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  • Energy Without Borders: How Poland and Ukraine Can Mutually Benefit

    13.03.2024

    Recently, relations between Ukraine and Poland can hardly be called good and neighbourly. However, there are many things that unite our countries, not divide. For example, cooperation in the energy sector. We discussed this at our first Ukrainian-Polish discussion within the framework of the "Ukrainian Path to European Union. Polish Accession Experience"project.

    The European Green Deal, which aims to achieve energy neutrality on the continent by 2050, is a noble goal but, at the same time, a difficult one. One that requires European economies to change their approaches to energy production and energy efficiency radically. Thus, by 2030, EU members must reduce greenhouse gas emissions by 55% compared to 1990.

    Modernization of outdated, "inherited" from the Soviet Union, and significantly damaged by the war energy system is one of the critical challenges for Ukraine in the process of integration into the European Union. Therefore, the experience of the EU's closest neighbors, particularly Poland, in the liberalization of the energy system and the development of green energy is essential for us. However, Ukraine also has a lot to tell the world.

    Transition to renewable sources and modernization of nuclear energy

    The discussion "Energy without Borders: Ukraine and Poland," which the Institute for Economic Research and Policy Consulting (IER) held jointly with the Warsaw Enterprise Institute, was mainly devoted to implementing the postulates of the Green Deal.

    At the beginning of the meeting, Włodzimierz Ehrenhalt, Chief Expert on Energy at the Union of Entrepreneurs and Employers of Poland, spoke about the situation with the diversification of energy sources in Poland. Although Poland has been actively developing renewable energy in recent years, coal is still the primary source of energy in Poland.

    However, as the expert explained, selling energy produced with a significant carbon footprint in the EU markets in a few years will be complicated. Large Polish companies are already using the environmental friendliness of products as part of their marketing policy. Therefore, they demand ecological friendliness from suppliers of their goods, including energy.

    Here, according to Ehrenhalt, Ukraine has a more advantageous position than Poland because Ukraine has nuclear generation, which Poland does not yet have. And of the carbon-free sources of "green" generation, only atomic energy is entirely predictable regarding production volumes.

    "In Poland, 65% of the kilowatt-hours are the so-called 'black energy' produced by coal. Nuclear energy will continue to be perceived as "green" energy because we have no choice. However, we are just starting to build nuclear power plants. At the same time, we have to consider economic considerations, and here, the experience of Ukraine can be helpful since the country has already built its power plants. All you have to do is modernize them," Ehrenhalt said.

    Volodymyr Omelchenko, Director of Energy Programmes at the Razumkov Centre, continued the topic of nuclear energy development. He noted that Ukraine has a very good energy mix compared to most European countries. In Ukraine, nuclear generation accounts for 55% of electricity production; thermal generation holds 25%, and renewable energy and large-scale hydropower — 10% each. "75% of the energy balance is performed by types of electricity that have minimum carbon emissions," says Omelchenko. In his opinion, although the deindustrialization of the post-Soviet years and the destruction of thermal units during the war played a significant role in the decarbonization of Ukraine, RES received significant investments before the war, which entirely coincides with European trends.

    Regulatory policy

    On the other hand, Maciej Jakubik, Project Coordinator for European Regulations at the Energy Forum (Poland), drew attention to the EU regulatory requirements that Ukraine must fulfill to become a member of the community. He emphasizes that it was much easier for Poland because EU legislation twenty years ago was much softer. "We need a great team to screen Ukrainian legislation to adapt it to EU requirements. Then this team will prepare appropriate amendments to the legislation of Ukraine, which the parliament will adopt," the expert says.

    Bohdan Serebrennikov, Deputy Research Director at DiXi Group, said that Ukraine is already developing a national energy and climate plan, one of the fundamental documents in the field of energy sector development, which all EU countries have. This document should answer how Ukraine sees its energy sector by 2030 and how it approaches it. According to the expert who is a member of the working group preparing this document, there is a chance that it will be adopted in June.

    According to Serebrennikov, the country desperately needs deeper energy integration with the EU because restoring the Ukrainian energy sector requires significant investment, and no investor will want to invest in an industry where there is no regulator independent of the government and a large debt. "Ukraine should become a full-fledged part of the market of Eastern Europe. For us, this means higher competition and fewer opportunities for market manipulation and unfair behavior," the expert concludes.

    Instead, Paweł Stańczak, former Deputy CEO of LLC Gas TSO of Ukraine and former Member of the Board of PGNiG Technologie and Gas System SA, focused on the opportunities that joining the community will open up for Ukraine. In his opinion, Ukraine has great potential for supplying biomethane (gas made from agricultural waste) to the European market. In addition, Ukraine has significant technological potential in this direction. "Poland could also benefit from certain solutions in this area," the expert concluded.

    Maksym Sysoiev, a member of Dentons' Global Energy Group, also agrees that Ukraine has already accumulated a lot of experience in producing biomethane, which can be helpful in Poland. In addition, Sysoiev says that Ukraine has a well-developed wind energy industry and more favorable legislation in this area. Therefore, building windmill farms on the border with Poland makes sense, as they would transmit energy to neighboring countries. "I already know about the first projects like this," he says.

    Maksym Karpash, Vice-Rector for International Relations and Strategic Development of King Danylo University, drew attention to the fact that the transformation of the Ukrainian energy market should include not only its liberalization and further decarbonization of generation but also the development of energy efficiency. In this regard, the experience of Poland will be beneficial, where most of the housing stock has already undergone thermal modernization, and large municipal facilities have significantly reduced energy consumption. "It is necessary to convince consumers of the need for energy conservation and efficiency, to build ecosystems where institutions, enterprises, and citizens work for the common good. There is an opportunity to use the experience of Poland," Karpasz said.

    The discussion participants are convinced that energy is one of the sectors where there are perhaps the most significant opportunities for mutually beneficial cooperation between Poland and Ukraine.

    The discussion can be viewed on YouTube IER: https://www.youtube.com/watch?v=V_xF-HBwHQg (English) and https://www.youtube.com/watch?v=fQ_nIq5wzQQ (Polish)

    The project "Ukraine Path to the European Union. Polish Accession Experience" is conducted by the Institute for economic research and policy consulting in cooperation with the Warsaw Enterprise Institute (WEI). The main goal of the project is to support the preparation of Ukraine and Ukrainian entrepreneurs for future membership in the European Union by analyzing the experience of Polish entrepreneurs in working in European markets and Ukraine's current integration efforts, in particular through the instruments of the Association Agreement. The project is supported by the Open Society Institute and International Renaissance Foundation

     Ievgen Gordeychyk 

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