FEC development priorities

Analysis of impact of scenarios and energy balance options based on different energy security constituents allows identifying such FEC development priorities for the near and far future. Economic development is supposed to provide the funds necessary for proper development of the energy sector and guaranteeing the energy security. Priority channeling of funds for energy efficiency enhancement will make possible abating energy needs (and, hence the share of imports in energy consumption) as well as contamination of the environment In the fuel balance, priority should be given to coal, however, social and environmental problems of the sector should be addressed. In parallel, oil and gas production should be increased along with diversification of their imports. The power balance will not have such dependence provided that thermal and nuclear power plants ensure the forecasted output, and power output by renewable and alternative sources is further increased. At the same time, it is necessary to introduce clean coal combustion technologies, to enhance NPP safety level and enhance Ukraine's participation in the projects relating to nuclear fuel production and supply.

For the successful entry of Ukraine to the European and world energy markets, it is necessary to ensure compatibility of internal and European (world) energy prices, enhance FEC efficiency, strengthen the operating wholesale electricity market, crate efficient energy markets based on the principles of their staged liberalization and deregulation, and guarantee environmental acceptability of energy production. Making energy policy of the country compatible with the principles of the European Energy Charter and harmonizing regulatory and legislative framework, using existing and looking for new opportunities for cooperation, on a mutually beneficial basis, with energy suppliers and consumers, forming a situation of systematic interdependency between them and Ukraine are the necessary steps in this area.

Foreign policy and foreign economic activities of public authorities in the energy sector require identification of international cooperation priorities, strengthening Ukraine's presence and enhancing its role in the international distribution of labor, based on realization of the available potential of the country's economy, launching the process of creation and implementation of high-technological research and development projects aimed at ensuring energy sovereignty not only in our country, but also in other energy-dependent economies.

Gradual transition to the development and implementation of specific economic projects in the framework of Ukraine's participation in the work of international organizations, development on such basis of efficient mechanisms for intensifying European and Euro-Atlantic integration processes are the main goals for such foreign policy changes of the State in the energy sector.

The primary measures related to enhancing national energy security are supposed to be:

  • developing a package of measures with regard to giving effect to and implementation of the Energy Strategy of Ukraine for the Period until 2030;
  • developing strategic provisions with regard to reforming the national economic and social sector taking into account energy prices in line with European and world levels;
  • developing prospective fuel and energy balance of the county where the shares of natural gas, oil and oil products will be significantly reduced;
  • concluding strategic agreements with regard to natural gas and oil imports;
  • carrying out repairs and reconstruction of energy sector facilities with a view to ensuring the required safety level and minimizing technogenic threats to the population and the environment;
  • continuing activities for the interconnection of the Unified Power System of Ukraine with the European power systems;
  • developing and implementing a new version of the energy saving program of Ukraine;
  • developing a program for reducing natural gas consumption in Ukraine's economy and social sectors;
  • developing and carrying out a package of measures related to diversification of sources of natural gas, oil and nuclear fuel imports into Ukraine;
  • developing and implementing a Program for creating a strategic reserve of oil and oil products;
  • developing programs and measures in accordance with FEC sectors' lines of development;
  • developing a short-term, until 2010, package of measures to attain Ukraine's energy security goals identified under the strategy.

Implementation of the above measures aimed at upgrading and developing the national energy sector is supposed to contribute to the improvement of energy efficiency as a basis for enhancement of the energy independence level. Based on GDP and primary energy consumption figures, the GDP energy content (based on 2005 prices) will be decreasing from 0.48 kg of standard fuel in 2005 to 0.24 kg of standard fuel/UAH in 2030, or by factor of two. If measures provided under the Energy Strategy are implemented, energy efficiency of Ukraine's economy at the end of the forecasted period will be 25% to 30% behind that of the developed countries, compared to the current 2.5-3 times lag. Such energy efficiency will ensure competitiveness of Ukrainian products on the internal and world markets.

Due to the need to impose internal energy prices in Ukraine in line with the world levels, major changes are forecasted in the primary energy consumption patterns and volumes. It is expected that natural gas consumption will decrease, oil products usage will stabilize with increase in coal and nuclear fuel consumption occurring at the same time. As a result of pricing effect, natural gas in Ukraine's economic and social sector will decrease to the volumes which can be mostly provided by internal sources (domestic gas production, coal bed methane, industrial gases, etc.) Ultimately, taking into consideration gas produced by Ukrainian companies outside of Ukraine, the share of gas in the primary energy consumption pattern will decrease from 41% in 2005 to 20% in 2030, with gas imports for local needs considerably reduced. At that, the share of imported energy resources in the pattern of primary energy resources consumed in Ukraine will fall from the current level of 54.5% to 11.7% at the end of the specified period. which will ensure the country's energy security.