Business proposes to reduce to 50% the share of electricity imports for stable energy supply

This is necessary to prevent a reduction in production and loss of competitiveness by Ukrainian exporters

Representatives of large companies of the mining and metallurgical complex called on the Cabinet to reconsider the decision to increase to 80% the share of electricity imports for stable energy supply to enterprises. Business believes that a compromise solution can be the establishment of this norm only at the level of 50%. Otherwise, the high cost of imported electricity will lead to a reduction in production.

This was discussed at a workshop dedicated to the discussion of problematic issues related to electricity imports held by the Federation of Employers of Ukraine.

A key factor in the impact of electricity imports is its cost. According to the chief analyst of GMK Center Andriy Tarasenko, the cost of electricity for industrial consumers in Ukraine is the highest in Europe. For example, the June price on the day-ahead market in Ukraine was €112.3/MWh, while in Poland and Germany – €105/MWh and €72.6/MWh, respectively.

According to Vasyl Honcharuk, director of Dniprostal-Energo, which is part of the Interpipe group, the cost of electricity is about 25% in the cost of steel billets, which are later used to produce Interpipe’s main products – pipes and railway wheels.

«Increasing the cost of electricity leads to a decrease in competitiveness in the world market and puts the company on the brink of survival. This fact can be felt especially tragically in the frontline Nikopol, which is under daily shelling of Russian aggressors. This plant employs about 3,000 people, which is 30% of Interpipe employees. It hurts us to realize that the already difficult and risky work of our people in the city on the front line is under threat because of one decision on electricity imports,» Honcharuk said.

According to him, the company is ready to continue working if the share of electricity imports is reduced to 50%, as provided for by Cabinet of Ministers Resolution No. 1127 of 27.10.2023.

«Increasing the cost of production after raising the import quota to 80% casts doubt on the economic feasibility of our company. We ask the Ministry of Energy to reduce this figure to at least 50%, «added the director of Dniprostal-Energo.

For his part, Maxim Zhuravlev, Director of the Department of Procurement of Strategic Raw Materials and Energy Resources of Metinvest Group, noted that the company operates in world markets in the face of fierce competition, so the level of production costs and the cost of logistics are key competitiveness factors. For example, in the structure of the cost of production of iron ore products more than 40% is the cost of electricity.

According to him, the decision of the Cabinet to increase the share of electricity imports to 80% to ensure a stable energy supply was unexpected for Metinvest, while the company is trying to plan its work for a long period.

«Now, after the adoption of amendments to the resolution of the Cabinet of Ministers and the need to import 80%, our production becomes unprofitable. We try to reduce costs, but it is impossible to produce products with negative profitability. Due to the high cost of electricity, we will be forced to reduce production. In such conditions, it is better to find a compromise – for example, an import rate of 50% would be acceptable for both energy and steel industry, «said Zhuravlev.

According to Yaroslavna Blonskaya, executive director of Ferrexpo, the company faced great difficulties due to a change in the import quota, which was adopted without discussion with the business. At the same time, a negative impact on the company was added by the fall in prices for iron ore products in world markets.

In addition, the problematic moment in the near future may be the abolition of the norm on 2 classes of electricity consumers, which is currently under discussion. This could hit industrial consumers hard, who would be forced to pay for infrastructure they do not use.