In fact, the path to Europe began long before March 16, 2022, the day when Ukraine synchronized with ENTSO-E. However, we propose to restore the chronology of the key events of European energy integration in 2022. On the night of February 24, the Ukrainian energy system began its isolated operation disconnecting from Russia and Belarus forever. Instead of the planned 2 days, Ukraine worked independently for 3 weeks. And on March 16, a truly historic event occurred.
Ukrainian energy system started work synchronously with the European ENTSO-E, together with Moldova.
"The power grids of Ukraine and Moldova have been successfully synchronized with the continental European network. This will help Ukraine maintain a stable power supply system and turn on the lights. This is a historic milestone for our relations. In this area, Ukraine is now part of Europe!" Kadri Simson, European Commissioner for Energy commented at the time.
In half a month the launch of the first export to Poland became possible via the separate Zamost–Dobrotvirska TPP line. For a long time, DTEK Zakhidenergo was the only exporter in this area. Later the state-owned energy trader - Energy Company of Ukraine - chaired by the former DTEK manager Vitaliy Butenko. And since October 2, the companies have divided Polish exports in half.
The next country, to which Ukraine began to export electricity, was Moldova. Suppliers in this area were 2 state-owned companies, Ukrhydroenergo and Energoatom.
Share of Energoatom and Ukrhydroenergo in the structure of exports to Moldova, %
Later, on June 30, 2022, Ukraine started export to Romania, and a week later, on July 7, to Slovakia. The proposed capacity volumes could initially even be called "test ones". They amounted to 100 MW in both directions, which the countries could share with each other. At the end of July, the possible cross-border capacity was increased to 250 MW (125 MW in each direction). Exports/imports were not opened for Hungary, which has become one of our unfriendly countries, even despite its membership in the EU.
In the summer, Europeans were very interested in Ukrainian electricity and the situation at that time allowed expanding exports as much as possible. However, on October 10, the Ukrainian energy system was subjected to the first serious massive missile attack by the Russian Federation, and the very next day exports were urgently stopped. Russian missiles and Iranian drones have begun plunging Ukrainians into darkness, and the issue of import has become relevant.
Let us have a look at the numbers
After synchronization with ENTSO-E, since March 2022, Ukraine has exported over 1.9 million MWh, almost half was delivered to Poland, a quarter to Moldova.
For comparison, in 2021, almost 3.5 million MWh were exported. At that time, the main destination was Hungary – 45% of all exports. At the same time, after synchronization with ENTSO-E, the Hungarian direction was never opened, and the question "Why?" remains open.
Let us go back to 2022. DTEK Zakhidenergo delivered almost the entire export volume to Poland last year. Only in October, the state-owned energy trader ECU joined DTEK, and the companies divided the cross-border capacity in half.
By the way, the ECU case is interesting for the Ukrainian electricity market. The company quickly increased its export volumes, delivering about 30% of all exports to Slovakia and 27% to Romania, second only to DTEK. It will be recalled that the company bought volumes from Energoatom and resold them to both the foreign and domestic markets. Whether Energoatom itself could sell effectively to Europe is another open question. Such attempts have already been made, and the state-owned nuclear company supplied electricity to both Romania and Slovakia. Even in July, Energoatom ranked second among exporters in the Romanian direction.
Therefore, the most competitive export destinations were obviously Romania and Slovakia. In 2022, 22 companies exported to Slovakia, and slightly less (16) to Romania.
The top 5 exporters in both directions were DTEK Zakhidenergo, ECU, ERU Trading, Ukr Gaz Resource, and Energoatom.
According to the state customs service, in 2022, Ukraine exported electricity for $ 589.1 million and imported for $172.3 million. Please note that trading before synchronization - in January-February - is also taken into account here. At that time, Ukraine imported over 800 thousand MWh from Belarus and exported 451 thousand MWh to Europe from Burshtyn Island and 193 thousand MWh to Poland via the Dobrotvirska TPP-Zamost line.
In the previous year, 2021, electricity was exported for more than half the amount – $ 256.9 million. The growth of exports in monetary terms (with smaller volumes in MWh) is caused by the favourable price situation for Ukrainian companies in the markets of the neighboring countries. At the end of August, electricity in the spot markets of Slovakia and Romania reached its price records of 600-800 euros per MWh, and the price in Ukraine at that time was significantly lower - about UAH 3,300 per MWh. Interestingly, prices on European markets declined in winter. And now, due to the lack of capacity in our energy system, for companies in some periods, the imported resource may be more profitable in terms of cost, compared to the Ukrainian one. Already on New Year and Christmas holidays, when prices in Slovakia collapsed, Ukrainian companies sharply increased imports, at the end of December. Over 3 thousand MWh were exported by D.Trading, NextTrade, and ERU Trading.
What to expect in 2023?
Electricity exports cannot be restored due to a shortage in our energy system. Therefore, according to the most optimistic scenario, and so far unlikely, Ukraine will be able to resume supplies to the European Union and Moldova immediately after the end of the heating season. However, with constant shelling, it is difficult to make forecasts. In this case, we should consider imports as one of the tools to reduce the deficit. It can be applied either through the Cabinet's regulation on the specifics of imports (regarding guaranteed deliveries) or as a cheaper resource subject to low prices in Europe.