supply direction (about 70% of pellets and 50% of

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Fig. 2. Potential of wind energy in Ukraine [31].

Table 2 Dynamics of wind energy development for electricity generation in Ukraine 2009– 2013 [28]. Year

Number of wind plants

The available power of wind plants (MW)

Electricity generation from wind energy (million kW h)

2009 2010 2011 2012 2013

7 7 11 14 17

49.2 76.6 146.4 193.8 334.1

41.4 49.2 89 257.6 636.5

Table 3 Dynamics of bioenergy development for electricity generation in Ukraine 2009– 2013 [28]. Year

2009 2010 2011 2012 2013

Number of bioenergy The available power of plants bioenergy plants (MW)

Electricity generation from bioenergy (million kW h)

Solid biofuel

Biogas

Solid biofuel

Biogas

Solid biofuel

Biogas

– – 2 3 5

– 1 5 5 6

– – 4.2 6.2 17.2

– 0,7 4.0 4.5 6.5

– – 9.6 17.7 32

– 0.2 2.8 3.5 5.2

briquettes), there is a trend to expand the geography of sales markets. So, almost 38% of all wood briquettes were sent to Germany and Czech Republic.

Hence, further development of the solid-fuel segment will depend on the search of new directions of export deliveries and increase of this product consumption in the domestic market of Ukraine. Liquid biofuel. Having sufficient land fund Ukraine has great potential for the production of ecologically clean motor fuels. According to the Ministry of agrarian policy of Ukraine, the potential of bioethanol production is about 2 million tons per year. Corresponding legislative base for stimulating the development of production and wider using ethanol in transport sector of Ukraine and regulating the adding of biological additives into oil products was created in Ukraine. In particular, according to the Law of Ukraine «On alternative types of fuel» [32], the content of bioethanol in motor fuels produced and/or sold on the territory of Ukraine is to be as follows: – in 2013 – recommended content 5% (volume); – in 2014-2015 – obligatory content no less than 5% (volume); – in 2016 – obligatory content no less than 7% (volume). However, introduction of obligatory norms of adding ethanol in gasoline is done without consideration of the possible risks and the degree of perfection of legislative-normative base regulating the market of composite fuel. Accounting the fact that Ukraine currently produces about 50 thousand tons of bioethanol per year, domestic production capacities are not able to provide the required annual needs of 250–320 thousand tons of biofuel. In addition, 2/3 of the fleet of Ukraine is not adapted for using motor fuel with a high content of bioethanol. Therefore, at the present stage the requirement about obligatory content of bioethanol in motor fuels was stopped. The potential of the domestic production of biodiesel is about 1 million tons per year. Ukraine has favorable conditions for cultivation of rapeseed

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as one of the most popular crops for biodiesel production. Regarding the fact that rape plants improve soil structure, and clear it from radionuclides, the Chernobyl zone seems to be especially attractive for crop growing. According to analysts, about 100 thousand ha of contaminated land in Ukraine are suitable for growing technical crops [33,34]. Volumes of rapeseed cultivation in Ukraine have in recent years significantly increased. However, the average yield in Ukraine (1.8 ton/ha) is insufficient for profitable production of biodiesel. At the same time in Poland this figure reaches 3.4 ton/ha, and in the Netherlands 3.9 ton/ha [35]. To improve the quality of seeds and achievement of sufficient yield Ukraine needs considerable investments in agricultural technologies. Since about 90% of seeds and rapeseed oil are exported, the dynamics of production of this biofuel culture in Ukraine directly depends on world trends in the sector of liquid biofuels, and consequently, on investment into the sector. Today the production of biodiesel in industrial scale lacks in Ukraine. Through lack of effective competitive plants and factories and high price of rapeseed ether working-out its production is unprofitable. Biogas. Significant amounts of organic waste of the agro-industrial sector of Ukraine under their full recycling can potentially provide annual biogas production in equivalent to 2.6 billion m3 of natural gas [36]. The annual volume of municipal solid waste in Ukraine is 11–13 million it is provided about 800 thousand tons of methane that also represents a good opportunity for energy generation. Despite the available potential for development of biogas energy sector the former is at the initial stage of construction. The main reason is absence of long term support from the State. For example, feed-in tariff for other sectors of RE was implemented in 2009. At the same time, the analogical tariff for bioenergy generation was activated from 01.04.2013 only. 3.4. Hydropower energy The total hydropower potential of Ukraine is 44 billion kW h/year (including small hydro ⎕ about 3.0 billion kW h). It should be noted that the potential of large rivers of Ukraine currently almost exhausted. At the end of 2013 the power of large hydropower plants was 4.6 GW. The most of them was built in 60–80 years of the ХХ century. Their intensive exploitation for decades has negative consequences. Physically and morally obsolete equipment has low (compared to modern) efficiency, does not provide support of the necessary regulation options and it has a significant impact on the environment. Therefore, increasing of capacity large hydropower plants is possible and necessary due mainly reconstruction of existing and installation of new more effective hydro and electrical equipment [37]. So, today more interest for Ukraine presents the potential of small rivers and prospects of construction of small hydropower plants, which can function under feed-in tariff. Ukraine has good conditions for electricity generation based on the potential of small rivers, which is concentrated in Uzhgorod, Lviv, Chernivtsi, Ternopil, and Ivano-Frankivsk regions (Fig. 3) [38]. The Table 4 shows dynamics of small hydropower potential for electricity generation in Ukraine 2009–2013 [28]. Among main problems that have a negative effect on investment activity in this sector, the most significant are the following: increase of water value standard by 120% compared to 2009, difficulties in obtaining permission for using special water with intake limits, water using and discharge of pollutants.

4. Renewable energy on the annexed Crimean peninsula Among the other regions of Ukraine, the Crimean peninsula has the best climate conditions for the use of RES potential, in particular solar and wind.

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The average value of the annual total solar radiation that falls on 1 m2 of the surface of the peninsula territory is in the range of 1020–1400 kW/h, quantity of sunshine hours is 2300–2400 per year. Together with a sufficient amount of suitable areas for photovoltaic installations in the central steppe part of the peninsula, these facts create favorable conditions for large-scale deployment of solar power plants [26]. The Kerchenske and Tarkhankutske coasts are the most promising for wind energy deployment in Crimea. Wind energy resources are the biggest in the winter, the wind speed reaches 7–8 m/c. The specific power wind power is 470–600 W/m2 that together with the presence of free territories for wind farms construction creates favorable conditions for intensive use of wind power potential. At the same time the Crimean peninsula is one of the problematic regions in terms of electricity provision. Only 14% of the electricity needs of the peninsula are provided by its own power plants, which use hydrocarbons for energy generation, the rest is supplied from the continental part of Ukraine [39]. Therefore, Crimea was determined as a focus area for RE development in Ukraine. Over the past few years in Crimea were realized the most ambitious projects of solar and wind power. In general, as of 01.04.2014 the total installed capacity of solar power plants in Crimea was amounted to 407 MW, wind – 87.7 MW. It comprised 75% and 70% respectively of the total installed capacity of these types of renewable plants in Ukraine that allowed generating about 30% of the electricity produced on the peninsula [40]. The operation of solar plants was ensured by high rates of feedin tariff for solar energy, which as of 01.04.2014 was amounted to 0.45 € kW/h, that was 8.64 times higher than the retail price for Ukrainian consumers (0,054 € kW/h) and almost 24 times higher than the price of electricity generated by nuclear power plants (0.019 € kW/h). Feed-in tariff for wind power plants was set at 0.14 € kW/h that also ensures a high level of profitability. The annexation of Crimea by the Russian Federation radically changed the situation in the field renewable energy for peninsula. Since 01.04.2014 the operation of all renewable plants on this territory was stopped. Formally, they were turned off due to the uncertain political and economic situation in the country, but actually because the Government of Ukraine refused to subsidize payments to the Crimean generating capacities immediately after the occupation of the peninsula. At the same time the current government of Crimea refused to buy renewable electricity for the high Ukrainian feed-in tariff. The operation of renewable plants was restored on September 2014. The reason was the shortage of coal for thermal power plants, which were located on the continental part of Ukraine caused by a military conflict in the Lugansk and Donetsk regions. To save fuel and to normalize the thermal power plants functioning, Ukraine began to limit energy supply for consumers in its continental part and the occupied peninsula. However, the owners of renewable plants were unable to retain the former high income. They received the tariff, which did not exceed the price of electricity imports from Ukraine as of 01.04.2014 (0.08 € kW/h) that for solar plants 5 times and for wind plants 3 times less than they received till the annexation of Crimea by the Russian Federation [41]. It is obvious that such a sharp decline in the purchase price of green electricity makes the operation of existing Crimean RE plants unprofitable. In addition, the Crimean Government has repeatedly stressed that it will focus on traditional sources for energy generation in the future and has no plans to invest in new renewable energy projects. This way, the annexation of Crimea by the Russian Federation questioned the realization of great RE potential of the peninsula. Overall, as a result of the peninsula occupation, the Ukrainian RE sector lost 36.5% of all renewable plants of Ukraine. This fact questioned the full fulfillment of the obligations to achieve 11% of energy from renewables in total energy consumption by 2020,

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Fig. 3. Potential of small hydropower energy in Ukraine [38].

which was approved within the framework of Ukraine's membership in the European Energy Community. A major role in maximizing losses of RE plants sector as a result of Crimea annexation played by the imperfect state RE policy. The shortcoming of management by RE development allowed focusing more than a third of renewable plants on the peninsula, which occupies 4.5% of the total territory of Ukraine. Currently, there is an objective need to revise the system of RE governance, the formation of a clear mechanism aimed at creating a more variable structure and geographical expansion of renewable energy installations. State regulation of equal distribution of renewable energy generation capacity within the corresponding administrative units will not only expand installations geography, but will also promote equitable consumption of green energy environmental benefits.

5. The barriers to effective development of renewable energy in Ukraine At the present stage there are a number of barriers, which reduce the effectiveness of the RE deployment. The main of barriers are as follows: 1. Russian military intervention. The annexation of Crimea and military conflict in the east of Ukraine significantly impairs indicators of economic development and an investment climate in Ukraine. Obviously, the result of an armed confrontation will be an outflow of foreign investment in the short and medium terms in the RE sector, which is one of the keys for reform of the domestic economy. In addition, Ukraine has lost a

Table 4 Dynamics of small hydropower development for electricity generation in Ukraine 2009–2013 [28]. Year

Number of small hydropower plants

The available power of small hydropower plants (MW)

Electricity generation from small hydropower plants (million kWh)

2009 2010 2011 2012 2013

7 7 11 14 17

49.2 76.6 146.4 193.8 334.1

41.4 49.2 89 257.6 636.5

significant share of the generating facilities as a result of the annexation of the peninsula; several generating facilities are located in the war zones of Donetsk and Lugansk. Currently, the construction of new power plants in these areas has stopped. 2. The obligatory condition for a purchase Ukrainian goods and services under the realization of projects claiming to receive the feed-in tariff (50% total power plant construction if the plant is put into operation for those put into operation in 2014 and later). On the one hand, that legislative requirement may slow down RE development, as Ukraine has insufficiently developed a network of enterprises specializing in designing and manufacturing of equipment for RE plants. On the other hand, the existence of such a rule guarantees the development of domestic new technologies and will allow updating the production capacity of the machine-building enterprises of

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– 6.

7. Fig. 4. Prices of electricity power sale in «Wholesale electricity market of Ukraine» USD/MW h [42,43].

3.

4.

5. –

–

Ukraine, in improving the country’s balance of payments by reducing imports of equipment, and to increase the export of this product in the future. The high cost of electricity generation from RES compared to non-renewable energy remains the key restriction to the RE development in Ukraine (Fig. 4) [42,43] as the figure shows the difference in tariffs between non-renewable and renewable energy in Ukraine is extremely high. This does not allow green energy technologies to compete with traditional energy production. Thus, the cost of solar energy is almost 27 times higher than the cost of electricity from nuclear power, 7.2 times than energy generated by bioenergy plants and 6.6 times than wind power plants. This is why it is necessary to develop new technologies of production, storage and transportation of «green» energy along with working-out organizational and economic mechanism for RE stimulation in Ukraine. The state of the national power networks. Unsatisfactory technical condition of grids (about 35% of terrestrial networks are older than 40 years, and about 52% of them require immediate updating of the equipment) makes it impossible rapid adaptation to the addition of a large amount of electricity generated by renewables [16]. Therefore, the future RE development requires optimization and modernization of the national electrical grid that will significantly increase the capacity of transmission lines and improve the reliability of the United Energy System of Ukraine. The number of shortcomings associated with the functioning of the feed-in tariff in Ukraine, namely: A lack of single methodological approach to determining the cost of energy from all types of RES (feed-in tariffs) which would be based on technical and economic assessment of RE projects in Ukraine. As a result, there is debate regarding biased assessment of “feed-in tariff” rates. In the parliament, a number of legislative initiatives concerning the gradual reduction of the ‘feed-in-tariff’, which aim to solve the stimulation of electricity generation from solar energy and insufficient encouragement of bioenergy [44]. violation of the current legislation by the National Commission for State Regulation of Energy and Public Utilities (NCSREPU), namely the temporary absence of indexation of feed-in tariff from August 2014 to February 2015. The difficult economic situation is caused by the annexation of Crimea and military conflict in the east part of Ukraine led to a significant devaluation of the national currency. As a result, according to [45] NCSREPU stopped the monthly review of feed-in tariff relative to exchange rate for euro as of 01.01.2009, which is provided by the Law of Ukraine “On Electric Power Industry”. It undermines

8.

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the confidence of investors and impairs the investment climate in Ukraine. feed-in tariff is not for producers which combine use of nonrenewable and RES. Insufficient state financial support of scientific research and development (for the period 2005–2012, the share of spending on science in GDP did not exceed 0.3%). Generally, Ukraine has a wide network of higher educational institutions and has a developed industrial base capable to produce smart equipment as a basis for development of research in the branch of clean technologies. In particular, in recent years, Ukraine has intensified research for creating novel transformers of solar energy and synthesis of new semiconductor materials suitable for solar energy with improved characteristics [46,47]. Low rate of GDP per capita. A number of investigations confirm the hypothesis that countries with higher levels of economic welfare faster deploy RE, as they can easily afford the costs for developing such technologies and encourage their development through economic stimulation [48,49]. Therefore, at the present stage of economic development of Ukraine too fast and large scale replacement of traditional energy production technology by RES is unlikely. Lack of stimulation of green energy consumption by end consumers. The main purpose of feed-in tariff, which today is a key tool to stimulate RE development is to encourage energy generation from RES, its consumption is a side effect of this economic instrument. In our opinion, the formation of the growing demand for “green” energy can stimulate a significant increase in its proposal. Therefore, one of the possible ways to improve the governance of RE development is the introduction of mandatory quotas for green energy consumption by end consumers.

6. Conclusions At present, Ukraine has significant dependence on energy resource exports. In the future, with increasing levels of energy consumption and the depletion of existing reserves, this dependence will only grow and negative affect on the energy security of the state. Today, the Ukrainian government emphasizes on increasing the organic fuel production. Very little attention is paid to the fact that these energy sources are exhaustive; therefore, the direction of a significant amount of investment in their development is not too logical step. Such specified direction is only a temporary solution of the problem, because the long period of using new generating capacities based on fossil fuel will create a dependence on this chosen direction and will predefine the balance of greenhouse gas emissions by the middle of this century. Consequently, Ukraine will not be ready to fulfill possible future obligations on climate protection being very likely in case of further integration of European energy markets. Currently, Ukraine with enormous potential of all range of RES takes first steps in the building of RE sector. For a more dynamic realization of this direction it is necessary to take additional long term actions for changing the state energy policy and reviewing the strategy for development of energy sector of Ukraine.

Acknowledgment This paper has been supported by the Ministry of Education and Science of Ukraine under the project “Methodology of forming mechanism of national economy innovative development based on alternative energy” (No. 53.15.01-01.15/17.ЗФ).

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