The role of the electricity industry in the recovery of

1

The role of the electricity industry in the recovery of Ukraine's economy after the pandemic

June 2021

2Source: Economic Recovery Center, Eurostat, IAE

Electricity losses and investments in distribution networks, 2018

Electricity sector has come across a number of challenges that have a negative impact on the economic development

Production volume and installed capacity of power plants of the total, 2000–2020, %

Energy intensity of GDP and final energy consumption in households by type of fuel, Ukraine and Europe, 2018

0.07

UkraineVenezuela

0.09

USAIndia

0.11

0.23

PolandGermany

0.21

0.060.09

United Kingdom

• Due to depreciated equipment and outdated technologies energy intensity of Ukrainian GDP is more than twice the world’s average.

• Ukrainian houses are 3 times less energy efficient than those in Germany.

2019

4%

38%

2018 2020 Post

COVID 19

6%2%

2020 Prior

COVID 19

20192020 Prior

COVID 19

8%

35%37%

2020 Post

COVID 19

36%

2018

-3 p.p.

+6 p.p.

TPP/CHPP RES

Share of generation in the total volume of energy generated

9.8%

6.0%

10.4%

4.5%

+0.6 pp

Electricity losses in distribution networks, %

Ukraine2018

Ukraine2019FrancePoland

Energy intensity of GDP, 2019, kgoe / USD

• A significant number of TPPs/CHPPs will bedecommissioned starting from 2021, reshaping thejob market.

• The cost of investments in a solar power plant isdeclining in Ukraine and it remains as an attractiveinvestment.

• Power outages (SAIDI) in Ukraine are the longest in Europe and their duration reached 696 minutes in 2018.

• Introduction of RAB tariff will stimulate investments in energy infrastructure.

GENERATION SUPPLY AND DISTRIBUTION CONSUMPTION

GDP, UAH billion (2019)380 Employees, thousand people (2018)120 Tax revenues, UAH billion3210% 1% 3%

3

Projects in the electricity sector will ensure the recovery of Ukraine's economy

Source: Economic Recovery Center

3. CONSUMPTION AND MARKETS

POPULATION

ECONOMYUkrainian economy is one of the most energy-intensive in the world

2

The system is anticipating long-term change of generating capacities with the commitment of 25% of RES till 2035 according to the Energy Strategy 2035

1.GENERATION

The electricity distribution networks require modernization as the losses in the distribution reach on average 10% along the distribution system

2. SUPPLY AND DISTRIBUTION

DEVELOPMENT OF PRIVATE SOLAR POWER

PLANTS

MODERNIZATION OF ELECTRICITY

TRANSMISSION AND DISTRIBUTION NETWORKS

ENERGY EFFICIENCYIMPROVEMENT

Households, government organizations and industrial users face significant electricity costs due to low level of energy efficiency

Energy efficiency measures will help to reduce the consumption of the energy resources and thus reduce the costs of the industry and the population spent on the energy.

Modernization of the electricity networks will lead to reduction in electricity losses within the network and reduce the risks of the power outages.

Development of private solar power plants will help to reduce the leverage on the energy system and foster the further decarbonizationof the ukrainian energy sector.

4

Installation of 50 ths household SPP will provide 5.4 BN UAH ofadditional revenues to the state budget


1.GENERATION 2. SUPPLY AND DISTRIBUTION 3. CONSUMPTION AND MARKETS

EFFECT FROM PROJECTS IMPLEMENTATIONSPP INSTALLED AND ENERGY GENERATED (MLN kWh)

EFFECT ON THE ECONOMYGENERATED JOBS

STATE BUDGET REVENUES1, MLN UAH

719

2030Increase

5,6344,916

Generated in 2021

497 506 514 523 532 541 551 560 570 580

2030202820272026 202920252021 20232022 2024

Total amount (2021-2030)

5,373 MLN UAH

4,163

753

Production of equipmentInstallation

4,853

878

831

366

209

66

286

2030

451

2022 20292028

539

136

2027

729

2024 20262023

632

2021 2025

REDUCTION OF CO2 EMISSIONS ( thousand-ton CO2)


4.2 Mln ton CO2


9,189 Mln kWh

PROJECT - Household power plants up to 30 kW)

Benefits for the energy system:• clean energy generation;• additional energy system balancing

capacity;• prosumers market growth.

Benefits for investors:• energy independence of households;• additional revenues for the household;

through “green tarrif”.

Total amount of SPP (30 kWh) installed:50 000Total installed capacity: 1.5 GWhTotal program investments: 865 mln USD• Required investment per project: USD 20

thousand• Electricity produced by 1 SPP: 35970 kWh

per year

Households with the income of more than USD 41 thousand per year:744 thousandRequired amount of households to be involved over 10 years: 0.54%

TYPES OF PROJECTS (ESTIMATION COSTS FOR 10 YEARS)

144295

453619

793975 4.000

1.600

5.000

0

400

8001.000

3.000

1.800

2.000

7.000

1.000

1.400

0

1.200

6.000

600

200

2030

1.167

2028

1.367

2021 2022 2023 20292024 2025 2026 2027

1.5781.798

Energy generatedSPP installed

Total amount (2021-2030)50,000 SPP

Note: 1- State budget revenues include revenues from materials used for SES and jobs generated

5

Implementation of RAB tariff will provide 72 BN UAH of additional revenues to the state budget



EFFECT FROM PROJECTS IMPLEMENTATIONSAIDI (MINUTES) AND LOSSES IN DISTRIBUTION NETWORKS (%)


DIRECT AND INDIRECT STATE BUDGET REVENUES, BN UAH

TYPES OF PROJECTS (ESTIMATION COSTS FOR 10 YEARS)RAB-tariff implementation will ensure INVESTMENTS OF 202 BN UAH for 7 general projects :PROJECT 1. Reconstruction and modernization of electrical networks ~101 BN UAH

PROJECT 2. Creating technical prerequisites for the development of distributed generation with RES ~ 21 BN UAH

PROJECT 3. Introduction of SMART GRID technologies ~20 BN UAH

PROJECT 4. Improving the efficiency and cost - effectiveness of networks by reconfiguring them (changing the topography of networks) ~20 BN UAH

PROJECT 5. Automation of electricity metering systems ~16 BN UAH

PROJECT 6. Implementation of measures for automation, scheduling and telemetry of DC operating voltage ~14 BN UAH

PROJECT 7. Implementation of measures to compensate for reactive power ~10 BN UAH

Generated in 2021

14,274

Increase 2030

17,004

31,278

1 1 2 2 2 2 2 2 2 2

2 3 45 5 6 6 7 7 8

2027 20302021 2026202520242022 2023 2028 2029

44

56

78

89

1011

Direct tax revenues Indirect tax revenues

Total amount (2021-2030)72 BN UAH

Decrease2021

312 min.

319 min.

2030

632 min.7,002

10,003

Construction and engineeringDomestic production of equipment materials

12,879

18,39911% -3%

8%

Note: 1- Estimations based on NCER approved electricity losses reduction plan through RAB measures implementations (up to 7%) until 2035

ENERGY LOSSES1 (BN kWh)

18.01

14.50

3.51

2021 Decrease 2030

Total amount of energy saved (2021-2030)

4 BN kWh

6Source: Economic Recovery Center, YASNO Efficiency, GIZ, Ukrastat


EFFECT FROM PROJECTS IMPLEMENTATIONPROJECTS IMPLEMENTED AND ELECTRICITY SAVED(MLN kWh)


STATE BUDGET REVENUES, MLN UAH

3,817

62,048

58,231

Generated in 2021 Increase 2030

339 461 628 855

2,955

2,166

4,034

1,5881,165

2023 2030

5,507

20282025 20292021 2022 2024 20272026

Total amount (2021-2030)19,7 BN UAH

789

6.882

5.044

2.713

1.074

2027

1.9911.462

2028

9.393

2023 2025 2026 2030

12.824

202920242021

3.699

2022

REDUCTION OF CO2 EMISSIONS (Mt CO2)


46 Mt CO2


51,399 Mln kWh

884

5.000

2.000

15.000

0 0

10.0001.500

2.500

500

1.000

20252023

2.231

2022

14.370

2021 2024 2026

10.525

7.712

2029

5.652

1.638

2027

4.145

2030

1.2033.040

2028

Electricity savedProjects realized


8252 Projects

Implementation of 8252 energy efficient projects for іndustrу by 2030 will provide 19.7 BN UAH additional revenues to the state budgetTYPES OF PROJECTS Capital investment for ~ 8252 projects is 36 BN hrn

General types of projects:

PROJECT 1. Modernization of the lighting system ~ 1 MLN UAH

PROJECT 2. Modernization of electrical equipment with the use of frequency control ~ 1-3 MLN UAH

PROJECT 3. Modernization of heating, ventilation, air conditioning systems ~ 3 MLN UAH

PROJECT 4. Modernization of compressor equipment~ 1 MLN UAH

PROJECT 5. Modernization of gas equipment~ 2-3 MLN UAH

PROJECT 6. Monitoring and energy management system ~ 0.5 MLN UAH

Effects of projects:

~ 1 MLN of UAH =• 409 THS kWt of energy savings

• 365 t CO2 of energy savings

• 1.8 new jobs

7

Updating lightning and electrical appliances and building energy efficient buildings will generate additional 90 thousand workplaces

Source: Economic Recovery Center, ODYSSE and MURE database, Ministry for regional development, GIZ, SAE



164,000

254,000

2030Increase

90,000

Generated in 2021

ELECTRICITY SAVINGS (MLN kWh) AND CO2 REDUCTION (MT CO2 )UPDATING LIGHTNING AND ELECTRICAL APLLIANCESThe transition from incandescent to more energy-efficient LED lamps and lamps with motion sensors for outdoor lighting will reduce electricity consumption by more than 50%

Project cost - ~4.7 BN UAH# of households covered: ~ 6 MLN (40%)

Due to the replacement of obsolete devices with new high-end power consumption will reduce costs by 30-70% of the existing base of devicesProject cost - ~64 BN UAH# of of households covered: ~ 13.4 MLN (90%)

BUILDING NEW ENERGY EFFICIENT RESIDENTIAL BUILDINGSConstruction of energy efficient houses, in which heat losses are minimized and the latest energy saving technologies (heat pump) are additionally installed allow to reduce heating costs to <60 kWt/m3

Project cost - ~1.4 TRL UAH# of households living in new energy effective building : ~ 740 THS

STATE BUDGET REVENUES,BN UAH

ELECTRICITY SAVINGS, (MLN kWh) AND CO2

REDUCTION (MT CO2 )

EFFECT FROM PROJECTS IMPLEMENTATION

717860

11

23

34

0

1

2

3

4

5

6

7

2.000

4.000

0

8.000

12.000

10.000

6.000

5

1.147

20282026

3.192

6

2.2372.685

2025

1.434

2.660

202920242023

1.004

3.723 4.255

20222021

4.027

5.319

2030

4

1.290

4.474

4.787

3.579

6

2027

3.132

From indoor lightning

AppliancesFrom outdoor lightning

CO2 Reduction

86 172 258 344 429 515 601 687 773 859

0.8

1.0

0.0

0.2

1,1001,000

800700

300

500

200100

1.2900

0

1.4

600

0.4

1.6

0.6400 0.5

0.8

0.2

2021 2026

1.4

2022 2030

1.21.1

0.9

202720252024 2029

0.6

2023 2028

1.5

0.3

Electricity savingCO2 Reduction

24 26 27 28 30 31 33 3436

38

20282024 203020262022

8

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The role of the electricity industry in the recovery of