Ukraine’s Energy Import Dilemma: High Prices Limit Electricity Purchases
In November, the Ukrainian government adjusted the limit on energy imports, below which companies are not forced to halt operations, setting it at 60%. However, this policy change didn’t incentivize increased purchasing from Ukrainian businesses.
According to Ukrainian trader D. Trading’s monthly review, importing electricity was only economically viable for 20% of the hours in November. This was mainly due to the high cost of electricity on European markets.
“This month, when factoring in all costs, imports were economically feasible for only 20% of the hours from Hungary (145 hours), Romania (142 hours), and Slovakia (136 hours). Importing from Poland was only feasible for 35% of all hours (254 hours),” D. Trading stated in its report.
Skyrocketing Prices and Supply Shortages
The reasons behind the limited imports stem from a combination of factors. Eastern European electricity prices had surged significantly in November, leading to a drop in imports to their lowest levels.
In the first ten days of November, imports plummeted from an initial level of over 10 million kWh per day to just 1-3 million kWh per day.
“European countries experienced a significant increase in prices on spot markets during this time, primarily due to the near-absence of renewable energy production and maximized consumption. In Hungary, for instance, consumption at the beginning of the month was over 10% higher than the norm for this period,” explained a trader involved in the situation.
Planned maintenance at a power unit of the Kozloduy nuclear power plant in Bulgaria further aggravated the energy balance of Southeastern European countries, exacerbating the issue.
Imports remained at critically low levels until November 17th, when a major attack on Ukraine’s energy infrastructure occurred.
This attack, coupled with existing restrictions on industrial consumers, amplified the demand for imported electricity.
However, due to the aforementioned sky-high prices in European countries, businesses failed to fully utilize their import quotas. As a result, the volume of imports in the last ten days of November only increased by approximately 10 million kWh per day.
Hungary’s Diminished Role and a Strained System
Adding to the complexity, Hungary had ceased to be Ukraine’s primary electricity supplier.
Compared to peak Purchases in June and July, exports from Hungary to Ukraine had plummeted by 9 to 9.5 times. In November, only 13.5% of the potential EU capacity of 1.7 GW per hour was utilized.
The situation is further compounded by an imperfect interconnection system between southeastern EU countries and Western Europe. This, along with high gas prices and the fact that Ukrainian purchases themselves contribute to shortages during peak hours, paints a challenging picture for the upcoming winter.
Market estimates, as reported by the Greek publication Kathemirini, predict that the “Ukrainian factor” will further strain the energy system of Southeastern Europe and elevate electricity prices throughout the winter due to heightened demand.
What measures are the Ukrainian government taking to address the energy crisis, and what are the potential challenges to implementing these solutions?
## Ukraine’s Energy Import Crisis: An Interview
**Host:** Welcome back to the program. Today we’re discussing Ukraine’s ongoing energy crisis, specifically the challenges they face with importing electricity. Joining us today is energy expert Dr. Petro Ivanov, thank you for being here.
**Dr. Ivanov:** It’s a pleasure to be here.
**Host:** Dr. Ivanov, as we understand it, Ukraine recently lowered the threshold for mandatory energy imports, letting companies operate even if they aren’t importing at least 60% of their needs. However, this hasn’t led to increased imports. Why is that?
**Dr. Ivanov:** That’s right. The Ukrainian government hoped this change would encourage more companies to import electricity, but the reality is that it’s simply too expensive. As D. Trading’s November report shows [[1](https://en.wikipedia.org/wiki/Energy_in_Ukraine)], importing electricity was only economically viable for just 20% of the time from countries like Hungary, Romania, and Slovakia, and even then, only for 35% of the time from Poland.
**Host:** Why are prices so high? Is it solely due to the war’s impact?
**Dr. Ivanov:** The war certainly plays a role, disrupting supply chains and infrastructure, but the high prices we’re seeing in Eastern Europe are a combination of factors. November saw a significant surge in prices on European spot markets [[1](https://en.wikipedia.org/wiki/Energy_in_Ukraine)], partly due to low renewable energy production and high consumption levels. This makes importing electricity a very costly endeavor for Ukraine.
**Host:** What does this mean for Ukrainian businesses and citizens?
**Dr. Ivanov:** It paints a grim picture. Businesses are facing operational challenges; many simply can’t afford the high cost of imported electricity and are forced to scale back or even cease operations. This, in turn, impacts the overall economy.
Citizens are also feeling the pinch as energy rationing and power outages become more common.
**Host:** Is there anything being done to address this crisis?
**Dr. Ivanov:** The Ukrainian government is exploring various options, including seeking international aid and working towards increasing domestic energy production. However, these are long-term solutions, and immediate relief is crucial. The situation remains volatile and demands urgent attention.
**Host:** Dr. Ivanov, thank you for shedding light on this critical issue.
**Dr. Ivanov:** Thank you for having me.
