Ukraine. Q: Why are utilities prices rising? A: In the interests of the oligarchs
In Ukraine, beginning January 1, 2020, the price of electric power was increased. That cancelled the previous tariff for the first 100 kW of electricity that the population received at half price.
A new fixed price of 1.68 UAH ($0.059) per 1 kW was set for households.
The new tariffs will primarily hit the poor and those who heated their homes with electricity. At the expense of the Ukrainians, they are trying to plug the hole created by the “green” tariff, which is several times higher than the price of atomic energy.
The number of "green" power plants in Ukraine is growing every year. This is due to the fact that electricity obtained from renewable energy sources (RES) is very attractive to produce: the government buys it out at prices that exceed the cost of the cheaper electricity produced at nuclear power plants. All "green" power plats are owned by the richest Ukrainians. They are making huge amounts of money from this arrangement.
But the government has found itself in a situation where funds for the purchase of green electricity are sorely lacking, and instead of curbing the appetites of renewable energy sources (that is, the oligarchs), it raises electricity tariffs for the population, and cutting subsidies at the same time.
"Green" tariffs were introduced in Ukraine in 2009. Their peculiarity is that they are not only several times higher than the tariffs for nuclear and thermal energy, but are also fixed in euros.
At one time, at the suggestion of energy lobbyists, the government gave long-term guarantees for the purchase of energy from renewable energy sources at an increased price - the legislation of Ukraine and the international agreements signed by it guarantee the preservation of the "green" tariff at the same level until 2030.
According to the Ukrainian National Commission for State Regulation in the Spheres of Energy and Utilities (NEURCU), the "green" energy makes 26 percent of the total money turnover in the electricity market.
The ten largest investors in renewable energy sources earned more than UAH 14 billion ($495.2 million) in 2019.
Rinat Akhmetov
Photo: © RIA Novosti, Sergey Starostenko
As soon as the Ukrainian government made an attempt to moderate the appetites of the "greens", several foreign embassies in Ukraine - Germany, France, Great Britain, Sweden, Belgium, Canada, Norway and South Korea, in a letter to the government noted that they were disappointed with a perceived "retreat" of Ukraine on green tariffs.
The subsequent Ukrainian government's actions were no surprise: the forecast balance of electricity production by nuclear power plants in 2020 was reduced by 8.6 percent - to 73.7 billion kWh.
In April 2020, the Cabinet of Ministers decided to suspend the operation of three blocks of nuclear power plants and to reduce the production of electricity at another seven blocks in favor of more expensive producers - "green" and thermal generation.
It turned out that the government did not need cheap nuclear power. The nuclear power plants were stopped but the government bought the "green" electricity that is several times more expensive. This immediately triggered a 13 percent rise in the electricity tariff in the market.
In other words, in order to pay off for "green" energy, Ukraine began cutting the production of the cheaper nuclear energy.
The political pressure by the foreign embassies affected the Ukrainian economy, and ultimately, the caused a decrease in the income of ordinary Ukrainians.
Obviously, the Ukrainian government gives preference to private "green" energy producers. Rinat Akhmetov's DTEK controls 63 percent of thermal generation and 25 percent of renewable generation, being the largest player in this segment.
However, even after the suspension of the operation of the nuclear power plants, the funds to maintain the special tariffs for purchasing "green" energy are still not enough.