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  • Decrease in Energoatom surplus generation should not cause increase in electricity prices for end consumers – Volodymyr Kudrytskyi

    Volumes of electricity generated by NNEGC “Energoatom” which could not be sold on the bilateral contracts, day-ahead, and intraday markets are sold by suppliers to end consumers predominately at the price stated in contracts with other electricity producers who submit downward offers in the balancing market. 

    For this reason, according to the new forecast electricity balance, reduced generation of electricity at nuclear power plants (NPPs) will not have a significant impact on the electricity price for the end consumer. This message was conveyed by Volodymyr Kudrytskyi, Acting CEO of NPC Ukrenergo, at a round table on the topic “Overcoming crisis phenomenon in Ukrainian energy industry” in the Verkhovna Rada Committee for Energy and Public Utilities.

    “Today’s crisis in the electricity sector is caused by a sharp decrease in the consumption of electricity entailing the electricity surplus in the power system. And it brought significant consequences not only for the power system balancing but also for the functioning of the electricity market itself,” said Volodymyr Kudrytskyi. 

    From the market standpoint, the surplus is electricity that is not sold by the producer and, accordingly, not purchased by the supplier/consumer on bilateral contracts, day-ahead, and intraday markets but that continues to be generated. Today, when this surplus is produced by NPPs, it replaces the share of volumes that under contracts with suppliers/producers should have been generated mainly by the thermal power plants (TPPs and CHPPs) submitting downward offers in the balancing market. Under these offers, the producers agree instead of generating electricity to repurchase surplus electricity on the balancing market. In this case, the price of such purchase is determined in the framework of the Market Rules and amounts up to 55% of the price in the day-ahead market. After that, participants of the balancing market sell the purchased electricity to their clients at prices determined in their respective contracts.

    “As a result, the suppliers buy surplus electricity (the surplus created by the NPPs – editorial comment) at the price of the balancing market. For surplus electricity generated, “Energoatom” receives the market price “minus” 45%, in other words, a deep discount price. The difference remains with, for instance, thermal power plants as revenue from the balancing service,” clarified Mr. Kudrytskyi.

    He emphasized that the reduced NPP generation in the new forecast electricity balance will not affect those volumes of “Energoatom” that can be sold to suppliers for end consumers. 

    “When preparing the balance, we acted on the only premise that we need to ensure sufficient volumes of balancing reserves for the power system in conditions of decreasing consumption and to remove surplus electricity on the market, in other words, the surplus generation,” stressed Mr. Kudrytskyi. “The new balance, on one hand, gives the opportunity to “Energoatom” to generate and sell all electricity (which consumers can purchase) at market price, undiscounted in the balancing market. On the other hand, it does not involve the surplus that has brought the accumulation of huge debts on the market.”

    Mr. Kudrytskyi further stated that balance constraints for baseload in the power system are solely hinged on the need to ensure the operational security of the power system, which is the primary priority for Ukrenergo under the existing Transmission Network Code. And, at the same time, they are only stemming from the decrease in the consumption overall level in the power system of Ukraine.

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