How #Ukraine can resolve its energy crisis

| June 8, 2020

The impact of the coronavirus pandemic on the world and Ukrainian economy has been very significant. It has affected virtually aspect of our lives. Whilst the pandemic has compounded many existing problems, it is also creating a new economic reality, one that allows us to tackle these issues and set a new and more positive course, writes DTEK CEO Maxim Timchenko. 

Developed Western economies have been able to offer effective solutions and business support mechanisms to minimize the economic impact of the pandemic, and the crisis has clarified, even strengthened, the strategic direction for transforming and developing the European Union. According to European Commission President Ursula von Der Leyen: “Using the Green Deal as a compass, we can turn the pandemic crisis into an opportunity to restructure our economy in a different way and make it more resilient.” The Green Deal, adopted last year, will be the basis for the EU’s post-pandemic economic recovery.

Ukraine’s more immature public administration was less prepared for such a major crisis. Private business came to the aid of the state to help stop the spread of the virus and reduce its effects. Thousands of companies across the country have, under extremely challenging conditions, mobilized their resources around the most valuable asset: human life. The actions of the Ukrainian government, coupled with the coordinated work of the private sector and civil society, have paid off. The spread of the virus has been minimized.

Unfortunately, from an economic perspective, we are now facing a much more difficult situation, a solution to which remains elusive. Current, very optimistic, government forecasts predict Ukraine will lose only 3.9% of GDP in 2020. When Ukraine returns to normality after the lifting of quarantine restrictions there will be less foreign capital available to the many industries in need of investment. Increasing global competition for capital means fewer international businesses will be willing to invest in Ukraine. The lockdown measures, whilst necessary, have also exacerbated the systemic problems faced by many industries.

Even before the coronavirus outbreak, Ukraine’s energy sector was facing a systemic crisis, one that has been ongoing since last year. The main issue behind the crisis was a rejection of the planned transition to a free market for energy. This, combined with unjustified restrictions on domestic producers that result from unprofessional management of the industry and populism, means that all types of generation and all market participants are in crisis. Reduced electricity demand due to the coronavirus pandemic has only compounded the situation. The crisis has very significant and negative implications for Ukraine’s economy and the energy security of the country.

Finding a way out of the crisis requires an open dialogue between government officials and market players. Thankfully, this dialogue has started. The newly established Anti-Crisis Energy Task Force will help to enable decision-making that reflects the interests of business, is more transparent and is based on Ukraine’s national interest and development strategy. This will allow for the implementation of faster, more effective and coordinated solutions to the issues facing the sector.

We are convinced that Ukraine must also follow its European counterparts and adhere to a long-term vision for the development of the energy sector. Ukrainian companies should also follow international best practice and integrate broader societal concerns into their business strategies and activities. This means adopting long-term strategies based on the UN Sustainable Development Goals (SDGs) and international Environmental, Social and Governance (ESG) principles.

For the Ukrainian energy sector, the primary focus for the vision, the strategy and principles adopted and pursued, has to be decarbonization. However, if this goal is to be achieved Ukraine needs full liberalization of the energy market. The introduction of genuine competition will encourage domestic energy companies to invest more actively in renewable energy, infrastructure and new technologies, network upgrades and energy efficiency projects.

We must also recognize that the process of decarbonization is not painless. The shift from fossil fuels to more sustainable energy sources could negatively affect those communities that are currently economically dependent on coal or thermal power. We should take care of these communities – provide them with necessary support for retraining and create new opportunities for regional development.

Ensuring a just transition should be a key element of Ukraine’s decarbonization strategy. But it will be challenging and can only be achieved with the active partnership and close cooperation between all relevant parties: the private sector; local, regional and national government officials; and the international community.

Whilst the pandemic has had a very negative impact on Ukraine, it has also served to highlight the challenges that we face and has provided an unprecedented opportunity to review and revise the ways in which we approach these challenges. Progress is already being made in this direction, but much more needs to be done if we are to capitalize on this opportunity in the energy sector, and the Ukrainian economy more broadly. The decisions that Ukraine makes today will determine what kind of world we will live in tomorrow.

All opinions expressed in the above article are those of the author alone, and do not reflect any opinions of EU Reporter.

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Category: A Frontpage, coronavirus, Coronavirus face masks, Coronavirus Global Response, COVID-19, EU, Health, PPE, Ukraine

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