As it follows from the above table, Ukraine has about 55 GW of installed generation capacity and about 50 million people, but faces a serious and growing energy crisis. Since its independence in 1991, Ukraine's energy utilities have not been able to recover their costs, quality of service has deteriorated, and thermal and hydro plants badly need refurbishing. The average retail electricity price tripled from 1994 to1997, reaching $39/MWh, which is close to its economic costs. Electricity cost per capita has increased dramatically, and the percentage of utility income received in cash has declined. Real per-capita income has declined as well. Two results of this are political pressure to keep prices artificially low and an enormous non-payment problem. The non-payment problem is exacerbated by special government sanctions that remove the obligation to pay electricity bills for a broad host of groups. The non-payments problem is joined by a cash-collections problem that requires barter to provide compensation for electricity and fuel. Ukraine's high-energy intensity and low end-use efficiency make it highly dependent on electricity production. The current electricity economy relies heavily on nuclear power (50%), imported oil and gas from Russia and Turkmenistan, and low quality domestic coal. Its thermal power plants, including combined heat and power units, have an average efficiency of approximately 10,355 Btu/kWh. Thermal plants have insufficient funds to procure fuel, have low average utilisation rates (30-35% capacity factors), and Ministry for Fuel and Energy controls daily plant dispatch. Most of these plants lack controls and cannot follow load, which contributes to frequency fluctuations and use of load curtailment to reduce low frequency excursions. Electricity exports are limited (to Poland, Moldova, and Russia), largely because the Ukraine grid cannot maintain frequency (50 cycles) within acceptable limits (+/- .025 cycles). This limits Ukraine's ability to benefit from electricity trade and interconnection for reliability and ancillary services. The political context is one where key decision-makers lack the will
to implement real reforms. Any possible market forces, for example, have
been muted completely by centralised control or routine government intervention.
In short, energy policy lacks certainty and the necessary legal institutions
and laws to implement so-called "twin sector approach" to mitigate energy
related environmental issues.
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