[] TL: ECOLOGICAL REFORM ENERGY IN UKRAINE SO: Oko-Institut for Greenpeace Germany (GP) DT: March 1994 Keywords: atmosphere energy ukraine oil gp greenpeace reports / Institute For Applied Ecology Essential Elements in the Ecological Reform of the Energy Industry in Ukraine Final report of a study commissioned by Greenpeace International and Greenpeace Germany Authors: Gero Lucking, Felix Christian Matthes & Jurgen Poschk (Energy department, Oko-Institut) Antonia Wenisch & Helmut Haberl (Austrian Okologie-Institut) Berlin, Freiburg, Vienna March 1994 Oko-Institut offices: Freiburg office Binzengrun 34a 79114 Freiburg i. Br. Germany (0761)473031 Darmstadt office, Bunsenstrabe 14 64239 Darmstadt Germany (06151) 81910 Berlin branch office Friedrichstrate 165 10117 Berlin Germany (030) 2291393 English translation by: Andy Elliott, Joanne Runkel & John Saul. Table of contents List of tables List of figures (NOTE: tables and figures omitted here; unscannable) Introduction and preliminary remarks Current economic and demographic situation in Ukraine General The current economic situation in Ukraine On the political situation in Ukraine The energy industry's current situation Primary energy balance Production and consumption of electrical power Power production Power consumption Exports / Imports Primary energy Electrical power The ecological situation in Ukraine Economic and demographic development Two scenarios of electricity consumption until 2010 Basic assumptions Consumption development according to sectors in Trend Consumption development according to sectors in an Efficiency version Potential energy savings Development of the Efficiency scenario A comparison of the scenarios Future availability of the electrical power in the future Development of power plant demand Backfitting and construction of Soviet designed reactors The potential of combined heating and power production Reconstruction and replacement of fossil fuelled power plants Regenerative energy sources The future role of electricity imports from Ukraine Preliminary remarks Perspectives on exporting electricity from Ukraine The role of energy source imports Summary evaluation of resources consumed to cover electrical requirements New energy policy New energy policy in Ukraine New energy policy for Ukraine Appendix 1: The electricity supply agreement between Austria and Ukraine Overall conditions for co-operation between Austria and Ukraine in the energy sector Transmission possibilities between East and West The electricity import agreement between the Osterreichische Verbundgesellschaft and Ukraine Background to electricity purchases: planned barter transactions The economic significance of Ukraine Agreement Appendix 2: Safety problems with the VVER-1000 reactors General preliminary remarks Containment Pressure vessel Reactor core Control technology and reactor protection Safety systems Secondary side Steam generators Quality assurance Bibliography Abbreviations used (omitted here) Executive Summary The Oko-Institut was commissioned by Greenpeace Germany and Greenpeace International to investigate the possibilities and conditions necessary for re-orienting the Ukrainian electricity industry along ecologically sound lines. In the foreground of the investigation were the questions of either phasing out or possibly backfitting nuclear power plants in operation or under construction. The current economical. ecological and energy industrial situations in Ukraine are described in detail. Scenarios of future development based on this were evolved and political priorities for necessary shifts are discussed. The Ukrainian power industry The Ukrainian power industry is marked by two important factors, the domestic and primarily industrial electricity consumption and the export of electricity. In the past, a considerable portion of the electricity generated in Ukraine was exported to regions within and outside the former Soviet Union. Between 1985 and 1990, the amount of electricity generated increased by nine percent to about 295 terawatt-hours (TWh). After that, power generation declined rapidly so that by 1993 only 228 TWh of electrical energy were produced. This is about 85 percent of the 1985 value. Reduction of electricity generation occurred almost entirely in fossil fuel power plants. The total generating capacity of Ukrainian power plants in 1990 was around 56,100 megawatts (MW). In 1993, there were electricity generating capacities of 3,000 MW in RBMK type nuclear power plants, 10,000 MW in VVER-1000 type plants and 818 MW in VVER-440/213 type plants. Only the reactor unit 4 at Chernobyl that was destroyed during the 1986 catastrophe was officially "shut down". This means that a total net capacity of 13,050 MW is available in nuclear power plants in the Ukraine. The electricity produced in Ukrainian nuclear power plants rose from 53 TWh in 1985 to 75 TWh in 1993. This means that the portion of power produced by nuclear facilities is 33 percent of total production (in 1985 it was 20 percent). Future economic development of Ukraine If the economic capacity of Ukraine is divided into sectors, the typical industrial sector dominance of former planned economy countries is clear, with a low level in the service sector when compared to free market western industrial countries. The high level of agricultural production is noticeable when compared internationally. Industrial production in Ukraine is marked by a high percentage of heavy industry with 77 percent of industrial production in mining, petrochemicals and machine construction. Because of a relatively high technology base and rich resources, Ukraine assumed a role as one of the most important industrial centres in the former Soviet Union. In addition, Ukraine was one of the centres of the military-industrial complex in the former USSR. It produced about half of the tanks and missiles of the Soviet Army. The arms industry is about 38 percent of total industry. It can be assumed that future development will continue to follow a pattern of economic decline which will then be followed by a boom. The boom will probably be marked by a clear structure change. Since Ukraine must import all primary energy sources (except coal) at world market conditions in the future, power production will be determined largely by domestic electricity demand. The specific cost advantages of past Ukrainian electricity exports were based especially on conditions of inexpensive energy source supply. Future development of electricity demand in Ukraine Based on the current power supply situation in Ukraine, two scenarios were evolved for expected electricity requirements until 2010. The Trend scenario presents a development that does not undertake any special energy policy efforts beyond the "business as usual" measures. In contrast, an Efficiency scenario is presented that assigns a moderate implementation rate to the savings potential already present in Ukraine. Between the Trend and Efficiency scenarios there is a potential energy saving that illustrates the room for political action. In the Trend scenario, electricity consumption in Ukraine will reach the 1990 level again in 2010. The consumption decline that began in 1990 will bottom in 1997. In the Efficiency scenario, the decline in power consumption until 1997 will follow the same route as the Trend scenario. It will not increase again until the economic situation in Ukraine stabilises. In all, the increase is more moderate than in Trend so that by 2010 electricity consumption will reach 188 TWh. This would fall short of the real 1993 value of 206 TWh by 9 percent. The scenarios presented by Oko-Institut establish a capacity requirement of 56,400 MW in Trend and 42,500 MW in Efficiency by 2010. Possibilities for shutting down Ukrainian power plants It is assumed that all presently operating Ukrainian nuclear power plants should be shut down as soon as possible because of safety evaluations. The energy economy framework is presented as follows: Between 1990 and 1993, electricity production in Ukraine dropped by 67 TWh or about 23 percent because of lowered domestic demand and reduced exports (this amount equals about 90 percent of annual Ukrainian nuclear power production). Electricity production in Ukrainian nuclear power plants has remained constant since 1990 at about 75 TWh; the decline in power production took place almost exclusively in fossil fuel power plants. Since it can be assumed that the plants that were conventionally operated in 1990 are still in existence, 90 percent of nuclear power plant capacity could be shut down immediately if the fossil fuel supply were guaranteed. For the period of time until 2010, a program is proposed to cover power needs in a non-nuclear way that included several elements: energy savings (up to 13,900 MW), increased use of combined power and heating (8,500 MW), reconstruction of existing power plants (20,000 MW), new construction of highly efficient gas-fired power plants (6,950 to 20,800 MW) and the use of renewable energy sources. The basis for all suggested measures is that the necessary energy source imports don't increase and, if possible, are lowered. Based on the evolved scenarios, it can be summarised that The backfitting of Ukrainian nuclear power plants already in operation is not economically or technically feasible. Completion of nuclear power plants currently under construction would - with a very vague increase in safety - cost between US$ 4 to 7.28 billion (possibly as much as US$ 11.2 billion) for a net capacity of merely 2,860 MW (!). In spite of these high costs, an irresponsible potential for risk through nuclear facilities would continue. The costs of a complete phaseout of nuclear energy in the Trend scenario, which reaches a total power plant capacity of 56,400 MW, are equal to between US$ 8.2 and 14.84 billion. The costs of a complete phaseout of nuclear energy in the Efficiency scenario, which reaches a total power plant capacity of 42,500 MW by 2010, are equal to between US$ 4.34 and 7.11 billion. The Efficiency scenario demonstrates that in the next 15 years, it would be possible to open up a savings potential of 13,900 MW by making structural, technological and behaviourial power saving changes. Total investments in the Efficiency scenario lie in the same dimension as the backfitting costs for nuclear power plants that would increase net capacity by only 2,860 MW (!). Over a period of 15 years, the investment requirements of a non- nuclear power industry would be US$ 550 million to one billion per year in the Trend version, or US$ 290 to 475 million per year in the Efficiency version. In all, a risk reducing strategy that is based on: increased energy savings, more efficient use of energy in combined power and heating facilities, environmentally protective backfitting as well as higher efficiency in existing fossil fuel power plants, and replacement of fossil fuel power plants by new plants, could also be economically attractive for Ukraine. It should be pointed out that the costs of the phaseout strategy described above - if they are defined in more detail - are stable and relatively easy to calculate. In contrast, every strategy that is based on the continued and new operation of nuclear power plants (including vague safety increases) implies a substantial risk potential not only for accidents and catastrophes but also for the economic situation. For a new course to be taken in Ukrainian energy policy, there must be an intent to re-orient the energy industry on the basis of the above four strategy lines. The major element of such a strategy is the systematic opening up of domestic resources (know-how, capital, technology, regenerative and fossil energy sources) through regulation, a guaranteed legal system, directed support and comprehensive information. Western aid could be an essential addition towards setting a new direction in Ukrainian energy policy. This means that a paradigm shift must take place (away from exclusively supporting the export of technologies no longer selling in the West and towards really efficient and stabilising aid for the Ukraine). Different elements of such a new energy policy are sketched in the study. Time is an important factor for the phaseout of nuclear energy and the start of an efficiency oriented energy industry. The economic structural crisis in Ukraine and the accompanying collapse of power consumption create, for a short time, a realistic chance to begin restructuring the Ukrainian energy system. It will be of great importance to support the development of reliable concepts for alternatives and to push on ahead with their implementation as soon as possible. The possible costs should not distract attention from the fact that the phaseout of nuclear power in Ukraine could also be seen as an insurance premium for Europeans, since it would completely dismantle the risk potential of the largest concentration of nuclear power plants in eastern Europe. If the most pessimistic and expensive version were chosen for Ukrainian nuclear power phaseout and if it were assumed that investment costs were covered entirely by western Europe, then over a period of 15 years this would cost every citizen in the European Union an insurance premium of, at most, US$ 2.80 per year! 1 Introduction and preliminary remarks The nuclear reactor disaster at Chernobyl in Ukraine on 26 April 1986 is the turning point in evaluating the use of nuclear power. On this day, hypotheses on the hazardous potential of this technology became reality for the first time. The actual medical, social, ecological and economic effects of the disaster are becoming alarmingly more and more clear to those concerned with them. But with the growing lapse of time the necessity to redirect energy and environmental policy which the disaster called for is manifestly being less and less considered by the general public and many decision-makers in East and West. On the one hand, problems in obtaining energy in Ukraine (with Russia halting supplies of gas, oil, nuclear fuel and equipment), and on the other, the manifestly enormous wastage of energy in private consumption and net product, epitomise both the dilemma and the potential areas for action in East European energy and environmental policy. Greenpeace in this context commissioned the Oko-Institut to examine the possibilities and implications of a phase-out of nuclear power in Ukraine. It was to outline the ecological and economic aspects of a new energy policy for Ukraine. The study would therefore look in particular at the electricity industry in Ukraine, without wholly ignoring the other spheres of the energy industry. Sections 2, 3 and 4 give a clear outline of the current situation in Ukraine with regard to demography, economics, ecology and the energy industry. In Section 5 deliberations are made on the basic lines of future development in Ukraine, and, on the basis of these, Section 6 develops two scenarios for the consumption of electrical power until the year 2010. In Section 7 the different energy supply variants for these two energy demand scenarios are discussed. Section 8 contains a summary of the basic outlines of a new energy policy both in Ukraine itself and also for Ukraine on the part of the West. The especially sensitive issues of power exports from Ukraine and the safety of WER-1000 reactors are discussed in detailed in two appendices. This study was drawn up in a very short time by a working group based in Berlin, Freiburg, Vienna and Kiev. Thanks are due here especially to Helmut Haberl and Antonia Wenisch of the Austrian Ecology Institute in Vienna, and to Anna Tsvetkova of Greenpeace Ukraine. Our colleagues in Vienna made a crucial contribution to enabling this "pilot project" for East-West cooperation, indicative of the "old energy policy", to be evaluated for this study with their in-depth knowledge of discussions on the Temelin nuclear power plant in the Czech Republic, and of Austria's imports of electrical power. Their two contributions, with minor revisions, are included in the study as independent appendices. Even today all work on eastern Europe is hampered by considerable problems in obtaining data. and Anna Tsvetkova of Greenpeace Ukraine worked tirelessly to fulfil our often detailed requests for data and to reply to the questions which kept arising. We owe her a great debt of gratitude for this. Responsibility for all data and statements is hereafter borne by the study's authors. 2 Current economic and demographic situation in Ukraine 2.1 General Ukraine's population is composed of a large number of ethnic groups (approx. 100). Next to Ukrainians (73 percent) Russians are the second largest group (21 percent or 11 million people) in a total of roughly 52 million people. In some areas - particularly in the south-east of the country - the Russian percentage of the population is 50 percent and over. The country's population development has been marked by a slight increase in the last twenty years. Between 1980 and 1992 this amounted to a total of some two million inhabitants, the equivalent of a 4 percent increase (BOIS 1992, World Bank 1993a). Settlement in Ukraine is extensively rural with few conurbations. Approximately 11.2 million people live in cities, 2.6 million of them in Kiev. The population density of 86 inhabitants per square kilometre is around the European average and at the same time well above that of the former USSR, 13 inhabitants per square kilometre (BOIS 1992). Its area of 603,700 km2 is equivalent to 2.7 percent of the former USSR. Ukraine has borders with Rumania, Hungary, Slovakia, Poland, Belarus, Russia and Moldavia. Its climatic conditions are temperate continental with subtropical influences on the south coast of the Crimea. Ukraine's endowment of natural resources is marked by large deposits of minerals. Ukraine is estimated to have at its disposal over 20 percent of the former Soviet Union's exceptional wealth of raw materials, or 5 percent of worldwide reserves. Specifically the reserves are comprised of coal, iron ore, peat, manganese, uranium, titanium, chromium, nickel, zirconium, lithium, beryllium, phosphorus compounds, kaolin, china clay, limestone, graphite, cerium, asbestos, gypsum, dolomite and salt. Ukraine possesses a high export potential for the most important reserves. The highly developed mineral extraction and processing industry, mining and heavy industry, are concentrated in the central and eastern part of the country. 2.2 The current economic situation in Ukraine Establishing internationally comparable indicators for the economic performance of eastern European countries is extremely problematic. With currencies which are not fully convertible and in part over or undervalued, the strongly distorting influence of exchange rates is always dominant and thus prevents any methodically reliable comparisons. The sectoral division of Ukraine's economic performance shows the dominance of the industrial sector, typical of former Socialist states, and a corresponding low development, in comparison to western industrialised countries, of the services sector (FAZ-ID 1993). What is striking here is the elevated importance of agricultural production, this occupying a large share when compared internationally. As the following table shows, the total growth in national income 1 (almost 30 percent between 1980 and 1991) is also largely determined by the growth in the agrarian sector, its volume of production having more than doubled in this period, while industrial production, on the other hand, was in 1991 roughly its 1980 level (World Bank 1993a). 1. Overall international accounting was not carried out according to the United Nations System (SNA, or System of National Accounts). The System of Material Product Balances (MPS) used in Eastern Europe records only part of the services sector (see UN, 1977, for the differences in approach between the two systems). Unlike the Gross Domestic Product or Gross National Product used in the SNA, MPS uses the Net Material Product to express economic power. With many Eastern European countries having now switched their system of international accounting to SNA, comparisons with data from the past are always problematic. The high share of the agricultural and forestry sector (approx. 30 percent) corresponds to a share of labour of over 20 percent. Ukrainian agriculture has an exceptionally high production potential compared to other parts of the former USSR. 53 percent of all the former USSR's sugar beet, 27 percent of potatoes, 26 percent of grain, 26 percent of vegetables and 22 percent of meat products, were produced in Ukraine (BOIS 1992). The dominant importance of Ukrainian agriculture can be made clear by international comparisons. Finland, with 11 percent of its labour working in agriculture and forestry, has the highest such proportion in Europe. The corresponding figure in Germany, as in the Netherlands and France, is around one per cent. The increase in the productivity of labour in agriculture typical of the past few years has, however, so far been wanting. Industry, employing almost 40 percent of all labour, constitutes a further core area of the Ukrainian economy. Ukraine's industrial production is marked by a high proportion of heavy industry. 77 percent of industrial production is accounted for by mining, petrochemicals and the engineering industry (FAZ-ID 1993). With its broad orientation to basic and heavy industry Ukraine's-industrial profile is largely comparable to the typical pattern of eastern European industrialisation, and possibly to countries in the early phase of industrialisation (e.g. Portugal). With its relatively high level of technology and abundant resources Ukraine achieved the role of being one of the most important industrial centres in the former USSR. On the basis of the volume of production the Ukrainian steel industry is the fifth largest in the world after the USA, Russia, Japan and China (StBA 1992b, BfAI 1993). In 1989, 54 percent of the steel was still being produced with the outdated Siemens-Martin process - energy consumption for steel production is roughly 60 percent higher in Ukraine in comparison to the West (DIW 1992). In the former USSR roughly 36 percent of black metal products and 34 percent of steel pipes stemmed from Ukrainian production. Ukraine was furthermore one of the former USSR's centres for the military-industrial complex, with half the Soviet army's tanks and missiles having been produced in Ukraine. Its share in the armaments industry is estimated to be roughly 38 percent. In spite of all its reserves of raw materials Ukrainian industry is heavily dependent on imports. The Ukrainian economy's services sector has the typical weakness of former eastern bloc countries. The proportion of people employed in it is around 27 percent (World Bank 1993a). In Germany, by comparison, 50 percent can be numbered in the services sector, and in other developed industrialised countries (Belgium, Denmark, Britain, the USA, etc.) the figure is around 70 percent. Ukraine's employment quota of 47 percent is well above the figures typical for western European countries. The proportion of the whole population in employment in Germany is around 33 percent. The catchword "hyperdepression" is often used to describe the current economic situation in Ukraine. Economic performance has fallen by about 44 percent in the past three years. A further decline of over 10 percent is expected for 1994 (FAZ-ID 1993). One of the main reasons for this disastrous development is the far-reaching process of disintegration in trade relations between the CIS countries. The orientation of the Russian economy, in particular, in substituting its own products for Ukrainian imports, presents the Ukrainian economy, which was highly integrated in the former USSR's interlocked economy, with extreme problems. The short term development of replacement markets for Ukrainian products appears almost impossible. Above and beyond this the energy supply, notable for drastic energy price rises, is a central problem for the Ukrainian economy. In 1992 production in agriculture, for example, declined by 30 percent as a result of the lack of fuel. On top of this the other branches of the economy that are particularly susceptible to falls in production are also among those with a high specific energy consumption. 2 2. The energy industry is thus both a cause of the economic crisis and (as a result of declining consumption) a sector hit by the effects of the crisis. Here there is already a question which is very important in developing forecasts for energy consumption: Does energy consumption fall because economic growth is in decline or is economic growth in decline because not enough energy can be made available? But, given that the distortions in supplies of gas and oil from Russia have been made solely because of arrears in payment, the problems in energy supply must be regarded as an element in the economy's crisis over costing, a crisis which is typical for all economies. Statistical appraisals which make special consideration of the construction sector put the development in annual industrial net product for the other industrial spheres at - 0.8 percent in 1990, - 8.9 percent in 1991 and - 12.5 percent in 1992 (in each case based on the previous year) (PlanEcon 1993). Over and above this, inflation, which is evidently no longer controllable, and on the exact size of which there is little reliable data, is having an increasingly critical effect. Consumer prices are said to have risen by about 5,000 percent in both 1992 and 1993. 2,500 percent inflation is likewise expected for 1994 3 (EIU 1993). The main reasons cited for the inflation are the lifting of price controls, cuts in subsidies, pay rises, and the enormous creation of money through the granting of state loans. A substantial proportion of the inflation has been imported - for example through Russian oil which has been raised in price by 3,000 percent. The Ukrainian Government budget, which has an estimated 25 percent deficit in the gross domestic product (GDP), likewise appears to have got entirely out of control (FAZ-ID 1993). 3. Another source cites an annual inflation of 13,000% and comments that the "Ukraine's 13,000 per cent annual inflation rale makes Russia 's economy look stable " (OECD/IEA 1993). Investment activity has also been subjected to a rapid decline corresponding to the economic data cited, with investments in 1992 falling by 40 percent in comparison to the previous year. State planning for 1993 is as a consequence expected to fall overall by 20 percent (BfAI 1993). 2.3 On the political situation in Ukraine Three years after Ukraine's declaration of independence on 24 August 1991, the political situation in the country is seeing an extensive stagnation of the political process of reform. Ukraine is today further than ever from realising the Kravchuk Government's proclaimed objectives of not only national independence but also democratisation and effecting the transformation to a market economy. The reform-oriented approaches to policy of Prime Minister Kutchma, who was invested with special powers for the first half of 1993 in order to accelerate the reform process, have by and large had no effect. The attempts at privatisation of what continues to be in the main (94 percent) a state economy, and the attempt to consolidate the national budget, have to be regarded as having failed. A major cause may be seen as being the dichotomy, typical for different CIS countries, of a reform-oriented Government and a Parliament occupied by old elites; this has led to all kinds of blocking by both sides and prevented a calculable course of reform from making a mark. In addition the old power elites in the economy and administration, whose influence and power would be threatened by reform to a market economy, are a major factor obstructing efforts at privatisation being realised. The political situation in Ukraine can in sum be described as being determined by strongly restorative leanings. Rebuilding the state administrative and legal system has by and large come to a standstill. The old decision-making structures and status interests also continue to determine the direction taken in the energy and nuclear industry. The growing influence of industry on policy in virtually all the former Soviet Union's successor states is leading to more freedom in making decisions; this is especially so for those representing the relatively rigidly organised energy industry, which is linked in part to the military- industrial complex. It is thus hardly any wonder that the political decision to close the Chernobyl nuclear power plant could, in this situation, be revoked by reference to employment and securing the power supply. Something which became particularly clear in the conflict over removing Ukraine's nuclear weapons was the interlinking of the civil use of nuclear power and military interests. When the Ukrainian state hesitated to destroy or hand over its nuclear warheads Russia countered by stopping the supply of fuel rods for Ukrainian nuclear power plants. As this indicates, it seems very much within the realm of possibility that shutting down Ukrainian power plants - as has already happened with nuclear disarmament - will be used on the part of the Ukrainian Government in negotiations with Russia or western countries. Such a strengthened link between armament and energy policy would greatly impede the establishment of an energy policy oriented on ecological and economic requirements. 3 The energy industry's current situation 3.1 Primary energy balance The primary energy balance 4 in Ukraine in the period between 1985 and 1990 was roughly constant, at approximately 10,000 petajoules (PJ). A clear decline in the primary energy balance is discernible from 1991 onwards, with consumption falling by 1993 to about 7,100 PJ, or approximately 28 percent. This rapid decline is due to the deep crisis in the structure of the economy and the concomitant negative economic growth. 4. The primary energy balance for the years 1985 to 1993 was compiled on the basis of various data (Greenpeace 1994, OECD/tEA 1992 8: 1993, UN 1993, World Bank 1993b). The main source of energy is natural gas, the share of which is 44 percent (in 1993). This proportion has risen in the last eight years (having been 33 percent in 1985). From 1985 to 1993 consumption of natural gas fell in absolute terms by roughly 150 PJ. Hard coal covers about 32 percent of primary energy demand (constant for years), making it the second most important source of energy. Demand for hard coal declined in absolute terms from 3,150 PJ in 1985 to 2,260 PJ, or 28 percent. Oil (14 percent) has a relatively low share, with demand having declined by a third compared with 1985. Ukraine has a highly intensive use of energy in what, in international terms, is relatively low productivity. This is due partly to the high proportion of energy-intensive industries (iron, steel, armaments and petrochemical industries) and partly to low efficiency in transforming energy. In 1993 the primary energy consumption per head of population in Ukraine was 136 gigajoules per capita (GJpc) while in 1992 it was 153 GJ per capita. Consumption reached a maximum of 199 GJpc in 1988. Comparative figures for other countries are given in the table below. While having a lower net product, Ukraine's specific primary energy consumption was until 1990 roughly on a level with that of Belgium, and as much as four to eight per cent above the comparative figure for Germany. Comparative figures for East Germany in the period under consideration were 225 GJ per capita (229 GJpc in 1989 and 226 GJpc in 1985). 3.2 Production and consumption of electrical power 3.2.1 Power production From 1985 to 1990 the amount of electricity generated rose by 9 percent, from approximately 270,000 GWh 5 to about 295,300 GWh. Production of power then fell steadily, with 228,300 GWh of electrical energy having been generated in 1993. This is roughly 85 percent of the 1985 figure. The share of fossil-fuelled power plants in the generation of electricity was 74 percent in 1985, and by 1993 had fallen to about 60 percent. This is a fall in absolute terms of 63,000 GWh of electrical power in comparison to 1985. The fall in power production has come about almost entirely in fossil-fuelled power plants. 5. The basis of all statements on electricity production and consumption is a relatively comprehensive set of figures for 1985 to 1933 compiled on the basis of different sources (Greenpeace 1994, World Bank 1993b). The electrical power generated in Ukraine's nuclear power plants rose from 53,300 GWh in 1985 to 75,200 GWh in 1993. This means that nuclear power's share in total power production in Ukraine is today about 33 percent (20 percent in 1985). The amount of electricity generated in hydroelectric power plants, which has been relatively constant over a period of years, is roughly 11,000 GWh. The amount of electrical power generated in nuclear power plants may, as the figure below shows, be divided between Ukraine's five different nuclear power plant sites. In the year of the disaster with the reactor at Chernobyl (1986) the production of electrical power at Chernobyl dropped to less than half that of the previous year. Power production in the remaining three reactors rose notably again in 1988. In 1993 power production at Chernobyl was about 13,000 GWh. In spite of the reactor disaster electricity production from nuclear power in Ukraine is continuing to rise in absolute terms, with the present everyday problems linked to it increasing at the same time. If power production in Ukraine's nuclear plants in 1993 is compared with the decline in power production since 1990 the following picture results: Because of the reduced demand for power for domestic consumption and export, 67,960 GWh less electricity had to be produced in 1993 than in 1990 (296,258 GWh minus 228,298 GWh = 67,960 GWh). Compared to nuclear-produced power production, which was little changed in 1993 vis-a-vis 1990, the total reduction in consumption since 1990 amounts to roughly 90 percent of the electrical power produced in nuclear power plants in Ukraine in 1993! The gross megawatt output of nuclear power plants in Ukraine was 3,000 MW in plants of the RBMK series, 10,000 MW in those of the VVER-1000 series, and 818 MW in plants of the VVER-440/213 type. The only reactor still shut down is the Unit 4 reactor at Chernobyl destroyed in the 1986 disaster. This means Ukraine has at its disposal a net capacity of 13,050 MW in nuclear power plants. Some technical data on the nuclear power plants have been compiled in the following table. The "sarcophagus" built for the Chernobyl Unit 4 reactor after the disaster is not leakproof at a number of places, as a result of which a new casing must be constructed. Estimates of the costs made so far run to (US) $ 250 million, with a further $ 2.5 billion for the building's demolition. After the Ukrainian Parliament in 1991 decided to shut down all the reactors at the Chernobyl nuclear power plant by the end of 1993, the resolution was revoked in October 1993 as the Parliament and Government had been "entreated by the management and staff at Chernobyl to rethink the date for the shutdown on account of the loss of employment and fall in production of electrical energy" (Jahrbuch der Atomwirtschaft (nuclear industry annual), 1994). 3.2.2 Power consumption In consuming 71 percent of electrical power (in 1985) industry is by far the most important sector. Industry's power consumption declined sharply in 1993 on account of the industrial downswing in Ukraine. Industry's share in consumption is today about 65 percent. The various sectors' approximate share in total power consumption are: iron metallurgy 33 percent, chemical industry 16 percent, engineering 15 percent, and nonmetallic minerals 11 percent. The nonferrous metallurgy branch consumes 7 percent of the power consumed in industry, the building trade 3 percent and wood-working 2 percent. 14 percent of power consumption is accounted for by other branches of industry. Since the industrial sector is heavily concentrated on heavy industry, with its intensive use of power, its share in the consumption of power is high even though industry only produces 42 percent of national income 6 (FAZ-ID 1993). 6. See comments in section 2 on the problems in having different international accounting systems. Power consumption in the household/small-scale consumption domain has risen in both absolute and percentage terms since 1985. 16 percent of power was consumed in this sphere in 1993 (13 percent in 1985). The consumption of power in agriculture rose from 1985 to 1991. A reduction in consumption has been discernible since then (13 percent share in 1993). Ukraine is striking in an international comparison with industrial countries in that its agriculture has a very high share (over 28 percent) in the country's total net product. But in spite of good harvests there has been a decline in production in this sector too (of 30 percent from 1991 to 1992). The reason for this is the lack of fuel for agricultural machinery (FAZ-ID 1993). The increase in the productivity of labour in agriculture is long in coming but will then lead to a higher specific consumption of power. Electrical power consumption in transport shows a similar course as in the other sectors (a rise until 1990 and fall after then); its percentage in 1993 was 6 percent. The grid losses in Ukraine in the period considered were constant at some 8 percent of production. The following table shows the consumption of power per capita in Ukraine compared internationally. Per capita power consumption in Ukraine increased from 1985 to 1990 and in 1990 was at a level comparable with that of Britain. Specific power consumption fell by 22 percent in 1993 compared to 1990. It is today roughly 3,740 kWh per capita, making it comparable to that of Italy. Besides this general comparison of specific power consumption per capita, a comparison of the specific power consumption in the net product makes a significant statement on the efficiency of the use of electrical power, especially when the comparison is made for industry. On account of the problems in comparing figures described in more detail in Section 2.2, the power consumption per person employed is used for the analysis here. In having a specific power consumption of some 12,400 kWh per employee in industry Ukraine - with a much lower specific net product and probably considerable overemployment 7, is roughly at the level of Austria (12,450 kWh). The comparative figure for (West) Germany (18,400 kWh) is about 48 percent above that of Ukraine, with Italy (16,700 kWh) exceeding Ukraine by about 35 percent, Japan (17,500 kWh) approximately 41 percent, and Britain (14,000 kWh) roughly 13 percent. Only countries which have access to large amounts of very economical energy sources, and have adapted their industrial structure (sectors for paper, special steel, etc.) to these (Norway (85,300 kWh), Finland (35,200 kWh), Sweden (38,200 kWh)), or have a generally higher rate of energy wastage (Canada (58,500 kWh), USA (25,200 kWh), are above Ukraine in the order of magnitude of their specific power consumption. 7. The following reflection should show that the efficiency of the power consumption in the Ukraine is clearly considerably overestimated. If one assumes over-employment of only 30%, the power consumption per person employed in industry rises to 17,800 kWh. This effect ought to taken into account in evaluating the international comparison below. 3.3 Exports / Imports 3.3.1 Primary energy Ukraine is heavily dependent on imports of primary energy. However, exports of primary energy do play a minor role. Although the area of Ukraine only constitutes 2.7 percent of the former USSR, some 20 percent of the former Soviet Union's mineral resources, or 5 percent of the world's reserves, are in Ukraine (OECD 1993). Ukraine has considerable coal deposits at its disposal but only modest reserves of oil and gas. In 1985 Ukraine had to import 51 percent of the primary energy sources it needed. By 1991 this percentage had risen to 55 percent. Natural gas is the most important energy source in the primary energy balance; but it is also the energy source which must in the main be imported (some 3,000 PJ in 1991). On top of this over 2,000 PJ of crude oil were imported in 1991. Ukraine is a net exporter of hard coal, brown coal and electrical power. Because it has a relatively well-developed petrochemical industry Ukraine exports oil products (heating oil, diesel oil, petrol, etc.). The table below shows Ukraine's imports against exports in the period from 1985 to 1991. Primary energy exports declined continuously in this period while imports of primary energy needed rose parallel to rising total consumption until 1990. Since 1990 imports have declined. The fall in imports since 1990 is attributable to the fall in consumption and to other increasing problems in acquiring supplies. With Russia demanding from Ukraine that the amounts supplied be paid for in foreign exchange, and with it intending to raise prices to the international market level, it is not at all clear how Ukraine is to balance its books. A debt mountain of more than US$ 0.9 billion has already now been run up with Russian suppliers. Ukraine is at the moment looking for ways of freeing itself from this dilemma. Endeavours are being made to found an inter-republic oil company with an associated clearing bank, and the Govemment is trying to reduce dependency on Russian supplies by concluding new contracts with other countries. Contracts for the supply of crude oil, the construction of pipelines and exploitation of other reserves have been concluded with Iran, Kazakhstan and Uzbekistan. But these payments must also be made in hard currency, and so the basic problems of foreign exchange being in short supply continue to exist. 3.3.2 Electrical power Ukraine is a net exporter of electrical power. The export of power reached a maximum of roughly 31,000 GWh in 1988. In 1986 the amount of power exported sank to around 19,000 GWh, but the following year again reached its 1985 level (23,400 GWh). A clear reduction in power exports can be discerned from 1991 onwards. In 1993 only 2,700 GWh of power were still being exported. This is just 9 percent of the amount exported in 1988. Moreover, in 1993 some 1,500 GWh had to be imported, so that net exports for 1993 sank to 1,150 GWh (Greenpeace 1994). Gauged on the level attained in the past, power exports are thus now of only minor importance. If Ukraine's net 1993 power export is applied to the total electrical power generated at Chernobyl, it follows that 91 percent of Chernobyl's nuclear-generated electricity is on balance consumed in Ukraine. The statement that Chernobyl cannot be shut down because the reactors produce urgently required foreign exchange for Ukraine cannot therefore be upheld for 1993. Power imports and exports can be broken down according to their areas of destination. Within the CIS, Ukraine is engaged in trade in electrical power with Russia, Belarus, Lithuania, Moldavia and the Caucasus region. Power exports were also made to countries outside the former USSR. Ukraine's imports against exports of power are depicted in the following diagram. The developments of the last few years appear to trace Ukraine's path as changing from being a big exporter of electrical power (at the end of the 1980s some 10 percent of total power production was still being exported) to that of a country producing exclusively for domestic consumption. The reason for this is in the removal of cost advantages in purchasing primary sources of energy. 4 The ecological situation in Ukraine Only isolated and sometimes not comparable information and data is available on the ecological situation and its development in Ukraine (DIW 1992, BMU 1992, Sahm 1993). For this reason only environmental pollution connected with the use of energy will be described at this point, with further discussion limited to the pollution of the air and the radioactive damage in the aftermath of the reactor disaster at Chernobyl. As a rule, data on emissions in the former Soviet Union states are compressed into a total amount which conveys little. The totals formed are of the emissions of dust, sulphur dioxide, carbon monoxide, nitrogen oxide and hydrocarbons. This total of emissions for 1989 was given as approximately 17 million tonnes. The percentage of industrial emissions in this was 61 percent, or 10.4 million tonnes, and that of emissions from transport about 38 percent The detailed emissions for the industrial sector available are compiled in the following table. The development of the emissions of each pollutant, especially of dust and sulphur dioxide, reflect two main reasons for the overall development in emissions. The changeover from electricity and industrial heat production to gas as a form of energy and the start-up of nuclear power plants dominated the development of emissions until 1989, with the influence of the economic crisis in the years after this becoming very evident. Only isolated data is available on energy sectors. The power plant sector (63 percent) and the coal industry are regarded as the main dischargers of sulphur dioxide, and carbon monoxide emissions are caused mainly by the metallurgy industry (67 percent) and coal industry (11 percent). Roughly half the emissions of hydrocarbons arise in chemical or petrochemical industry. The regional distribution of air pollution matches the industrial structure. The Donetsk region, the centre of coal mining and basic and heavy industry, accounts for three quarters of industrial emissions of pollutants. The highest summary emissions of pollutant are accounted for by the towns of Krivoj Rog and Mariupol (steel production), Dnepropetrovsk, Debal'cevo, Energodar, Novyj Svet and Kurachovo (coal-fired power plants). The Ukrainian emission limits for many pollutants is exceeded by more than fifteen times in a number of towns. Up until the beginning of the severe economic crisis in 1990 carbon dioxide emissions thus declined only slightly, this again being due to the greater use of gas and nuclear power plants. From then until 1993 the emissions of this greenhouse gas have on account of the crisis of transformation fallen to 66 percent of what they were in 1985. In having a specific carbon dioxide emission of some 14 tonnes per capita in 1985 and about 13 tonnes per capita in 1990, Ukraine was comparable internationally with Germany (including East Germany) and the Netherlands. As a result of crises this figure was reduced by 1993 to roughly 9 tonnes of carbon dioxide per capita of the population. As well as carbon dioxide emissions Ukraine probably also emits substantial quantities of methane, a greenhouse gas, arising mainly in hard-coal mining. An important, if not dominant ecological, economic and social problem in Ukraine is the effects of the Chernobyl reactor disaster. The following table shows radioactive pollution by the isotope caesium-137 in 1991. To appreciate the proper significance of these figures it should be said that the highest value measured in Germany (in Bavaria) after the Chernobyl disaster was 1 curie per square kilometer (Ci per sq km2). The data on the number of people affected in Ukraine runs to a total of between 1.44 and 2.8 million people (2.8 to 5 percent of the population), some 250,000 to 500,000 of them children of up to 14 years of age. The number of localities radioactively polluted is put at between 1,600 and 2,000, and the total area contaminated by over 1 Ci per km2 about 40,000 square kilometres (Sahm 1993, BMU 1992). This is equivalent to the total area of the German states of Berlin, Bremen, Hamburg and the Saarland. Only the scale of the numbers of resettlements is known (some 200,000 people). One thing that is certain is that, at least at the beginning of the 1990s, the resettlement plans made had not even begun to be realised. An internal Soviet Communist Party Central Committee note is cited in the study by Sahm as saying that only 85 percent of the resettlement measures planned in Ukraine had been realised (Sahm 1993). The result of the palliative policy of information, still employed today, and the economic crisis and/or the increasing number of refugees wanting to settle down, is that a large number of people will be living in polluted areas in future too. There are few specific data for Ukraine on the effects on health of the Chernobyl disaster. The study by Sahm reports an increasing number of cases of thyroid cancer in children (Sahm 1993). The situation of the roughly 120,000 Ukrainians (or "liquidators", as they are called) who were involved in the work of clearing up and decontamination is shown to be especially tragic. These people were occupied with a total of 25 million square metres of space inside buildings, 13,291 tonnes of earth, 944 localities and 160 hectares of forest. The volume of material transported totalled 1.2 billion (!) tonnes. After medical examinations only 18 percent of those involved in this work were classified as "healthy" (Sahm 1993). Although the ecological, social and economic burdens may not, for various reasons, have attained the scale of the neighbouring country of Belarus (see Oko-Institut 1993), it can be assumed the legacy of the Chernobyl disaster is an enormous burden. A particularly severe handicap exists for Ukrainian agriculture, which has to cope with the loss of 4.7 million hectares of arable land (the equivalent of the area of the German state of Lower Saxony) (BMU 1992). With Ukrainian agriculture necessarily having to orient its agricultural products to international trade, existing or suspected radioactive pollution will probably make the solid development of a viable export potential exceptionally difficult. 5. Economic and demographic development There are several, partly contrasting, tendencies in demographic development that must be reckoned with. On the one hand, the population of Ukraine has steadily increased in the recent past. Between 1980 and 1992, the population increased about 4 percent to 52.057 million. On the other hand, experience shows that countries that are going through a structural crisis because they are in transition from a centrally planned to a market economy have a strongly retrogressive number of births. Thus a gradual increase in the birthrate can be first accounted for when a stable and positive economic development occurs. For all practical purposes, the population regression will continue until at least the year 2000. Influences that are very difficult to estimate are the possible migrations of Ukrainians living abroad back to Ukraine, and also of migrations away from Ukraine to, in particular, Russia. Therefore, developments in the scenarios are based on a constant population of 52 million until 2010. Due to Ukraine's unclear political and economic structure, dependable and detailed prognoses of its economic development can't be made. The following considerations can only name relevant factors of influence and define the scope of possible developments. These factors can be differentiated by their effectiveness within a given time. 1. Short and medium term factors: The Ukrainian economy with its high degree of involvement in foreign trade, particularly in the import of energy sources, is rapidly being confronted by world market conditions. This means that the prices of import goods, and correspondingly, of export goods, are being developed under world market conditions within a relatively short period of time. Ukrainian products are in a new competitive relationship that is additionally aggravated by the attempt of other CIS states to substitute imports. The most recent increases in Russian import duties illustrate the effort to protect native producers in the face of imports (Russian import duties on foodstuffs that are particularly significant for Ukraine are supposed to be doubled). Furthermore, several "traditional" Ukrainian exports (coal, steel, uranium, non-ferrous metals, etc.) are directed towards markets that, because of the substantial supply offered by eastern European countries, are now either governed by increasingly protectionist regulations (for example, European Union import restrictions on East European steel products or cement) or regulated by cartel agreements for limiting supply (uranium, non-ferrous metals, etc.). It's not possible yet to see how much the markets for weapons exports can be comprehensively occupied. But it is certain that under no circumstances will the present production capacity for weapons be fully employed in the future. Because of these factors, that can also be aggravated by political tension, particularly with Russia, a continued decrease in foreign trade with other CIS states can be estimated for the near future. The possibility of compensating the export decrease in this area by opening other export markets must be judged very sceptically in light of the still deficient productivity of the Ukrainian economy. The reasons for this lie not only in insufficient technological capacity and the poor quality of Ukrainian industrial products when compared internationally, but mainly in the lack of a calculable reform strategy. The problems of rapid privatisation, during which the social effects of economic collapse are initially aggravated (drastic rise in bankruptcy, unemployment), leads to a procrastination of necessary reforms. This determines a substantial misallocation of scarce state resources presently going into the subsidising of sectors whose economic survival is very questionable. Among other things, the enormous state deficit (in 1992 about 25 percent of the GNP) created by this situation reduces the leeway for setting up a prospective infrastructure, particularly as the expected costs of social security during increasing unemployment in the next years will lead to increased burdening of the state budget. In addition to which, the present prospect for economic impulses coming through foreign investment is primarily negative since the construction of an efficient government administration as well as the creation of a calculable legal system haven't reached the standard needed for adequate investment security. Correspondingly, no appreciable increase in foreign direct investment can be calculated for the near future. 2. Long term factors: In looking at long term development perspectives, the basic quality of resources in Ukraine appears in the foreground. Agricultural potential and very abundant natural resources will continue to enable Ukraine to maintain a high degree of self-sufficiency in these sectors. Agricultural products will still be one of the main export goods. Among other things, it's possible that the opening of Asian markets will be of great significance since in the long run they will have a high import demand due to population growth. The same holds true for the sector of mineral resources in which Ukraine today achieves production quotas in many areas that are significantly higher than what is domestically needed. To what degree possible exports in this sector will benefit the Ukrainian economy in the future will depend primarily on how successfully the necessary technology imports can be uncoupled from a following net capital export, or, how and under what conditions it will be possible to enter the corresponding markets. Other positive factors that will be of significance to the long term economic future of Ukraine are the relatively highly qualified level of the Ukrainian population and the low cost of labour. Here it will be important particularly to transfer the resources in the arms industry to the civil sector. The listed short and medium term factors of influence will initially intensify the structural crisis of the Ukrainian economy. Unemployment and the aggravation of social problems cannot be headed off by further state subsidisation of the economy but must be softened by the organisation of a social network. The increasing transaction of foreign trade on world market price levels will lead to a significant price increase on all imported goods (especially energy sources) and the products made from them. It can be estimated that the export markets in which Ukraine has no specific geographical, qualitative or economic advantage that could result in relative price benefits, will also collapse. The expected increase in bartering 10 can offer only limited possibilities for compensation. This business will concentrate especially on those areas where there is a particular shortage of those goods meant to be exchanged, such as energy supplies from Iran (oil and gas in turn for weapons from Ukraine). 10. These are business deals in which goods are exchanged for goods. It can be assumed that the volume of production in those branches of industry that depend on imports and that are high energy users will further decrease 11. This will be primarily heavy industry and the corresponding section of the arms industry. Development potential could lie in the branches of industry that are labour intensive, particularly in light industry. But it can be generally assumed that the portion of industrial production in the net product will continue to decline. The timing of this structural transition will be determined not just by economic conditions but primarily by political factors such as the further arrangement of cooperation relationships within the CIS. Basically it can be assumed that the pressure to rationalise, induced by high energy costs, can lead to a comprehensive modernisation of those production areas where stability is guaranteed. This will lead to extensive renovation of production facilities since it can be excluded that production will be profitable in obsolete facilities, at least in those areas dependent on imports. This assumes that there will be high profits from all those rationalisation investments that can be managed using domestic capital, labour, know-how and production capacities. 11. An interesting example can be found in the discussion on the construction of new capacities for mining primary aluminium (see Handelsbatt dated 10.02.94). There already is a surplus on the world market that has led to cartel agreements on capacity shutdowns (in Russia as well). The fact that the energy costs which dominate the production costs have now reached world market levels make the sense of such investments in the Ukraine very questionable. In all, the question of whether the Ukrainian arms industry can convert its technology potential will be of conspicuous importance since it's here that significant rationalisation is possible without using foreign technology imports. For example, products from the area of military control system electronics can be used to save energy and thereby substitute for energy imports. The underdeveloped services sector will be one of the future growth areas. This assumes that at first domestic demand for services will grow, which in view of good quality standards and the consistently low cost of labour, could continue on an international level as well. It can be assumed that agriculture will stabilise as far as dependency on foreign trade development is concerned. The volume of production here will be decided mostly by the speed of technological modernisation as well as by the development of corresponding food processing industries. The basic trends described here will influence economic development in any case. This doesn't mean that these processes won't be delayed or supported by political activity, whether this occurs either through subsidisation or administrative measures. The traditional possibilities of influence plus, in part, the strongly personal entanglements between politics, administration and, for example, heavy industry, can take these processes in either restorative or structure conserving directions. Therefore it will be decisive to clarify the overlapping interests in the transition processes and to establish decision structures that can set up a counterbalance to the above-named coalitions. 6. Two scenarios of electricity consumption until 2010 6.1. Basic assumptions Based on the present electrical power supply situation in Ukraine, two scenarios will be presented for the expected power needs of Ukraine until 2010. The Trend scenario describes a development that doesn't undertake any special energy policy effort in Ukraine above and beyond the present "business as usual" dimension. In contrast, the Efficiency scenario assigns moderate transformation rates to the existing potential for saving energy. There is a gap in electrical power consumption between the Trend and Efficiency scenarios that illustrates the room in policy-making. Since power demand at least in the net product sectors is very dependent on the development of the net product itself, and orientation towards international comparisons hardly makes sense because of complicated currency exchange rates, the scenarios were completed by using the oko-Institut EBES model. 12 12. The Employment Based Energy Scenario is based on specific energy consumption per employee. In an estimate of employment structure, labour productivity and development of the net product, an internationally comparable requirement scenario is developed for the different sectors of the net product. In calculating the scenarios, four important influence quantities were determined for the different sectors of net product: the gross domestic product, the productivity of labour, the development of the labour market, the specific electrical power consumption of employees. As in previous chapters, it will be differentiated between the industrial, forest and agricultural, services, transportation and private sectors. The assigned economics data such as the development of the gross domestic product, labour productivity and labour market development remain the same for both scenarios. The only difference in the assumptions used in the Efficiency scenario compared to the Trend scenario are the specific amounts of power consumed per employee or in the household. These factors will be explained. Future electrical energy use in Ukraine will be very dependent on the development of the economy. A leading indicator of economic development is the gross domestic product (GDP). The GDP in Ukraine sank drastically from 1989 to 1993. The World Bank describes the situation with the word "hyperdepression". Others call the situation "catastrophic" or write, "The Commonwealth of Independent States is politically and economically on the brink, Ukraine is one step further." (World Bank 1993b, FAZ-ID 1993). In 1992 and 1993, the gross domestic product dropped in real terms by 15 percent compared to the year before; from 1990 to 1991 it dropped by 11 percent (FAZ-ID 1993).Based on the political situation and experience in other countries belonging to the former eastern bloc, it can be expected that the bottom of the curve hasn't been reached yet. Stability or improvement in the situation is nowhere in sight. The World Bank and other authors assume that the GDP will develop negatively as follows in the next years: - 15 percent in 1993; - 10 percent in 1994 (World Bank 1993b). The following diagram illustrates the development of the GDP taken as a basis by the oko-lnstitut that is modelled on the sector specific prognoses in (PlanEcon 1993) and the typical crisis processes in eastern European states. Starting in 1998, it's calculated that light economic growth will increase until 2010, optimistically set at six percent per year. The forest and agriculture sector could stabilise earlier. It's optimistically assumed that the bottom of the curve in the industry sector will be reached in 1996. In all, the GDP would reach the 1990 level again by 2010. Labour productivity, defined as the quotient of attained gross domestic product to the number of jobs in a country, sank during 1993 to 85 percent of the 1990 value. It is assumed that this represents a minimum determined by crisis and that labour productivity will grow again in the next years. By 1997, the assumed labour productivity development in all sectors (industry, forest and agriculture, and services) would reach the 1990 value again. It's assumed that by 2010, labour productivity in the forest and agriculture sector will grow to 120 percent and in the industry sector to 130 percent compared to the 1990 value. The services sector is entered in the scenario calculation with a conservative estimate of constant labour productivity.13 13. The basis for this assumption is the idea that the services sector, for one, will not he as confronted by competition under world market conditions as the industrial sector will be and for another, will exhibit less labour productivity due to less pay when compared internationally. The employment rate in Ukraine is presently at 46 percent. In 1985, half of the Ukrainian population held jobs (employment rate 50 percent). The rate of employment in Germany is presently 33 percent (StBA 1992a). The rate in Ukraine is comparatively high but can be expected to further decline in the future. The scenarios assume that the rate of employment will drop to about 41 percent. There will probably be significant shifting within the sectors. Because of structural problems in industry and agriculture, it can be assumed that the number of jobs in these sectors will decrease. It's estimated that there will be a decrease to 73 percent in forest and agriculture, and a decrease to 60 percent in industry (compared to 1990). In contrast, the services sector will increase after a significant drop of 45 percent compared to 1990. Since the amount of electricity consumed per employee has decreased continuously in the past years due to the much greater decline in productivity as compared to employment development, it must be assumed that when renovation and modernisation of production facilities and work procedures occur on a large scale, power consumption will increase on the whole. Work processes will become more efficient, but this is also connected to an increase in power consumption, for example through increased automatisation and more electricity for heat utilisation. It is assumed that development will approach the present situation in Germany without reaching it. This parameter will differentiate a Trend and an Efficiency development. 6.2 Consumption development according to sectors in Trend While in Germany today about 18 MWh of electricity per employee are consumed annually in the industrial sector, the Trend scenario calculates that 15 MWh per employee will be consumed yearly in Ukraine in 2010. This is about 7 percent more than the present net power consumption per industrial employee in Great Britain. In the agricultural sector, the annual consumption of electric energy per employee is 6.5 MWh for 2010, which is less than the current amount of 7.2 MWh per employee in Germany. In the services sector, the current specific power consumption of 2.5 MWh is doubled to 5 MWh per employee annually for 2010. In the Trend scenario, we assume there will be an increase in household consumption of 122 percent, compared to the 1990 value. Accordingly, consumption would reach 800 kWh per capita. Comparably, in Germany more than 1,200 kWh per person is consumed annually (excluding electricity for heating!). The relatively low consumption compared to Germany is a result of the smaller living space available per person in Ukraine 14 with all its implications (lighting, household appliances, etc.). 14. In the Ukraine, specific living space per person is not significantly more than average for the former Soviet Union. At 10 square meters, it is about a third of the German figure. Even a very optimistic construction development in living space would far from make up the difference within the given time period. Under the above assumptions, electrical power consumption in Ukraine will reach the 1990 level again by 2010 (1990: 249 TWh; 2010: 250 TWh). The decrease in consumption that has been observed since 1990 will continue until 1997 when it will reach a bottom of 144 TWh (see the following diagram). 6.3 Consumption development according to sectors in an Efficiency version 6.3.1 Potential energy savings Detailed studies on specific energy saving potential in Ukraine don't exist yet. But if it is assumed that the technology base and the age structure of capital stock facilities in Ukraine don't greatly differ from that of other regions and states of the former Soviet Union (for which in turn a whole series of analyses exist) 15, then this evidence allows the dimension of saving potential to be established. The following table lists several sources of literature on saving potential. 15. Tretyakova and Sagers 1990, Sinyak 1991+1992, Cooper and Schipper 1991 + 1992, LBL 1991, Makarov and Bashmakov 1991, Dobozi 1991, Lithuanian Ministry Of Energy 1991, Gricevich 1992, Bashmakov 1992, Oder, Haasis and Rentz 1992. It must be clearly emphasised that energy is saved not only through specific efficiency increases but also through economic structure changes as well as through incentive or information induced changes in procedure. This list also shows that the savings potential for all sources of energy, fuels and electricity, are relevant. Based on the discussion of electricity savings carried on in western industrial nations, it can be assumed that, beyond the "business as usual" trend, the realisation of efficiency strategies in all political economies is also possible. It is clear that even though the crisis laden economic development in the former eastern bloc doesn't include an active savings policy, the existing structural, technological and procedural savings potential is far from exhausted. In formulating an active electricity saving policy, the important thing is to support the degree and speed of realisation of savings potentials by using targeted instruments. There are three significant areas of potential. 1. Structural savings potential: As described earlier, Ukraine has an economic structure that is overweighted by industry. In particular, the energy and electricity intensive areas in heavy industry possess special importance. "Business as usual" economic development assumes that a largely crisis laden decline of the portion of industrial net product in the total economic output will occur. An electricity saving policy would take the economic restructuring process into consideration and pursue structure changes under the aspect of limiting electrical consumption as well. 2. Technological savings potential: The comparison of specific electricity and energy consumption in the former Soviet Union to that of western nations, as well as the substantial technical savings potential still existing in the West (see Oko-Institut 1992) imply that considerable savings potential is present. This can be implemented by the replacement of aging facilities with technologies that are also more efficient in regard to energy consumption. An active electricity saving policy would aim, on the one hand, to create incentives to speed up rationalisation investments. On the other hand, it should also set high efficiency standards through the (in any case further existing) cushioning and incentive programs. 3. Procedural savings potential: Given that a drastic increase in electricity prices is expected to continue it can be assumed, particularly in the private sector, that a basic value system change would occur on the procedural level. An active electricity saving policy would aim to stabilise and continuously promote the savings awareness created by scarcity using strictly consumption-oriented pricing and direct information. Here it becomes necessary to present and extrapolate savings potential in relation to products since problems arise when an attempt is made to relate energy consumption data to the net product in currency terms. Since this would go far beyond the scope of the study, an auxiliary construction has been used. Similarly to the construction of the Trend scenario, the structural and technological savings potentials have been depicted using the specific electrical power consumption per employee in the industry, services and forest and agriculture sectors. 6.3.2 Development of the Efficiency scenario The following assumptions were made for the projections of electricity consumption. In the industry sector, a structural and technological savings potential of one-third compared to the Trend scenario was assumed for labour productivity in 2010, which will certainly still be below western standards. This potential is due by about 30 percent to further structural changes and about 70 percent to technological efficiency improvements. This is a reduction of the specific electricity consumption per industrial employee of just under 20 percent compared to 1990. In the services sector, a specific electricity consumption of 3,500 kWh per employee compared to Trend is assumed, which is a 40 percent efficiency increase. Electricity consumption per job in the services sector in 2010 would still be about 42 percent higher than in 1990. Since electricity consumption in forest and agriculture tends to take up a small portion of total consumption, a very moderate efficiency increase of 10 percent was calculated for this sector. In households, a doubling of consumption to 720 kWh per person was assumed, which lies only about 10 percent under the Trend value. The development of the net product in the industry, forest and agriculture and services sectors was not changed compared to the Trend scenario. The decrease in electricity consumption until 1997 takes the same course in the Efficiency scenario as it does in the Trend scenario. Consumption doesn't increase until the economic situation stabilises in Ukraine. But the increase is altogether more moderate than in Trend so that by 2010 consumption could be around 188 TWh (compare the following figure). This would be 9 percent less than the present (1993) value of 206 TWh. 6.4 A comparison of the scenarios The calculations in the scenarios basically use four influence dimensions: the gross domestic product, labour productivity, the expected development of the labour market and specific electricity consumption per employee. These are integrated into the sectors of industry, forest and agriculture, services and households (unit: consumption in kWh per capita). Electricity consumption in the transport sector is directly connected to development in the industrial sector. While economic framework data in the Trend and Efficiency scenarios were the same, the Efficiency scenario used lower specific consumption values than Trend. The following table contains an overview of the specific electricity consumption values used according to sector. The following figure compares the results of the Oko-Institut's calculations to scenarios that have been published by other institutions (World Bank 1993b). There are three other scenarios for reference: an "official" one from the Ukrainian government and two that have been published by the World Bank. The World Bank differentiates between "High" and "Low" scenarios. These begin with 1990 so that substantial deviations from real consumption already occur by 1993. The official government scenario overestimates electricity consumption in Ukraine during 1993 by 20 percent. The World Bank "High" scenario is 7 percent too high. Only the World Bank "Low" scenario is correct with a projected 1993 value of 204 TWh (real consumption was 206 TWh). The comparison of all scenarios including those of the Oko- Institut starting in 1993 lead to the following results: The official government and the World Bank "High" scenarios both reach the same end value in 2010 of about 290 TWh. It must be noted that the World Bank scenario forecasts a minimal electricity consumption during 1996 that is already 6 percent more than real consumption in 1993. Since it is highly unlikely that consumption will stabilise or increase again in the next three years just after it dropped 20 percent (between 1990 and 1993), it must be assumed that both scenarios forecasted values that are too high. The World Bank "Low" scenario, which illustrates development until 1993 very well, forecasts a minimal consumption during 1996 of 167 TWh. It reaches a consumption of 253 TWh by 2010. This result is in the same dimension as the Oko-Institut's Trend scenario value of 250 TWh, but the courses of these two forecasted developments differ significantly. Both Oko-Institut scenarios take courses that lie significantly under the "Low" scenario. The Oko-Institut calculated that the economic collapse of Ukraine would lead to much lower electricity requirements than the World Bank "Low" course describes. An increase in requirements was not determined until after the bottoming phase, at which point the Trend scenario increases much more steeply than the "Low" scenario. In the Oko- Institut Efficiency scenario, electricity consumption increases generally in parallel to the "Low" scenario. Consumption in the Efficiency scenario reaches 188 TWh by 2010. 7. Future availability of electrical power in Ukraine 7.1 Development of power plant demand As this study illustrated in Section 6, the electricity requirements of Ukraine won't reach the dimensions of 1993 again until 2010. This was still about 17 percent less than the value for 1990. If the greatly diminished exports from Ukraine are included in the balance, this means that the requirements for electricity production in 1993 compared to 1990 were reduced by approximately 23 percent. This amount of less needed electricity (about 68 TWh) would be enough to replace about 90 percent of the electricity produced in nuclear power plants in Ukraine in 1993 (75 TWh). Since it can be assumed that power plants that were operated during 1990 physically still exist, 90 percent of nuclear power plant capacity could be shut down immediately if there were a guarantee of fuel supply for fossil fuelled power plants. Given the problems associated with importing natural gas from other CIS states during the past three years, it can be assumed that the limiting of electrical power production occurred exclusively in facilities fuelled by natural gas. Accordingly, the excessively polluting coal power plants, as a "domestic resource", continued to operate in any case. Returning to power production based on natural gas would therefore not lead to a substantial worsening of the current ecological situation although considerable modernisation would be necessary in the future. Under the assumption that load growth for the scenarios illustrated in Section 6 is proportionate to the demand for electricity, then the following table illustrates capacity requirements. This overview shows clearly that a capacity-related relief situation would develop out of the economic structural change taking place over at least the next ten years. In this situation, measures could be taken for energy saving (particularly in the Efficiency scenario) as well as for the construction or improvement of generating capacities. The following sections will discuss the different potentials for meeting requirements from the point of view of electrical power availability and will be combined in a concluding chapter.16 16. This view of variations deepens and makes more precise an analysis grid that was developed by Oko-Institut/ FFU 1992). 7.2 Backfitting and construction of Soviet designed reactors A series of different questions are raised in the discussion about the possibilities and costs of measures to improve the safety of nuclear facilities generally and eastern European reactors specifically. They are: whether and how improvements in safety can be reached. what standard of safety is sought, and what costs are involved. It can be noted here principly that, among other things, there is no nuclear facility that is absolutely safe. It is only possible to direct the mathematical probability of accidents into predefined "accident paths" through technical and organisational changes. The Oko-Institut pointed out the inadequacy of such safety philosophies long ago (Oko-lnstitut 1983 + 1986 + 1990). When the "safety standards" for facilities licensed in Germany are discussed here, it is not because these standards are considered acceptable for avoiding risks. The observance of these criteria while looking into safety improvements for eastern European nuclear power plants was defined as at best a goal. All the existing licensing criteria in Germany did not prevent, for example, a serious accident at the Biblis nuclear power plant that took place in 1987. In other nuclear plants in the USA, France, Germany, etc., accidents or problems with components (instrumentation and control systems, material, etc.) have occurred that made constellations visible that hadn't been considered during the safety assessment process. They usually made the backfitting necessary complicated and expensive. To illustrate the dimension of these costs it can be pointed out that backfitting measures in the USA, for example, were included in cost comparisons in Integrated Resource Planning and that here less expensive options for saving electrical power as well as alternatives for generating electricity were identified. This means that basically possibilities exist to save energy or to construct new electricity generating capacities that are cheaper than backfitting existing nuclear power plants. There is a relatively broad consensus in the West that RBMK reactors should be shut down as soon as possible (see BMU 1991) and that the VVER-440 230 and VVER-440 213 reactors still in operation can scarcely be backfitted to attain the usual western safety standard (Sailer 1992). But the backfitting of VVER-1000 reactors is still being discussed in detail. There are currently no reliable statements being made about the technical feasibility and costs of backfitting VVER-1000 reactors that are now in operation. In view of many open questions about the general accessibility of facility areas, the generally limited possibilities for improving fire protection in already operating facilities and the very vague phrase "backfitting up to western safety levels" found in project descriptions, it can be assumed that a backfitting of nuclear facilities as currently accepted in the West can't be realised. The Finnish Loviisa nuclear power plant is often used as an example to show that backfitting VVER reactors with western technology doesn't create new problems and is actually successful. In Loviisa, two VVER-440 units were brought up to a safety standard acceptable in the West at that time (the end of the 1970s) by constructing containment as well as backfitting or replacing the emergency cooling system and the I & C (instrumentation and control systems). The difference to the current situation in Ukraine is, for example, that Loviisa was thoroughly replanned by Finnish technicians in a detailed design revision before construction and then built. The VVER-1000 reactors that are still under construction are supposed to be backfitted with western I & C systems and adopt other measures for safety-technical improvement (for a detailed discussion of the safety problems of the WER-1000 see Appendix 2). Should this be more than the addition of monitoring systems, the efforts of replanning and adjustment are considerable and assume that the original design plans are available or that extensive cooperation with the corresponding firms is possible. Not only the experience with the VVER-440 units at Greifswald in eastern Germany but also with the project to backfit the Czech VVER-1000 nuclear power plant at Temelin have established that design plans were not completely available in the past. Not only current reports by the American EXIM Bank that has financed the Temelin backfitting, but also the observations of Austrian experts indicate that in any case the American partner doesn't have access to all the data even today. This problem is aggravated by the fact that necessary material samples are also missing. Since business enterprises that are interested in the backfitting of eastern European reactors continuously express a need for research studies, this is an indication that current information on these reactors is hardly sufficient. Also, it cannot be assumed today that the backfitting capacity of these reactors is guaranteed. Two examples can illustrate this (Yearbook of the Atomic Industry 1994): A German-French consortium, Framatome S.A. and Siemens AG, received 10 commissions from the European Union to review the safety of VVER-440 and VVER-1000 facilities. For this, the consortium received more than US$ 21 million altogether. In 1993, the European Union made about US$ 34 million available for further analyses of weakness and studies on the backfitting of VVER reactors. These substantial gaps of knowledge about which measures are really necessary and what they cost are an indicator of the still insufficient reliability of cost estimates on backfitting measures. Another considerable problem that occurs when western businesses are involved in backfitting is that they offer those safety- technical improvements that come from their own product line. They aren't necessarily interested in delivering the components that are most important to the facility operators. Siemens, for example, offers a series of diagnosis systems: systems to detect leaks, vibration recording, fatigue monitoring. Such systems were built into some VVER-440 reactors. In addition, equipment is offered that is meant to decrease the effects of serious accidents such as hydrogen ignitions or pressure reduction valves for containments. It's also recommended to install a motorised safety valve on the pressure holding system to provide another possibility for cooling the primary circuit (feed and bleed) in case the usual emergency cooling system fails. All of this equipment was designed for backfitting that has become necessary in western reactor firms since 1986 and its purpose is to prevent some of the accidents that could occur in excess of the original design accident estimates. This only partially meets the safety-technical needs in eastern Europe because the deficiency of reactors there obviously lies also in completely other areas (for example, in fire protection or the unreliability of working parts). Until now there hasn't been any project to backfit a VVER reactor that guarantees a licensing qualification according to German standards. The basic feasibility or sensibleness of being able to safety-technically backfit up to the German level is questionable. The cost estimates of backfitting made until now are also continuously being corrected. Safety-technical backfitting for licensing according to the German pattern would drive the costs for completing VVER-1000 units drastically up. The dimension of this cost increase 17 can be illustrated very well using the example of the Temelin 1 nuclear power plant in the Czech Republic. Because of the detailed discussion that has gone on concerning this reactor unit, the level of information is relatively good; it also has the same construction design as the majority of Ukrainian nuclear power plants. 17. The problem of getting the hard currency needed for most of the backfitting is mentioned here just in passing. In 1992, the European nuclear forum FORATOM listed the costs of backfitting VVER-1000 reactors to an otherwise undefined "western safety level" without differentiating between facilities already in operation from those still under construction, at US$ 90 to 112 million per unit (FORATOM 1992). In its study for Ukraine, the World Bank refers to backfitting costs just for parts of the I & C in Temelin 1 as being "more than US$ 100 million" (World Bank 1993b). The Czech electricity utility CEZ lists the cost of completing the Temelin 1 unit (90 percent is allegedly complete) at about US$ 700 million (Austrian Delegation 1994). The Austrian expert delegation estimated the cost of completing Temelin 1 at US$ 1.7 billion, more than double the CEZ estimate. For all that, the estimate assumed that half of the still missing parts would be produced by Czech manufacturers - at prices that lie about 70 percent lower than those of western manufacturers (Austrian Delegation 1994). CEZ estimates that completion of the Temelin 2 unit (now about 50 percent finished) while taking adequate safety-technical improvements into consideration, will cost US$ 1.7 billion (Austrian Delegation 1994). If the same premises are assumed for the half-finished Temelin 2 unit as the Austrian expert delegation assumed for Temelin 1, the cost of completion at $US 3 to 5 billion will be far more than the cost of building a brand-new power plant (Austrian Delegation 1994). Although the dimension of completion costs mentioned above is initially unbelievable, it is supported by the fact that analyses for completing the VVER-1000 reactors in Stendal (former East Germany) have shown that these costs would lie in the dimension of brand-new nuclear power plant construction (up to US$ 2.8 billion). This although a total of 4.7 billion East German marks had already been used up in building. The enterprise responsible for building calculated that the cost for continuing construction would have added up to more than 20 billion East German marks (UfU/Oko-Institut 1990). There are still 6 VVER-1000 units under construction in Ukraine. The stages of progress are very different. Farthest along is Zaporozhe 6, which is allegedly 95 percent complete 18 both in constructing and equipping. The work is also relatively far along on the Khmelnitski 2 and Rovno 4 units (60 percent each) (World Bank 1993b). 18. It must ben noted that these statements are hardly reliable. It is still unclear how the relationship of cost equivalents to the degree of technical completion can be applied. In January 1994, construction on Temelin 1 was completed. The assembly passages were open and hadn't been sealed yet. Except for the reactor coolant pumps, all of the larger components had been installed. The electrical connections and control lines as well as parts of the pipeline system weren't yet installed. The installation of I & C equipment and the computer system hadn't started yet. This means that Zaporozhe 6 is farther along in completion than Temelin 1 in the Czech Republic. However this is only under the condition that no major changes will be made. But it can be assumed that if western safety standards are taken into consideration, a VVER-1000 reactor can not be put into operation in its original form. So it must be assumed that the cost of backfitting the nearly finished VVER-1000 unit in Zaporozhe 6 up to an internationally acceptable safety level will lie in the same range as that of Temelin 1 (US$ 700 million to 1.7 billion). The Rovno 4 and Khmelnitski 2 reactor units are at about the same stage of progress as the Temelin 2 unit. Here as well, the costs for the Czech unit could be carried over to estimate the costs of the Ukrainian units. It can be derived that the amount of equipment that is imported has a significant influence on the cost structure of backfitting. The following table illustrates the percentage of equipment imported at present to outfit nuclear power plants in Ukraine. This overview makes it clear that nuclear power is not a "natural resource" in Ukraine. On the contrary, the great need for imported components creates high costs in foreign currency. The Zaporozhe 6, Rovno 4 and Khmelnitski 2 reactor units appear to have their basic equipment (pressure vessel, steam generator, main coolant pump, etc.), so that only a portion of the other components need to be purchased abroad or manufactured in Ukraine. Although the capacities to develop or manufacture some of the components do exist in Ukraine, due to time restrictions it seems unlikely that they can be used for the completion of the three above-named units as long as western safety standards are being observed. The completion of Zaporozhe 6, Rovno 4 and Khmelnitski 2 alone will probably cost between US$ 4 to 7.28 billion, possibly even US$ 11.2 billion (plus interest costs), without even the guarantee that current western safety standards would be met. Added to these expenses are the costs of fuel. Ukraine has its own uranium deposits but doesn't have facilities to enrich the uranium or to produce fuel rods. It trades uranium for fuel rods from Russia. Because there is a glut of natural uranium on the world market, the gap between the price of uranium and the price of fuel rods would further increase the Ukrainian deficit in western currencies. Lastly, the problem of radwaste disposal in Ukraine is still unsolved since spent fuel rods are currently not being taken back by Russia and in Ukraine itself there are, at the most, plans for an interim storage site at Khmelnitski. In all, it can be said that the continued operation of active nuclear power plants in Ukraine appears irresponsible; the backfitting of facilities to meet western safety standards (which we think are still insufficient) is technically impossible. There are still plans to complete unfinished VVER-1000 reactors that seem to allow such backfitting. The costs of completing a net electricity generating capacity of about 2,850 MW would reach between US$ 4 to 7.28 billion and there are credible estimates that reach US$ 11.2 billion. It can be said that the continuation of Ukrainian nuclear projects carries with it incalculable safety and cost risks. The principal problem with the backfitting capability of VVER reactors is indirectly confirmed by the question of liability. In eastern European states, nuclear power plant operators are generally not liable for possible damage, potential contractors for backfitting work also assume no liability 19 and on the insurance market, the risks of East European reactors are classified as incalculable. 19. Compare the comments of the European nuclear forum (FORATOM) or the demand of the American firms Bechtel Power Corp. and Westinghouse Electric Corp. to be released by the U.S. government from all liability risks (Handelsblatt dated 10.11.1993 or Frankfurter Rundschau dated 19.02.1994) 7.3 The potential of combined heating and power production A large part of the Ukrainian population lives in communities. In 1991, it was about 68 percent. At least 20 percent of the population lives in large cities. Since a substantial portion of the net product takes place in concentrated centres, there is considerable potential here for combined heating and power generation. This is supported by the existence of large heating and power plants in Kiev (1,200 MW) and Charkov (470 MW), for example. Also, about 60 percent of the district heating plants that don't generate electricity are more than 20 years old and probably need to be replaced in the foreseeable future. Since there is no data on the potential amount of combined heating and power production available, only an estimate of potential according to plausibility criteria can be made here. If it is assumed that the structure of inhabitance in the urban centres of Ukraine are similar to that of eastern Germany, then a plausible estimate of combined heating and power production can be derived from existing studies of potential. Given that Energie Consulting Heidelberg (Kaier 1992) estimated potential at 6,800 MW for the total population of East Germany, a specific combined heating and power potential of 400 to 450 kW per 1000 inhabitants is calculated. If this specific potential is transferred to the urban population of Ukraine and if a safety rebate of 30 percent is assumed, there is a potential of at least 10,000 to 11,000 MW of electrical power. If the share of domestic supply is taken into consideration, investment costs vary from US$420/kW (much domestic supply) to US$ 560/kW (little domestic supply) for these facilities. This adds up to an investment between US$ 4.2 and 6.2 billion. Since currently a large part of the heating in urban centres and cities is provided by gas, it can be assumed that efficiency improvement through new combined heating and power facilities would not create additional costs because of higher gas imports. In addition, the construction of combined heating and power plants would compensate the necessary investments otherwise needed in district heating plant modernisation and repair. 7.4 Reconstruction and replacement of fossil fuelled power plants In 1991, there were a total of 35,500 MW fossil fuelled power plants installed as well as 2,200 MW industrial power plants. If the capacity shares of single energy sources are estimated on the basis of used amounts of fuel, the following structure of fossil fuelled power plants results: about 12,100 MW coal-fuelled power plants about 7,500 MW oil-fuelled power plants about 15,800 MW gas-fuelled power plants This structure gives just a rough picture of the real situation since there are a large number of mixed fossil fuelled plants. But the structure of energy sources used will play a dominating role in future developments, so that the assumption made above is sufficient for the estimates described. The World Bank report on Ukraine (World Bank 1993b) assumes that until 2005 there will be an inoperation of fossil fuelled power plants with a capacity of about 1,700 MW. This includes two units in Luhansk (700 MW), one unit in Pridniprovsk (600 MW) and one unit in Slaviansk (80 MW). For efficiency as well as environmental reasons, all fossil fuelled power plants in Ukraine must be replaced or reconstructed (World Bank 1993b). If the reconstruction costs and the costs of desulphuration, nitrogen removing and filtering over the next years are assumed to be from US$ 280/kW (much domestic supply) to US$ 560/kW (little domestic supply), these add up to an investment requirement of around US$ 5 to 10 billion for the coal and oil fuelled plants. On the average, net efficiency (including the electricity consumption of the flue gas pollution abatement facility) should improve by at least 3 percent.20 20. This amount of improvement will be sought in the reconstruction of brown coal-fired power plants in eastern Germany. The construction of modern gas and steam turbine power plants that reach an electrical efficiency of more than 50 percent could replace the reconstruction or renovation of existing gas or steam turbines. Given an average, and optimistic, efficiency of 35 percent for gas facilities operating until now, using the same amount of gas as in 1990 in new facilities would open up a capacity of 21,000 MW. This measure would need investments of about US$ 5.88 to 11.76 billion, depending on differing estimates of the share of domestic production (US$ 280/kW for much domestic supply or US$ 560tkW for little domestic supply). In another variation, if a present efficiency of 25 percent were assumed, the replacement of all currently existing gas facilities coupled with the same consumption of gas would yield a total capacity of 31,600 MW. Using the same specific cost basis as above, this variation would cost between US$ 8.85 and 17.7 billion in investments. Energy savings could be planned in the electricity generating as well as in the energy consuming sector. A current investigation by the Vereinigung Deutscher Elektrizit tswerke (Union of German Electricity Plants) revealed that self-consumption of electricity in East German power plants (that are partially comparable to those in Ukraine) was about 25 percent higher than that of West German electricity generating facilities. This although western plants consume considerable amounts of power in environmental protection installations 21. More efficient motors, plants (that are partially comparable to those in Ukraine) was about 25 percent higher than that of West German electricity generating facilities. This although western plants consume considerable amounts of power in environmental protection installations 21. More efficient motors, pumps and improved I & C could also reduce self-consumption by 50 percent in Ukrainian fossil fuelled power plants. By careful estimate, taking the increased self-consumption of environmental protection installations into consideration, an additional potential of about 1,000 MW electrical capacity could be opened up. 21. See Strom Themen 11, No 3 7.5 Renewable energy sources The broad agricultural basis of Ukraine suggests that considerable potential is available in biomass use. This potential could be very attractive to the Ukrainian energy industry since biomass is an original domestic energy source. An estimate of potential is not possible here because not enough data exist. Because of its good weather, the southern Ukraine and especially the Crimea is well suited to winning solar and photo-voltaic energy. Again, an estimate of potential can't be made in this study because not enough specific data exist The southern Ukraine is also very well suited to gaining wind energy. However, very little information is available on possible potential or development plans. According to information about the coast area, not available in detail, a potential of 1,000 MW in wind energy can be calculated (Siemens point of view, September 1993). Because the data basis is so poor, renewable energy sources can't be accounted for in the following strategy considerations. But this doesn't mean that the relief effects of these technologies should be underestimated as domestic resources, particularly in the Ukrainian situation. It must be said that an urgent need for investigation remains here. 7.6 The future role of electricity exports from Ukraine 7.6.1 Preliminary remarks The role of potential electricity exports is of outstanding importance in the planning of the Ukrainian electricity economy. As was shown in Section 3, Ukraine is traditionally an exporting state. Since the possible meaning of exports is dependent on a whole series of technical and economical structures, an initial attempt must be made to describe the economic sphere of such exports. Since there is so little documented experience or knowledge available, the study will analyse here an electricity deal planned between Ukraine and Austria. Although these exports were never realised, the conditions that were discussed give an excellent impression of the potentials and involvements of such business deals. The comments on this are in Appendix A of the study. 7.6.2 Perspectives on exporting electricity from Ukraine In considering the future role of the electricity trade, it can be assumed that the only economically interesting prospect for Ukraine is in exporting to western European countries. East European states such as Belarus or Rumania are hardly eligible as potential customers for Ukrainian electrical power because of their lack of hard currency. The question of exporting to western countries depends on whether Ukrainian electricity exports can fulfil the conditions that are set. From a purely economical point of view, the issues of guaranteed delivery and possibly cheaper prices compared to domestic electricity production are the basic conditions to be met before import contracts can be concluded. In the past, Ukrainian electricity exports - similar to exports in the petrochemical sector - were based on using raw materials whose prices were far below the world market level. Now and in the near future, a considerable portion of Ukrainian power plant capacities will be dependent on energy source imports that are unstable and priced on the world market level. Due to their low conversion efficiency, Ukrainian power plants will hardly produce lower priced electricity than their western counterparts. Added to this are the costs of transport in the form of power line investment and transmission loss. Given distances of 1,000 to 2,000 kilometers to western European consumption areas, these factors alone would add about US$ 0.03 to 0.06/kWh to the transport costs. Also, it would probably be very difficult to guarantee the delivery of electricity under the present conditions of uncertain Russian energy source deliveries. Under all these conditions, it is hard to see in what way electricity exports based on imported fossil fuel could lead to a hard currency surplus for Ukraine. Due to limited domestic resources, an export configuration based on domestic fuel would also offset the costs of imported energy. As described above, important parts of the technology needed in building a nuclear power plant in Ukraine would have to be imported at world market prices. Since fuel supplies for nuclear power plants are also ultimately guaranteed only by importing them, nuclear power in Ukraine must also be classified as import energy that will be produced in the future at world market prices. This development is also supported by that fact that on 27 October 1993, the western European firms Framatome, Cogema and Siemens AG founded a company to supply VVER reactors with fuel cassettes. Diversifying the purchase of nuclear fuel means that Ukraine would pay about 20 percent more for western than for Russian supplies (Interfax - Ukraine Business Review No. 41). This means that possible cost advantages of Ukrainian nuclear power in contrast to western European production could only come from reduced facility technology, particularly in safety-technical equipment. If limitations of the safety standards are not accepted and if more and more complicated conditions for domestic coal mining are assumed so that Ukraine will also remain dependent on energy source imports in the future, then exporting electricity in any useful dimension will not be rational. 7.7 The role of energy source imports Because of complex political tensions with neighboring states, an adequate guarantee of supplies can be reached only through the diversification of sources and supply channels. It can be principly assumed that, in any case, it is necessary for Ukraine to import resources, which include not only western capital but also energy sources. Until Ukraine has an equal place in the international division of labour, its weak currency 22 will make the import of resources disproportionately expensive if hard currency profits can't be made in turn. This cost pressure will hit the energy industry in particular since the possibilities of turning the costs over to the Ukrainian economy and population are very limited. 22. To evaluate eastern European currencies see (Frohlich 1992). The availability of imported energy sources will be a dominating development factor for Ukraine in the future as well. In the near future, practically all of the imported energy sources will be available only at world market prices and for hard currency. The diversification of suppliers being sought (Iran, for example) won't change this situation very much. To a limited degree, domestic energy sources, particularly coal, are available in Ukraine. It is not clear how much potential exists in regenerative energy sources. But it can be assumed that as far as Ukraine's very large agricultural production potential is concerned, a large portion of requirements could be covered by regenerative energy. Among other things, this variation could become more important as imported energy prices explode. The most important and therefore most attractive domestic resource is probably the potential for energy savings. The room for development of this potential in the electricity sector was illustrated in Section 6. It must be noted that there is considerable savings potential of all energy sources in the industrial, agricultural and services sectors as well as in private households (see the comments in Section 6). Although oil is used most in the power plants, we estimate that the portion of natural gas consumption used in industry, services and in households is about 75 percent. Experience in energy consumption for heating living space shows that, if the effort were made, energy could be saved here by 50 percent. The heavy use of imported natural gas to replace dangerous nuclear power plants could therefore be at least partially compensated by savings in other consumption sectors. 7.8 Summary evaluation of resources consumed to cover electrical requirements The previous chapters discussed the different resources used to cover the electrical requirements we presupposed. According to our assumptions, by 2010 Ukraine will need a power plant capacity of 56,400 MW in the Trend scenario and of 42,500 MW in the Efficiency scenario. At the same time, investments in pollution control must be made in any case, particularly in the coal-fired power plants. In conclusion, the following basic statements can be made: 1. The continued operation of RBMK and WER reactors must be rejected for safety reasons. 2. Nuclear power plants in Ukraine must be shut down as soon as possible. For technical and cost reasons, it is irresponsible to backfit operating reactors. 3. It would be possible to shut down all currently operating nuclear power plants in Ukraine very soon. This statement is based on the current drastic decrease in domestic power consumption and the moderate consumption projected for the future. The 1990 level of consumption won't be reached again until 2010 at the earliest. 4. Three reactors with a net capacity of 2,860 MW, that are now in an advanced stage of construction, could be backfitted to attain a western standard of safety, which we think is still too low. But this would lead to an incalculable cost risk of up to US$ 7.28 billion (possibly even up to US$ 11.2 billion). Also, the unsolved end disposal problem (and its costs) mean that this variation of nuclear power must be rejected. 5. An investment of between about US$ 4.2 to 5.6 billion could open up a combined power and heating potential of 10,000 MW. 6. Coal as a domestic energy source will continue to be used for power production in Ukraine in view of the problems associated with importing oil or gas. The environmentally protective backfitting of coal and oil-fired power plants would need an investment of about US$ 5 to 10 billion. These costs accrue regardless of the decision to continue using nuclear energy in Ukraine. 7. If the same amount of natural gas were consumed as in 1990, the present total capacity of gas-fired power plants could increase from 15,800 MW to 21,000 - 31,600 MW. The required investment here would be in the dimension of US$ 5.88 to 11.76 billion (21,000 MW) or US$ 8.85 to 17.7 billion (31,600 MW). 8. Efficiency increasing measures in the fossil fuelled power plants could open up an additional capacity of about 1,000 MW. Under the assumption that a power plant capacity of 2,200 MW will remain in the industrial sector and that hydroelectric plants will continue to supply 4,600 MW without greater investments, capacity requirements of 49,600 MW in the Trend and 35,700 MW in the Efficiency scenarios remain. In any case, domestic coal fuelled power plants (about 12,000 MW) must be reconstructed for further operation. If the same is assumed for oil fired power plants (7,500 MW), and a capacity gain of about 750 MW through efficiency increasing measures is assigned, an additional power requirement of 29,350 MW (Trend) or 15,450 MW (Efficiency) remains. A capacity potential of at least 8,500 MW for combined power and heating facilities can be opened up through the substitution of existing heating stations and the development of new district heating customers. A portion consisting of 20,850 MW (Trend) or 6,950 MW (Efficiency) remains that must be covered by reconstructed or new gas-fired power plants. If an average value is assumed for gas power plants existing today, new power plants would consume about 20 to 74 percent less natural gas to produce electricity as in 1990. One real additional cost of such a phase-out strategy would therefore be about US$ 2.38 to 3.2 billion for combined power and heating (crediting 30 percent to investments in replacements that are necessary anyway in the production of heat), as well as US$ 5.8 to 11.7 billion (Trend) or about US$ 2 to 3.9 billion (Efficiency) for modern gas-fired power plants. Over a period of 15 years, this investment requirement would be US$ 550 million to one billion per year in the TREND version, or US$ 290 to 475 million per year in the Efficiency version. In contrast to these dimensions are the above-estimated investments of up to US$ 7.3 billion (US$ 487 million per year over 15 years) needed to complete nuclear power plants that increase net capacity by 2,860 MW ( t). It can be summarised that 23 23. All given costs are initial and rough estimates that will prove to be very conservative after more detailed analysis is made and when a more exact view of import parts is taken that is consistent with very "sure" assumptions. The backfitting of Ukrainian nuclear power plants already in operation is not economically or technically feasible. Completion of nuclear power plants currently under construction would - with a very vague increase in safety - cost between US$ 4 to 7.28 billion (possibly as much as US$ 11.2 billion) for a net capacity of merely 2,860 MW (!). In spite of these high costs, an irresponsible potential for risk through nuclear facilities would continue. The costs of a complete phaseout of nuclear energy in the Efficiency scenario, which reaches a total power plant capacity of 42,500 MW by 2010, are equal to between US$ 4.34 and 7.11 billion. The costs of a complete phaseout of nuclear energy in the Trend scenario, which reaches a total power plant capacity of 56,400 MW, are equal to between US$ 8.2 and 14.84 billion. In all, a risk reducing strategy that is based on: increased energy savings, more efficient use of energy in combined power and heating facilities, environmentally protective backfitting as well as higher efficiency in existing power plants, and replacement of fossil fuelled power plants by new plants, can also be economically attractive for Ukraine. It should be pointed out here in particular that the costs of the phaseout strategy described above - if they are defined in more detail - are stable and relatively easy to calculate. In contrast, every strategy that is based on the continued and new operation of nuclear power plants (including vague safety increases) implies a substantial risk potential not only for accidents and catastrophes but also for the economic situation. 8. New energy policy 8.1 New energy policy in Ukraine Initially, the most pressing area for action in a new Ukrainian energy economy is paradoxically not energy policy but economic structure policy. The way economic conversion takes place in Ukraine will decide more about future energy requirements and the corresponding energy source supplies and investments than, as would otherwise be expected, the implementation of energy savings technology. There are many problems involved. The starting point for an economic structure change is completely unclear and not decided by economic calculation. An obscure, highly subsidised, greatly administrative economic structure and a political arena in which actors from government and industry protect their considerable power-holding and influence interests, create extremely difficult conditions for the active support of an economically attractive and ecologically innovative structure change. It will be crucially important during the transition process to expose overlapping interests and to estabLish decision hierarchies that build a counterweight to the conservative interests of heavy industry (that have, among other things, a traditionally strong personal involvement with politics). The discussion around the use of nuclear power has a high symbolic value in the policy of all East European states. Nuclear power plants are generally a sign of the fact that industrial high-tech is in their domain; they symbolise for many that the East European states are active as developed industrial nations. A symbol that dominates policy in all countries of the world must be dismantled. This makes transparency in the energy policy discussion necessary. In view not only of the considerable dangers of nuclear technology that have already been so painfully experienced in states like Ukraine but also of the resulting effects and costs that can hardly be quantitified today (disposal of radwaste, decommissioning of facilities, reduction of accident effects, etc.), the evolution of alternative development options must be made with the same detail and resources as was the case for present energy planning. This must be followed by a public and understandable debate that would encompass all the relevant energy and environment groups and that would not be dominated by either energy strategists in government and industry or the scientific institutions connected to them. As this short study has outlined, it is ecologically compelling and economically interesting to make the shutdown of existing nuclear power plants as well as the construction stop of all incompleted nuclear power plants a central point in the Ukrainian energy policy. In western Europe, working out energy concepts has proven to be a basis for such public decision making. These concepts give a clear and comprehensive description of the different options available to cover energy service requirements and their implementation, and they estimate the economic, ecological and social consequences of different strategies. Working out a comprehensive resource plan is the most important element of such energy concepts for the East European states. These resource plans must describe all variations of energy use (energy saving and energy producing), differentiated according to domestic or imported resources (technologies, know-how, capital, etc.).24 24. For example, energy savings in living space heating should be economically and ecologically very attractive. Making relatively easy changes in the heating system (the use of thermostats, for example) could implement domestic technologies and labour, as opposed to spending hard currency to pay for energy source imports. Energy saving as a domestic resource can often become a central part of energy policy. The possibilities for opening up domestic energy savings resources is, in view of industrial tradition and the existing potential of intelligence in Ukraine, much better than in many other former states of the former Soviet Union. The same holds true for an increased use of combined power and heating in the industrial as well as the private sector. Ukraine, important as an agricultural country as well, could find the development of domestic potential in renewable energy sources very attractive. This applies as much to biomass use in forestry and agriculture as to technologically easy solar energy (southern Ukraine lies in the same latitude as the south of France and northern Italy!) and wind energy (particularly on the Ukrainian Black Sea coast). In any case, the improvement and environmentally protective reconstruction of fossil fuelled power plants remaining in use belong to the priority duties of Ukrainian energy policy. It shouldn't be underestimated that the aim of opening up domestic (saving) resources will meet considerable resistance. The responsibility for importing energy sources is attached to administrative power over substantial amounts of currency and leads to strong positions of power for the responsible institutions and persons. A diversified use of currency for efficient energy saving investments, for example, would challenge this traditional claim to power. The disentanglement of government and energy utility concerns and the establishment of an effective controlling office for investments and energy prices belongs to the most important energy policy duties. In this context, special significance is attached to the disentanglement of the arms industry, the military and the energy industry. One of the problems involved is that Ukrainian nuclear power plants are used as negotiation material or for extortion. The conversion of the above-named resource plans should be operationalised through a modification of Integrated Resource Planning for the typical East European situation (differentiating between domestic and foreign resources, etc.). The different instruments of an efficiency-oriented energy services economy can't be discussed in detail here; just a few key areas will be pointed out. Particularly in the transformation phase of the economy, the connection of possibly necessary subsidising to the express purpose of saving energy can be an extremely effective instrument in increasing efficiency. The same holds true for buildings and installations largely in possession of the state, in which efficiency standards can be implemented during reconstruction that must be done anyway. The comprehensive enlightening and informing of industry and population, in connection with pilot projects and the establishment of innovative instruments must belong to the central areas of ecologically oriented energy policy. It must be pointed out that the conversion of the energy strategy needs Ukrainian decisions and intent as the initial impulse. Western responsibility is to support such intent and to guarantee assistance at critical points. Crucial preconditions are a clear decision process and a certain minimum of investment security. 8.2 New energy policy for Ukraine The energy policy transformations in Ukraine need support from the West at different places. This support will have to continue to orient itself to the facts that: there is a dramatic medium term economic crisis with permanent structural unemployment, the Ukrainian state will remain highly in debt and even small foreign deficits will be difficult to compensate using exports, political tensions with eastern neighbors of Ukraine will continue and possibly escalate. Western support for East European transformation economies has been limited until now mostly to export promotion of its own industries. Regional industrial or partial national interests (that dominate others) have been in the foreground. The best examples of this are, on the one hand, the state secured credit guarantees for exports from East Germany to East Europe, and on the other hand, the aggressive financing strategy of the USA. The EXIM Bank (Export-Import Bank of the United States), a government supported institution to promote exports, describes its involvement in the completion of the Czech nuclear power plant at Temelin as follows: "The mission of the Bank is to create and sustain American jobs by financing U.S. exports, while providing the V.S. taxpayers with 'reasonable assurance of repayment' on their investment. The bank steps in where the commercial market is not available, or where it is needed to level the playing field for U.S. companies facing foreign competition backed with financing from other governments. Financing for the U.S. exports was not available without Ex-Im Bank's support." In view of the conditions named above and the western interest in stability in eastern European states, a paradigm change must be introduced here. Western support must have predominate effects on the net production locally and must be calculable and stable in the long term in its economic and ecological consequences. Since there are so many unsolved questions about the further operation, the backfitting and the completion of eastern European nuclear power plants as far as safety, waste disposal and decommissioning, fuel purchasing and the barely calculable costs are concerned, western support almost exclusively of nuclear technology must end. A large portion of scarce investment resources are captured here, the effect on employment is negligible, the development of domestic know-how potential takes too long and the highly specialist nature of the industry means that it has little synergic effect on other sectors of the Ukrainian political economy. The systematic opening up of energy efficiency potential can, on the other hand, be effective to "help one help oneself" and support market economy structures corresponding to the Ukrainian market potential and production capacity. At any rate, the effect on employment would be larger than an orientation towards an extremely centralised supply technology. It shouldn't be ignored that traditional instruments and in particular, the financing instruments for small-scale and efficiency-oriented support, are barely practicable. In particular, the development banks are interested in projects with a large financial scope and with high-ranking and established responsible bodies. Because of this situation alone, projects oriented towards differing domestic resources are disadvantaged. As an alternative, pool models with project carriers could be set up on national, regional or local levels. The precondition for such project support would be the submission of a comprehensive resource plan and a possibly high amortisation factor in which prices were comparable within the national economy.25 25. For example, gas import prices should be applied to [be so high as to encourage - trans. note] investments in heat savings, even if the energy source is traded at lower (subsidised) prices on the domestic market thus making amortisation less attractive. A decisive point for the development of domestic production potential could be an increased orientation towards know-how and license transfer. Since production capacities for all the important components of the above-named technologies do exist in Ukraine, it will be important to transfer system know-how. This could be, for example, the subsidising (possibly limited in time) of license fees (especially for combined heating and power facilities, steam and gas power plants as well as savings technologies) 26. An interesting model for this support could be a graduated interest reduction model. The most attractive interest variation should be reserved for transfers or credits that either, through the measures described above, pull in a high domestic net product or use existing production and development capacities. The least attractive interest variation should be offered for the import of equipment. 26. A very interesting model case for this strategy is the currently negotiated cooperation project between the western European lightbulb industry and Bulgaria. It would make the production of energy saving lightbulbs as well as their sale at acceptable prices in Bulgaria possible. The precondition for this support should be the obligatory and fixed phaseout of nuclear power in the Ukrainian energy industry. Short term assistance during an immediate nuclear power phaseout could be in the form either of time-limited guarantees of energy source imports to keep existing gas-fired power plants in operation or of imports of electricity from the West 27. 27. According to unconfirmed reports, the East European union (EVU VEAG), that is still connected to the eastern European network, supplied about 600 MW capacity to the Ukraine for frequency stabilisation. Time is an important determinate of western support measures. The economic structural crisis in Ukraine and the accompanying collapse of power consumption create, for a short time, a realistic chance to begin restructuring the Ukrainian energy system. The part of western industry that is interested in this sector has recognised its chance 28 to export nuclear facilities. It will be of great importance to support the development of reliable concepts for alternatives and to push on ahead with their implementation as soon as possible. 28. "Osteurop: Die Talsohle der Stromnachfrage jetzt zur Kraftwerksnachriistung nutzen" ["East Europe: Utilising the Slack in Power Demand to Backfit Power Plants Now'] (Handelsblatt dated 9 February 1994). The possible costs should not distract attention from the fact that the phaseout of nuclear power in Ukraine could also be seen as an insurance premium for Europeans, since it would completely dismantle the risk potential of the largest concentration of nuclear power plants in eastern Europe. If the most pessimistic and expensive version (see Section 7) were chosen for Ukrainian nuclear power phaseout and if it were assumed that investment costs were covered entirely by western Europe, then over a period of 15 years this would cost every citizen in the European Union an insurance premium of, at most, US$ 2.80 per year 29! 29. Basis of calculations: the pessimistic assumption that phaseout will cost US$14.8 billion over 15 years, 343 million European Union population. A.1 Appendix 1: The electricity supply agreement between Austria and Ukraine A.1.1 Overall conditions for co-operation between Austria and Ukraine in the energy sector In 1992, Austrian imports from Ukraine amounted to US$ 77.4 million, 90 percent of which consisted of raw materials (iron ores). In the same year, Austria exported goods to the value of US$ 65.7 million, mainly in the form of processed goods (US$ 32.7 million, of which US$ 28.6 million were accounted for in iron or steel) and machines/vehicles (US$ 12.8 million). Trade between Ukraine and Austria is undergoing a process of drastic decline (Foreign Trade Office, Kiev 1993). Due to the depressed state of the economy in Ukraine, western companies are generally only prepared to supply large quantities of goods in return for direct exports from Ukraine. In 1992 alone, the share of barter business in Ukraine's foreign trade increased from 12.8 percent at the beginning of the year to more than 60 percent at the year's end (Foreign Trade Office, Kiev 1993, see also Boss 1993, WIIW 1992). Seen against this background, the planned electricity supply agreement would have constituted a significant project in terms of quantity (tens of millions of dollars). On the other hand, Ukraine is in urgent need of the modern power plant technology which constitutes part of the agreement. By the year 2000, approximately 70 percent of the main equipment in Ukrainian thermal power plants will have reached the end of its projected life and have to be replaced (Reinmuller 1993). As Ukraine will certainly not be in a position to import this equipment, the country is trying to establish its own manufacturing industry for a large part of the plant required (gas turbines, steam generators) 1. Above all, Ukraine lacks know-how in the field of environmental technology. 1. Accordingly, the Ukraine requires 10 steam generators for circulating fluidised heating in the next 10 years to replace out-dated coal-fired steam generators with 100 MW and 50 steam generators with 200 MW; in total 11,000 MW (Jatzkevitch and Borisov 1993). Ukraine is only in a position to import the relevant power plant and other energy technologies in exchange for exports. For this reason, the Austrian Verbundgesellschaft Company tried, at the initiative of their general manager, Walter Fremuth, to enter the clean-up business by establishing a joint venture for East- West energy co-operation in 1991 (AG fur Ost-West Energiekooperation, abbreviated to Energokoop). According to the Verbundgesellschaft staff magazine "Kontakt", in 1992 40 percent of shares were held by the Verbundkonzern (Verbundgesellschaft and Verbundgesellschaft subsidiaries), 10 percent by the Bankhaus Winter, 20 percent by the Russian and 20 percent by the Ukrainian Fuel and Power Association, and 10 percent by the Viennese trading company Eisler (Kontakt 8/1992). In a short report ("Figures, Data, Facts") presented by the Verbundgesellschaft dated December 1992, the Verbund Group's share amounted to 36 percent, and the capital stock of the Energokoop to 5.2 million schillings (US$ 416,080). The boards are composed equally of representatives from Austria and the CIS; the chairman of the board is the former Austrian trade delegate in Moscow, Friedrich Draszcyak.2 2. In the middle of 1992, more than two dozen Austrian electrical, electronics, engineering and steel companies belonged to this industrial consortium. The aim is obviously to handle business transactions on the basis of "technology in return for energy" (Kontakt 8/92, p.13.) Of much greater interest to the Verbundgesellschaft and/or other western investors than "long-term electricity contracts with an uncertain outcome" would no doubt be "joint power plants with real, depreciable and amortizable joint ownership" (Fremuth 1992). The result of this model would be that western companies would (help) set up and (help) run power plants in Ukraine. Investments would, of course, have to be made worthwhile via the electricity profits. However, a prerequisite for such models would first of all be an increase in electricity prices to a cost-covering level, secure capital and profit transfer and increased safety of the investment - in other words, the implementation of the main points of the energy charter. Such solutions must therefore at present be regarded as remote. A.1.2 Transmission possibilities between East and West Ukraine belongs to the MIR network (often known as the COMECON network), which covers the south-western part of the former Soviet Union and the so-called former "satellite states". This network is separate from the Western European UCPTE network. As a result of differing philosophies with regard to regulations, including extremely different frequency stabilisation, it is not possible to synchronise the COMECON network and the UCPTE network (Fremuth and Wagner 1993). Electricity supplies between the COMECON and the UCTPE networks are possible in the following ways: directional operation: a generating plant in the exporting country is uncoupled from the network and linked directly to the other network. partial network intrusion: in the importing country a region is uncoupled from the domestic network and supplied direct from the exporting country. d.c. coupling: the electricity is converted from ac to d.c. and back again to a.c . high-voltage d.c. transmission lines: the electricity is first converted to d.c. by means of a rectifier, then transmitted via a high-voltage power line and at the end of the line converted back to a.c. by means of a current inverter. Whereas the first two possibilities are somewhat restricted and involve some complications with regard to the networks and regulations, d.c couplings make it possible to transfer electricity in both directions unproblematically. The fourth variant is currently the subject of discussion, but as yet no detailed plans have been drawn up with regard to technical and economic feasibility. The network links between Austria, which belongs to the UCPTE, and the MIR network are very well established. For more than 10 years, Austria has had a d.c close coupling in Durnrohr (Lower Austria), which is connected to Slavetice (Czech Republic) via a 380 kV twin power line with a capacity of 550 MW (of which 150 MW are made available to Switzerland). A further d.c. close coupling with an output of 600 MW was put into operation at the end of 1993 in Southeast Vienna, and this is linked to Gyor in Hungary by means of a 380 kV twin power line. In addition to this, Austria has two 220 kV power lines, one from Bisamberg in Vienna to Sokolnice (Czech Republic), via which supplies from the CEZ and the Verbund-gesellschaft (approximately 200 MW) could be handled, and from Southeast Vienna to Gyor (Hungary) although this connection has lost importance for the exchange of electricity with Hungary since the d.c. close coupling started in Southeast Vienna. These two power lines have no d.c. close coupling. Austria thus has a large proportion of the high- voltage d.c. power line network connections between East and West (see the following table): A fourth link exists between the NORDEL network in Scandinavia and the Russian joint network in Vyborg with a transmission capacity of 1,070 MW (Straub 1990). As, for reasons of both costs and geopolitics, electricity supplies via Scandinavia and Russia almost certainly play a negligible role for Ukraine, this variant is only mentioned here as information. The current transmission possibilities in the form of high- voltage d.c. power lines between West and East thus total 1,850 MW. If 98 percent of the high-voltage d.c. power transmission are available, it is theoretically possible to transmit a maximum of 15,900 GWh per annum by this means (if all three high-voltage d.c. power transmission transfer electricity in one direction without interruption). In practice, however, this is unrealistic for many reasons, as e.g. Austria has surpluses in the summer, which are partially exchanged for imports in the winter. In addition, there are the other two possibilities for exchanging electricity. e.g. via 220 kV power lines between Austria and the Czech Republic and/or Hungary. The electricity quantities transferred in this way are, however, limited. One example of such supplies is provided by the Germany electricity aid supplies via Austria, Hungary, the Czech Republic, Slovakia and Yugoslavia to Romania in the winters of 1990/91 and 91/92 amounting to 400 MW (Grawe 1992). Solutions such as this are also conceivable between Germany and Poland, and Germany and the Czech Republic, but only in limited quantities. In the medium term it is intended to link the CENTREL countries (Hungary, Slovakia, the Czech Republic and Poland) to the UCPTE network. In this context, it would be possible to move the existing high-voltage d.c. power lines to the East. In the transitional period, this might cause problems with the exchange of electricity with Ukraine; on the other hand, the exchange of electricity between Austria and the CENTREL countries would become much easier. The Verbundgesellschaft has already signed an agreement with SEP (Slovakia) on the establishment of a 380 kV power line from Bisamberg in Vienna to the Slovakian substation in Stupava. Because of the planned connection between the UCPTE and the CENTREL countries, they will no longer have a high-voltage d.c. power line at their disposal.3 At the same time as the agreement on the power line, an agreement was signed between the Verbundgesell-schaft and SEP on mutual electricity aid supplies. already due to come into effect in 1995. On the Austrian side, US$ 48.16 million will be invested in the power line.4 3. According to Director Kvetan, the SECP hopes to be integrated in the UCPTE as early as 1996/7 (statement in Mochovce on 15 October 1993). 4. Kontakt 1/1994, p 13. A project planned under the auspices of PreussenElektra for a 750-kV high-voltage power line between Smolensk in Russia and Germany, with a transmission capacity of up to 7,000 MW (Suddeutsche Zeitung dated 24 March 1993 and Moscow News 3/1993) can be expected to incur transport costs of between US$ 0.28 and US$ 0.56/kWh over a distance of up to 2000 kilometres and thus only make sense if the cost advantages for electricity production in eastern Europe are extremely large. As far as tenable economic plans for electricity in Ukraine is concerned, however, such a project, as yet little more than a first idea, is unlikely to be of any significance. A.1.3 The electricity import agreement between the Austrian Verbundgesellschaft and Ukraine Austria has a long tradition of trading in electrical power with the former COMECON states, both in the form of barter contracts and import contracts. Furthermore substantial amounts of electricity transit business are still handled via Austria. This goes back to a strategy pursued by the association's former general manager, Dr. Walter Fremuth, whose aim it was to turn Austria into the "Europe's electricity hub" (Fremuth 1985). At the beginning of 1992, an electricity import agreement was concluded between the Ukrainian Interenergo (the sub- organisation of Ukraine state power supply company Minenergo, responsible for foreign trade) and the Verbundgesellschaft (Austrian electricity utility), on the basis of which a total of 10,800 GWh was to be supplied to Austria by Ukraine between November 1992 and March 2007. This was a contract under private law between the Verbund-gesellschaft and Interenergo. Payment for the electricity supplies was to have been made in the form of direct payments by the Ver-bundgesellschaft to Interenergo ("cash and carry").5 Supplies were to amount to 220 GWh per annum in the first years and then increased to 780 GWh per year by the mid-9Os, after the start-up of the high-voltage d.c. power lines in Southeast Vienna. However, this agreement was put on ice and has not been implemented to date. 5. Source: reply to a parliamentary question by the Green Alternative Party, GZ 10.101-x/A5a/92 (reference no.) The power supply conditions presented in the following table show that in the delivery periods specifically defined (in each case from Monday to Friday) electricity supplies were to be made in the complete amounts contracted for. The time periods described must be considered as belonging to the peak-load period with regard to the demand distribution in Austria over the seasons and days of the week, but with regard to their distribution over the day as basic loads. Electrical power with such output characteristics as this is generally provided by fossil-fuelled power plants in Austria.6 The import of electricity over the full spectrum of output would thus make superfluous the establishment of a fossil-fuelled power plant in Austria (in concrete terms this means that in this way the Verbundgesellschaft saves 300 MW of thermal power plant output). 6. In Austria electricity is mainly generated in hydroelectric power plants in the summer; their output decreases in winter due to the reduced water flow from the rivers. The winter shortfall is made up for by caloric power plants. On top of this, the agreement contains an option on further power supplies by Interenergo to the Verbundgesellschaft in the months of April and October, which the Verbundgesellschaft would have had to claim from Interenergo in advance, at the latest by 1 September of the year of supply. The amounts of power/electricity would have had to be transferred at the border between Ukraine and Hungary and/or Ukraine and Czechoslovakia (today: Slovakia). In accordance with the terms of the contract, the Verbundgesellschaft would have been responsible for handling negotiations with the transit countries on the use of their power grids and payment of the corresponding network costs. The Verbundgesellschaft would also have had to consider the losses in the Slovakian and Hungarian network. The amount of electricity available to the Verbundgesellschaft in the Austrian grid would thus probably have been approximately 10-15 percent less than the amount of electricity fed in by Ukraine (network losses, losses in the high-voltage d.c. power transmission). The text of the agreement between Interenergo and the Verbundgesellschaft is known in large parts, as the contract text was announced to the Ukrainian parliament.7 However, the contractual conditions relating to prices were made indecipherable. The contract expressly prohibits the parties to the contract from passing on information on electricity prices and describes these as the "business secrets" of the parties to the contract. 7. The text of the agreement was made available to the Okologie Institut by Greenpeace Austria. The stipulations indicate that the supplies shown in the above table were to be invoiced on the basis of a uniform working price (stated in groschen per kWh in the contract). For supplies outside this period, differentiated prices were planned depending on the different times concerned. The value of electricity prices was ensured in a separate clause in the contract. It was intended to adjust for inflation on the basis of the consumer price index issued by the Austrian Central Statistics Office, the year 1991 being taken as the base year according to the terms of the contract. In the text of the agreement it was expressly stipulated that the Verbundgesellschaft would not have paid any commission for mediating services. The Verbundgesellschaft would have had to pay for the electricity supplies monthly for each of the preceding months in the form of a bank transfer. According to figures provided by the Verbundgesellschaft, import proceeds for Ukraine would have totalled approximately US$ 560 million, which is equivalent to an average profit of 52.1 mille US$/kWh (VerbundPress No. 3/1992, 2.3.1992, Kontakt 4/1992).8 This figure is regarded as too high by the Verbundgesellschaft itself; they confirmed that a more realistic level would be 31.9- 39.8 mille US$/kWh).9 This contradiction may result from the fact that the sum of US$ 560 million allows for the expected price increase, whereas the electricity price stated of 31.939.8 mille US$/kWh constitutes the price at the time of conclusion of the agreement. If one considers the time distribution of the planned imports as well as price increases occurring in this period (assuming an inflation rate of 3 percent), this results in an average import price of 37.5 mille US$/kWh at today's price level for a total volume of US$ 560 million on the basis of the above table. The 52.1 mille US$/kWh would then be the average nominal electricity price, allowing for corresponding increases in electricity prices. Adjusted for inflation, in this case the total supply of electricity would correspond to an amount of approximately US$ 400 million. These prices are thus considerably lower than the Verbund tariff, i.e. the tariff at which the retailer purchases electric power from the Verbundgesellschaft (56.0-63.8 mille US$/kWh). 8. According to telephone information from the Verbundsgesellschaft responsible for the articles and/or press releases, this information came from the former VG board. 9. Telephone conversation with Director Kasamas, Verbundgesellschaft, on 4 March 1994 The price to be charged for Ukrainian electricity seems to be relatively high and is considerably higher than former prices for imports from eastern Europe, although it should be borne in mind that the import agreement between the Verbundgesellschaft and Poland (which, with more than 90 percent, dominates eastern European imports) is presumably based substantially on similar conditions with regard to the time distribution of supplies. The average import prices from Poland are, however, much lower, namely approximately 25.8-27.4 mille US$/kWh in the years 1988-1992 (Austrian foreign trade statistics). Director Kasamas (Verbundgesellschaft) has also confirmed that prices for imports from Ukraine were much higher than those in the Poland contract. According to the World Bank (World Bank 1993b), at the beginning of 1992 Ukraine signed several export contracts with non-CIS countries for a total of 5,500 GWh at prices between 40-50 mille US$/kWh, partly on the basis of barter contracts. Within this range, the Verbund agreement would thus lie more towards the lower end of the scale. The Austria agreement would account for barely 15 percent of the total electricity export volume of Ukraine in 1992. The agreement has currently been put on ice for the next three years. The reason for this, according to the Verbundgesellschaft, is that Ukraine was not able to fulfil the terms of the contract. According to the new member of the board, Dr. Johann Sereinig (Fremuth and Zach retired at the end of 1993) "in its present form the agreement would no longer be concluded by the new Verbund board". After the three years have expired, the future of the agreement will be finally clarified. 10 According to Director Kasamas 11, there were two main reasons for suspending the contract: it proved impossible to reach an agreement with Ukraine on the future planning activities for cleaning up the Burshtynsk power plant, as the Verbundgesellschaft and Ukraine had different ideas on planning. There were continued difficulties with regard to the planned power transit, which was to have been negotiated by the Verbundgesellschaft. These lay above all in connection with the planned link-up between the CENTREL countries (Hungary, Slovakia, Czech Republic, Poland) and the UCPTE network, which would make such power transits more difficult in the transitional period (gradual uncoupling from the MIR network and linkage to the UCPTE). The agreement has never become effective. It is true that in 1992 Ukraine supplied small quantities to Austria (49.8 GWh, US$ 1.34 million, the electricity price thus being 26.3 mille US$/kWh, but according to Kasamas this was based on a short-term agreement with Ukraine and had nothing to do with the long-term contract. 12 10. Interview with Dr. Johann Sereinig in 'Energie Spezial" (published by the Energieverwenungsagentur and Austria Presse agencies), dated 22 February 1994, p.9. 11. Telephone conversation on 4 March 1994. 12. Allegedly the Ukraine intends to make use of these exports to finance imports of medical products. A.1.4 The background to electricity purchases: planned barter transactions According to the text of the supply contract conditions for financing the reconstruction of thermal power plants in Ukraine in accordance with an agreement between the Verbundgesellschaft and the Ukrainian Ministry of Energy were to be created by the contract. In concrete terms, this meant the clean-up of the 2,400 MW power plant at Burshtynsk in western Ukraine. This power plant burns primarily gas, followed by coal and heavy heating oil. The coal obviously has a low thermal value of only 14.4 MJ/kg 13, thus probably resulting in a correspondingly large ash and water content and unfavourable emission levels. 13. Calculated value from World Bank statistics: 2.3 million tons coal consumption, electricity generation 3,427 GWh, efficiency factor 37 percent This method of calculation gives sensible values for the thermal value of gas and heating oil. On the other hand, measured in terms of efficiency (37 percent efficiency factor), this power plant is the second most efficient major thermal power plant in Ukraine, and, presumably also for this reason, the World Bank has recommended reviewing the original priority planning for converting this power plant in its "Energy Sector Review" (World Bank 1993b), as other power plants are in a much worse condition (efficiency factors down to 28 percent). This means that a greater effect could be achieved at this plant, using the same amount of financial resources. Incidentally, the World bank statistics are in clear contradiction to the figures on this power plant circulating in Austria. In a reply to a parliamentary question by the Green Party, it was stated that this power plant was a coal power plant with a 25 percent efficiency factor. 14 According to Director Kasamas (Verbundgesellschaft), it is quite conceivable that the differences between the Verbundgesellschaft and Ukraine with regard to the clean-up of Burshtynsk, which resulted in the temporary setting aside of the import agreement, are connected with the "review" of the clean-up by Ukraine Ministry of Energy on the basis of the World Bank study.15 14. Source: reply to a parliamentary question by the Green Alternative Party, GZ 10.101/210-x/A/5a/92 (reference no.), Vienna, 2 July 1992. 15. Telephone conversation with Director Kasamas, Verbundgesellschaft, on 4 March 1994. A.1.5 The economic significance of Ukraine Agreement For a long time, Ukraine was a net power-exporting country, which exported up to 15 percent of its electricity capacity. This continuous high export level on the part of Ukraine was part of a philosophy of "division of labour" between the USSR and other COMECON countries before the "turn-around" in political events, in which the USSR (and thus also Ukraine) assumed the role of a supplier of electrical power to the "satellite states". All other European COMECON countries, above all Hungary, Romania and Bulgaria were to a considerable extent dependent on electricity imports (the last two countries between 8 and 28 percent of electricity requirements) (Strasbourg 1991, Fremuth 1991a). These quantities of electricity were mainly produced by the former USSR "part-republic" of Ukraine (Grawe 1992). Compared to former Ukrainian exports, the agreement with the Verbundgesellschaft is thus relatively insignificant. However, due to the problems of Ukraine with regard to imports of gas and oil (conversion of import prices from Russia to world-market level, to be paid in convertible currency) as well as nuclear power plant problems, there are also increasing difficulties in electricity production (see Jatzkevitch and Borisov 1993). As long as Ukraine was able to obtain primary energy sources from Russia and these only cost about 1/15 of world-market prices, the export of classical electricity was doubtless an attractive possibility of earning foreign exchange. Recently, however, Ukraine's possibilities of importing oil and gas have been becoming increasingly problematic as Russia now only wishes to export at world-market prices and in exchange for convertible currency, and insists on payment of unpaid bills for gas and oil deliveries. It is expected that in 2-3 years time, Ukraine will be compelled to pay for its gas and oil imports from Russia in convertible currency and at world-market prices (PlanEcon 1993). In this case it is doubtful whether the production of additional energy in fossil-fuelled power plants will be an economically viable way to earn foreign exchange. According to foreign trade statistics, for example, the Austrian price for gas imports lies at approximately 9 mille US$/kWh of natural gas (Austria imports mainly Russian gas). At this price for gas the fuel costs alone for a gas power plant come to more than 24.1 mille US$/kWh of electricity, if power plants with an efficiency factor of approximately 35 percent are assumed for generating electricity. From gas prices of approximately 11.8- 16.2 mille US$/kWh upwards, the fuel costs alone exceed the obtainable proceeds (less than 39.8 mille US$/kWh). Apart from short-term bridging supplies and short-term contracts, there are two main types of import relationships with Austria: long-term contracts exchange contracts. With exchange contracts, Austria exchanges surplus summer electricity for winter basic load from thermal power plants. Towards the East, Austria has power exchange agreements with Czechoslovakia (currently: the Czech Republic; at present there are no direct power line connections to Slovakia) for up to 250 MW. There is also an exchange contract with Hungary (56 to 112 MW / 38.5 MW) and, since 1985, a 20-year agreement with the USSR (300 MW), which has now been transferred to Russia (Fremuth 1991 b, Fremuth 1993). There is a major electricity import agreement with Poland, which was concluded in 1975 and which was originally intended to run until 1999, but has been extended to 2010. 16 On the basis of this contract, Austria imports approximately 1600 GWh with an output of 400 MW (Fremuth l991b, 1993), whereby the import prices deducible from the foreign trade statistics amounted to approximately 24.1-27.4 mille US$/kWh over the past few years. Considerable amounts of electricity continue to pass in transit through Austria from East to West. 16. Kontala 3/1992. Ukraine agreement was clearly intended to continue this tradition. It is evident from the terms of the agreement that such a contract makes it possible for the Verbundgesellschaft to save practically 300 MW of fossil power plant output, import prices of less than 40 mille US$/kWh being much lower than the generation costs of any newly built comparable fossil power plant block. In addition, the Verbundgesellschaft "saves" complex and arduous authorisation and environmental assessment procedures. The possibility of making a profit a second time on barter transactions is of further interest for the Verbundgesellschaft and Austrian industry. However, this presupposes that deliveries are reliable (the agreement contains very stringent conditions on this point), as otherwise the Verbundgesellschaft would be compelled to maintain reserves of adequate power, which would greatly reduce the attractiveness of the agreement. A.2 Appendix 2: Safety problems with VVER-1000 reactors A.2.1 General preliminary remarks The VVER-1000 reactor is the latest series of the former Soviet pressurised water reactors (PWR). Basically, its design is identical to the western PWR. The emergency cooling system, containment and reactor protection are calculated for the same design faults (demolition of the main coolant pipeline). The VVER-1000 has 4 loops in the primary circuit.17 The VVER-1000 uses horizontal steam generators (in most other PWRs they are vertical). The steam generators manufactured in the former Soviet Union are of inferior quality due to a manufacturing fault. In contrast to most other PWRs, the VVER-1000 uses hexagonal fuel element cassettes (otherwise cassettes are now only used in boiling water reactors). 17. For comparison: the large Siemens/KWU reactors also have four loops; Westinghouse pressure water reactors have three loops in the preliminary circuit. The safety problems with the VVER-1000 in its original constructions - based on the plans of Soviet designers - have been described on numerous occasions in the past 5 years. Reactor companies, independent experts and international organisations have all had an opportunity of looking into certain power plants, analysing the weak points and making proposals for tightening up these plants. The following represents a summary of the results of these investigations. A.2.2 Containment The VVER-1000 containment is made of pre-stressed reinforced concrete; without an interior steel lining. The free volume in the containment amounts to 55,000 cubic metres (approximately the same as a Westinghouse containment) and is designed for a pressure of 0.55 MPa. It has not yet been adequately demonstrated that this is sufficient to withstand the overpressure in the event of a serious accident and to contain the escaping radioactive substances. This is also the opinion of the IAEA (IAEA 1993): "The safety of the containment construction of VVER-1000 plants must be re-assessed." Analyses for a major leakage accident (DOE 1986) showed that two-thirds of the flow rate of the containment spray are sufficient to condense the steam after 18 minutes. The maximum pressure occurring according to these calculations nonetheless amounts to 0.35 MPa. If only less cooling water can be pumped into the containment sprinkler system, the possibility cannot be ruled out that the design pressure will be reached, the containment fail and radioactive substances escape into the atmosphere. In order to limit the damage in such cases, the idea of equipping VVER-1000 containments with relief valves is being considered, so that surplus steam can be expelled via filter systems (boiling water reactors in Germany, for example, were later equipped with such valves). A.2.3 Pressure vessel From its dimensions, the pressure vessel of the VVER-1000 is only a little larger than that of the VVER-440. However, as more than twice the thermal output should be produced, this requires a densely packed and higher reactor core. The power density and neutron flow are high. The water column between the vessel wall and the fuel was enlarged by only 10 cm compared to the VVER-440, with the result that surplus neutrons are only slowed down a little before striking the vessel wall. The VVER-1000 pressure vessel is thus exposed to greater neutron radiation and there is a risk that the vessel walls and in particular the welding seams near the core becomes brittle (the material alloys used tend to become brittle more easily due to their copper and phosphorus content). A.2.4 Reactor core In the original design of the core, the narrow pressure vessel and the consequent narrow and very high geometry of the active zone in the VVER-1000 led to special problems due to the power density, especially to instability in power distribution and xenon oscillations. Instead of the usual fuel element exchange cycle (one third of the fuel elements per annum) for the VVER- 1000 a different cycle was chosen (half of the fuel elements every two years). No combustible absorbers were used in the original VVER-1000 core. The larger surplus reactivity required has to be compensated for by higher concentrations of boric acid. Under certain load conditions this results in positive values of the reactivity temperature coefficient and a tendency towards considerable xenon oscillations in the event of a change in reactor output. Although the positive temperature coefficient alone would probably not lead to a power excursion, it can cause local overheating in the core. Russian designers, western companies and the IAEA inspectors agree that the problem should be solved by redesigning the core. However, it is difficult to convert the core completely whilst retaining the VVER pressure vessel. In Ukraine, all VVER-1000 plants (except for the oldest South- Ukraine 1 block) are already run in one-year cycles. In Russia, the problems in controlling power output have for the present been solved by reducing output with a fresh core charge. To date it has not been possible to find out what changes have been made with regard to reducing power output in Ukraine. The latest Temelin report (HALLIBURTON-NUS 1992) comes to the conclusion that the system for suppressing xenon oscillations in the Soviet design is complex and difficult to understand. In Temelin, Westinghouse is of the opinion that they can solve several problems at the same time with the new core design. Apart from the fuel rods themselves, Westinghouse will supply the control rods, combustible absorbers and software for fuel management. The new core design is supposed to be more effective: more neutrons are supposed to be captured in the fuel. As a result it is claimed that the process by which neutrons make the vessel walls brittle can be slowed down. A.2.5 Control technology and reactor protection Soviet-built monitoring and control systems are generally considered to be outdated and unreliable. In the opinion of most experts, the control technology in the VVER-1000 should be replaced by a western-built system. In the VVER-1000, the failure of assemblies and components in the control system frequently leads to the plant being shut down. Some examples are intended to illustrate that these problems are not just teething troubles, but long-term problems which have still not been solved to date. There are frequently failures of the reactor protection and monitoring system itself: control rods are damaged or get stuck in the core. The drives of the control rods are particularly prone to malfunctions. It cannot be expected that the control rod drives in the plants currently being built in Ukraine have been radically changed. They will thus be equally unreliable. (Even in the Mochovce nuclear power plant in Slovakia the control rod drives are being retained, although the rest of the control technology is to be modernised by Siemens/EdF). The criteria for activating the reactor protection system and the linkage of reactor protection with operational output control also seem to be inadequate. The Gesellschaft fur Reaktorsicherheit (Commission for Reactor Safety) (GRSmSN 1993) considers that at least a partial exchange of the control technology of the reactor monitoring system and the modernisation of the core instrumentation should be regarded as improvements to be given a high priority. This is doubtless due partly to the outdated design and partly also to inadequate quality assurance. The technical inspectors of the EXIM Bank are of the opinion that the control system in the VVER-1000 reactors is not sufficiently separated in terms of its location and is not adequately protected against fire and mechanical damage. One of their fundamental criticisms refers to the lack of any direct measurement of filling level in the reactor pressure tank; (After the TMI/Harrisburg accident in 1979 all U.S. PWRs were equipped with this facility.) A.2.6 Safety systems Basically, the safety systems of the VVER-1000 are designed on three parallel systems, each with 100 percent efficiency (i.e. each individual system is alone capable of providing the required cooling output). This has been especially stressed on numerous occasions and the claim made that this design guarantees a higher level of safety than in western plants. Above all American inspectors come to this conclusion, although comparable Westinghouse PWRs only have two parallel safety systems. Siemens/KWU reactors, on the other hand, have four independent systems, each with 50 percent of the required output. The "positive" assessment of the design of the VVER- 1000 safety systems cannot be shared, however, for several reasons: Reactor protection The reliability of the control drives leaves much to be desired. The emergency shut-down takes a relatively long time (a few seconds). There is no second shut-down system (boric acid spray). Emergency and post-cooling 1. The three parallel system concept is not consistently implemented; e.g. there is only one drain from the containment sump and only one suction line (HALLIBURTON-NUS 1992). 2. Three-fold 100 percent emergency cooling output divided among four loops of the cooling circuit is in certain cases less favourable than four-fold 50 percent. For example, one can imagine accidents in which finally only 50 percent of the required cooling output is available (with the German Siemens/KWU design 75 percent would still be available assuming the same conditions).18 18. If one of three levels is being repaired, for example because a pump has broken down, or a valve does nol open etc., (single failure criterion), and if the third level is then fed into the faulty loop, i.e. half is fed into the leak, then actually only 50 per cent of the cooling output is available. 3. In practice, it is evident that actually only two parallel systems are available and not three! VVER-1000 reactors are often still operated although one system has had to be switched off for repair. The Khmelnitski 1 nuclear powerplant in Ukraine is a good example of this: there are seven or eight interrupters in each system. These are manufactured in Rovno; no other manufacturer exists. In Khmelnitski they soon reached the conclusion that these interrupters had to be replaced; but no replacement exists for them. And so they have to make do with frequent repairs and service work. For this purpose one of the three systems is taken out of operation. The problem is that repairs seem to be the normal state of affairs here. However, it should not be overlooked that in the worst case not even 50 percent of the cooling output is available in the event of a leakage accident; blockage of the only available drain from the containment sump (e.g. by insulation material) could completely prevent after-heat run-off. Emergency feed-water system The emergency feed-water system is also designed for three systems (emergency-cooling for the secondary circuit). However, it is not at all clear here either whether the design of the system can fulfil the single failure criterion. Special shortcomings are the lack of diversification with regard to electricity supply, insufficient availability of flowmeters and the possibility of isolating only two out of four steam generators. On top of this, the capacity of the emergency feed- water container is not always sufficient to cool down the plant. (HALLIBURTON-NUS 1992) Emergency electrical power The capacity of the emergency power storage batteries is much too small. The design planned for Temelin is just enough to provide the basic load for 20 seconds (the diesel generators will probably take this long - or longer - to start). In most western nuclear power plants the storage battery lasts considerably longer (one hour). Fire protection Fires occur frequently in all VVER plants and sometimes lead to - at least expensive - damage: Fire loads and fire protection are weak points in all VVER plants. VVER plants are often rendered inoperative as a result of short circuits in the control technology. Short circuits and inadequate insulation are frequent causes of fires. There are frequently hydrogen leaks from the generator cooling system, which can easily lead to fires. In the VVER-1000 one single 6 kV system also provides very high loads. In the event of short circuits this may result in considerable temperature increases in the cables (up to 380-C). In order to reduce the fire risk, Soviet engineers have recommended providing the large loads by means of an independent second circuit (14 kV). Short circuits would then only lead to temperatures of up to 150-C. It is not known if this has been considered in the plants currently being built in Ukraine. It has at all events been certified (GRS/IPSN 1993) that in the VVER-1000 the important technical systems for fire protection are spatially separated. Although this does not prevent fires from breaking out, it means that they are less likely to spread so fast and makes it easier to combat them. The most important point about spatial separation: a fire in the electrical system must not lead to a total power breakdown (station black out). A.2.7 Secondary side From its design, the plant should be able to cope with a rupture of the largest line in the secondary circuit. Nevertheless, there still seem to be problems: in the Khmelnitski 1 power plant in Ukraine it proved impossible to lay pipelines in the secondary circuit according to the construction plan. The danger thus exists that they run through rooms in which flooding could result in considerable damage and/or malfunctions. Siemens is of the opinion that the fresh steam and feed-water lines in the VVER-1000 should be replaced because of the poor quality of the material used. A.2.8 Steam generator Whereas the analyses of accidents involving leakages in the primary circuit do not indicate any overheating of the fuel, analyses for a break in the secondary circuit of the steam generator indicate that there is a potential risk of an accident with damage to the fuel (Soviet analyses, quoted in DOE 1986). Three cases were investigated for an accident involving a break in the fresh steam collector in the steam generator (the leak diameter in such a break is larger than for a break in the feed- water line): 1. SCRAM 19 19. Safety Control Rod Axe Man - emergency shutdown. 2. SCRAM and feeding in of boric acid at 270t/h into the primary circuit after 50 seconds, 3. boric acid at 540t/h after 20 seconds. In the course of this accident, severe overcooling occurs (100-150ø/min.) resulting in positive reactivity being fed in. The heat output increases. The following thermal outputs have been calculated: 55 percent, 32 percent and 12 percent of the reactor output respectively, leading to the risk of fuel overheating. In the event of such an accident, the situation could become even worse if the automatic power control interprets the pressure drop in the secondary circuit as a load increase and removes the control rods from the core (DOE 1986). The steam generators of the Ukrainian VVER-1000 reactors are highly prone to breakdowns. However, the damage there occurred not on the steam side, but on the primary side (collector). Some steam generators have had to be replaced. The VVER-1000 steam generators manufactured in the former Soviet Union all contain a production fault which results in a very short service life. Out of a total of 64 steam generators in operation in power plants in Russia and Ukraine, 35 have developed internal leaks. Due to this failure, several of them had to be exchanged after just a year (!). The cause for the short service life is a production error during the welding of the thin-walled heat-exchange pipes in the cylindrical primary collectors. The cracks occur when the plant is started up, when the collector is subjected to considerable mechanical strains. These steam generators were manufactured in the machine factory at Podolsk or at Atommasch. As this manufacturing fault has since also been criticised by WANO 20, it is to be hoped that the quality of the steam generators has in the meantime been improved. Few problems have to date been caused by the steam generators manufactured at Skoda, but there have been some with the steam generators manufactured in the former Soviet Union for the VVER-440 reactors. 20. WANO = World Association of Nuclear Operators. Western steam generators also tend to have internal leaks; in this case, however, it is the heat exchanger pipes which crack after a time. Damaged pipes are sealed. In older power plants the steam generators were replaced after 10-15 years of operation. Accidents involving cracks in heat exchanger pipes have occurred on numerous occasions. In the course of these accidents radioactive substances have always escaped into the atmosphere. The last rupture of a steam generator pipe occurred in the Japanese Mihama-2 nuclear power plant in 1992. A.2.9 Quality assurance As nuclear power plants always involve the handling of extremely dangerous material and isolating this from the environment, quality control is generally treated with great seriousness when a nuclear power plant is built (in a similar way to aircraft construction). However. it is precisely in this respect that the VVER-1000 reactors present major problems. As mentioned with the example of Kmelnitzki, it is difficult to maintain the high quality necessary when the sole manufacturer does not provide the corresponding products. The poor quality of some of the components is partly the result of a shortage of funds and efforts to fulfil planned levels of production in spite of this. Further problems are caused by bad management on the construction site. Quality assurance, control and the storage of components on comparable building sites in Temelin (Czech Republic) were thus also severely criticised by an IAEA team in 1990 (OSART 1990). What was criticised was a lack of incoming controls and documentation, lack of quality assurance for welding work and shortcomings with regard to storage; important components belonging to the primary circuit were exposed to contamination and the risk of damage as a result of building work. Electrical and electronic components were not protected against dust. Frequently no attention was paid to which parts and which welding material was intended for the nuclear part of the plant and therefore needed to fulfil special requirements. Often the material was not adequately separated from other material during storage. One can only assume that conditions at other WER-1000 building sites are not dissimilar to those described. In Ukraine the situation is further complicated by the fact that the two-year construction stop will certainly not have improved the situation, nor will the subsequent withdrawal of Russian troops and specialists from Ukrainian construction sites. Bibliography (omitted here; unscannable)