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Donbas as a fallen industrial giant

Author : Olena Holubeva

Before 2014, Donbas has been providing about 20% of industrial production in Ukraine, while only 10% of the country's population lived in this territory
11:13, 4 October 2019

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Before 2014, Donbas has been providing about 20% of industrial production in Ukraine, while only 10% of the country's population lived in this territory. There were mines, the largest metallurgical and chemical enterprises, and the densest network of railways was concentrated in the post-Soviet space in the Donetsk region. This economy required power every day - millions of kilowatts of electricity were generated by the heat stations – Starobeshivska, Slovyanska, Kurakhivska, Vuhlehirska, Zuyivska. The war tore the veins of this industrial giant. Most of the main power lines that connected Donetsk and Luhansk regions with the unified energy system of Ukraine were damaged. At the end of 2015, in connection with hundreds of line breaks, about 16 power lines were accidentally disconnected, many of the critical infrastructure parts were damaged by the hostilities.

In 2015-2017, the operator of the Ukrainian energy system Ukrenergo was able to restore part of the lines in the controlled territory.

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The north Luhansk region remains in the most difficult situation, where about 1 million Ukrainians live and large industrial enterprises are concentrated. The region, in which 15 cities, 28 villages and 517 villages of the Luhansk region, has faced the situation of an island, isolated from the unified energy system of Ukraine. Many of the power lines that connected this region with Russia and power sources in Donbas are out of order. Communication between Luhansk TPP and the Yuvileyna substation, a key voltage distribution center in the region (located 20 km from the demarcation line) was interrupted. Now, electricity is supplied through one single power line, built back in the 70s.

 For this reason, we can’t talk about the reliability of the region’s electricity supply. If the Luhansk TPP stops or damage occurs on the working line due to the lack of fuel supply, the entire region runs the risk of a blackout, without an alternative to connecting to other power sources: water utilities will stop, kindergartens, schools, hospitals, thousands of residential buildings will stay without power supply.

The situation is complicated by the fact that after Russia's refusal to issue quotas for coal shipment to a Ukrainian enterprise Luhansk TPP was forced to switch to work on expensive natural gas, which left only one power unit in operation. And due to the fact that there is only one power line in the region, the situation is further complicated by the fact that Ukrenergo can carry out scheduled repairs on it only on weekends when industrial enterprises do not work.

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In connection with the loss of the Starobeshivska TPP (it is located in uncontrolled Donbas territory), there is a problem with the reliability of providing electricity in the south of the key industrial hub of Eastern Ukraine - Mariupol (large metallurgical enterprises are concentrated in the city).

The implementation of the Ukrenergo Eastern Investment Program could solve the problems. It includes the construction of the Kreminska substation, which will connect the key substation of the Yuvileina region with the Donbas-Don transmission line (it connects the Don substation, which acts as the switchgear of the Russian Novovoronezh NPP-2 in the Russian Federation, and Donbas in Ukraine). The substation will be commissioned in May 2020. Moreover, as Ukrenergo is assured, these terms will not be disrupted. Previously, they were postponed twice in connection with the approval procedure in the Cabinet (dragged on for 17 months). According to the further steps of the program, two more new lines will be built: Kurakhivska TPP - the Belytska substation (located near Bakhmut), as well as the line connecting the new Kremenska substation with the substation in Kupyansk. Now the lines are being designed. The implementation of these plans, in particular, will allow the Ukrainian energy system to disconnect from Russia and Belarus by 2022 without endangering the safety of consumers' nutrition in the border areas. This is extremely important in the context of Ukraine’s integration into the European energy system ENTSO-E.

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To solve the problem in the south of Mariupol, the Azovska substation will be modernized (the voltage class will be increased from 220 kV to 330 kV). 2.5 km of power lines will also be completed, which will connect the substation with the infrastructure of a similar voltage class. Plans must be implemented before 2022. The planned investments for the implementation of the Eastern program will amount to about 100 million euros.

As in most projects, the issue of financing of these projects is a key one. Ukrenergo representatives say that they are looking for opportunities to attract credit from international financial organizations, but if they can’t be found, they will finance the program from tariff revenues, redistributing it from others less priority projects.

Tariff investment is now a problem. Before the launch of the new model of the energy market, the problem of settlements of the then market operator - GP Energorynok - with a number of companies, including Ukrenergo, was not resolved. The state-owned company owed Ukrenergo 25 million USD, which is equivalent to half the tariff part of the investment program.

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If reliability with the power supply to the Donbas is ensured, large industrial enterprises will be able to resume work. This is mainly about a major producer of mineral fertilizers - Severodonetsk Azot plant (part of oligarch Dmytro Firtash's OSTCHEM holding). Now this company is idling. In the Luhansk region, a large chemical enterprise in Rubizhne, NPP Zorya (production of benzene, industrial explosives, chemical plant protection products), also depends on electricity supply.

Lysychansk Refinery, the second-largest oil refinery in Ukraine, is also located there (before the war it was controlled by Russian Rosneft). The plant stopped in 2012, after which the only one of the six oil refineries, the Kremenchuk oil refinery (controlled by the Privat group of oligarch Ihor Kolomoysky), remained in Ukraine. The hostilities that began in the spring of 2014 further complicated the position of the plant. During artillery shelling on the factory territory, the thermal power station and the fuel oil storage were damaged.

According to the officials, with good dispositions, a large oil depot in Lysychansk might resume work.

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