19.02.2025
The enemy’s destruction of coal thermal power plants and reduced use of coal for electricity generation, the closure of mines resulting in Ukrainian coke-chemical plants being left without raw materials, and many people without work – all of this significantly affects the energy sector and the mining and metallurgical complex.
The crisis in Ukraine’s coal industry is occurring against the backdrop of the European Union’s adopted economy decarbonization plan and the introduction of a carbon footprint tax. European society’s perception of coal as a “toxic” raw material is destroying entire production chains. And everything would be fine if new ones were created to replace them, with new enterprises and industries.
What do these changes mean for Ukrainian and global industry and energy? We discuss this with Igor Chumachenko, Vice President of Energy Club.
Mr. Igor, what changes occurred in Ukraine’s coal market in 2024? What risks and opportunities have emerged for our state as a result?
The enemy wants to deprive our state of independence and has chosen the path of armed aggression and destruction of our energy sector. Unfortunately, coal thermal power plants are mostly disabled today. They play a very important role in Ukraine’s economy: together with nuclear and hydroelectric power plants, they supply electricity to enterprises and the population, providing jobs for thousands of people. The funds paid by consumers for electricity are directed, among other things, to the needs of thermal power plants, which buy coal, and mining enterprises get the opportunity to pay wages, pay for coal transportation and mining equipment supply. This multiplicative effect had a positive impact on the entire energy industry. But today, due to military actions, we observe one of the negative factors – existing power plants have already accumulated a lot of coal because state coal companies, in particular DTEK “Pavlogradvuhillya” – Ukraine’s largest coal mining enterprise developing deposits in Western Donbas (Dnipropetrovsk region), cannot stop production as this would affect both the cost of coal and workers’ wages.
The second negative factor: over the past year, the aggressor managed to occupy part of our territories in the Donetsk region, where strategically important enterprises are located, such as DVAT “South Donbas Mine,” which produced coal used in both energy and coke-chemical production, SE “Selidovvuhillya” and others. Mining and shipment stopped at PJSC “Mine Management Pokrovske,” where a new coal preparation plant was built, which I was involved with. The mine extracted rare for Ukraine coking coal grade K with low sulfur content, which is very important for the production of coke, cast iron, which was exported. Its shutdown leaves our coke-chemical plants without raw materials and people without work, which will significantly affect the mining and metallurgical complex. Unfortunately, today all other metallurgical enterprises in Zaporizhzhia, Dnipro, and Kryvyi Rih do not receive this coal and are forced to seek its replacement through imports from other countries.
The only positive moment over the past year is the liberation of the Black Sea waters and Ukrainian Black Sea ports from the influence of the Russian Navy and the ability to import coal, primarily anthracite, as well as export cast iron, which contributes to increased coke production.
Has the global coal market also undergone changes in 2024?
Undoubtedly. The European Union’s adopted decarbonization plan is changing the EU’s economic structure, and this is a painful topic today. In fact, the decarbonization of the world economy began long ago and was initially presented as optimistic. But we understand that in today’s world, it’s very difficult to predict how various processes will affect the result. What do we see today? Significant problems in the global economy. We, as a country that wants to be with the civilized world, are interested in Western Europe, USA. EU countries have introduced a carbon footprint tax. Almost all enterprises using coal and coke must calculate emissions and pay tax. This leads to significant production cost increases and negatively affects companies’ financial results. Coal power plants are ceasing operations. Although there is no electricity shortage in the EU, green energy is being built and actively developed, today is a transformation period, and so far there is no replacement for coal so that enterprises and companies could work and not lose their countries’ GDP. That is, European society’s perception of coal as a “toxic” raw material is destroying entire production chains, but nothing new is being created to replace them yet.
Recently I was in Asturias, Northern Spain. This part of Spain had coal production, anthracite was mined, mines were connected by railway, preparation plants and coal power plants operated. Today this is all in the past. Most mines are no longer working, preparation plants have been dismantled and scrapped, coal power plants are being dismantled, and seaports don’t have sufficient loading as coal imports have decreased. Despite there being no deficit in Spain’s economy, this very negatively affects the economy: enterprises don’t manufacture equipment for thermal power plants, miners, train drivers, and railway workers are left without work, etc.
This example shows us that the money circulation chain has disappeared, and in this region, like in Eastern Ukraine where mines were closed, an unemployment problem has emerged. And this is unfortunate. The European Union’s big mistake is that it started green transformation, and all money that the EU receives from carbon tax is directed to subsidizing the installation of solar panels by private enterprises and individuals. But a significant part of this money should have been directed to creating new enterprises, for example, for solar panel production. But today all funds from solar energy projects go to China for solar panels. China has both a powerful coal industry and very developed solar panel production. China is the only country capable of compensating for the liquidation of the coal industry with solar panel production. Meanwhile, there are very few solar panel manufacturers in Europe, and their production cost is higher than Chinese. And this is a big mistake that the EU is now suffering from.
But technical progress completely replaces production forces, and history knows many such examples. Do these changes, in your opinion, open new opportunities for energy and industry?
I don’t see any alternative to green energy today. It already objectively costs less than thermal energy. Also, solar energy practically has no “entry threshold.” But unfortunately, the EU hasn’t created new productions to replace the coal ones they liquidated.
Installing solar panels is cheaper than building coal thermal power plants – with turbines and steam boilers. This is the first factor. Now it’s not even necessary to subsidize enterprises: anyway, a company that wants to enter the energy market will build green energy facilities because it’s cheaper. 1 kW of electricity from solar panels today with all works can cost 800 euros. And the last coal thermal power plant built in Europe with capacity over 1 GW cost more than 1 billion euros – that’s 900 euros per kilowatt. From an investment perspective, everything is obvious.
As I mentioned, solar energy almost has no entry threshold. The aforementioned thermal power plant in Europe was built very large because according to economic law, capital expenditure (CAPEX) will decrease per unit of power with increased production capacity. This is the scale effect. But for the thermal power plants we’re talking about, to enter the energy market, you needed to have 1 billion euros minimum. But what about solar projects? Today everyone can become energy market participants because someone can install panels on their house roof, someone can acquire a 50 kW solar power plant, someone has the opportunity to build a 3 MW station, someone – 150 MW. Everything depends on financial capabilities. And this is very good because in Europe there are 800 million people, and this is great for competition, for developing this market. Therefore, I don’t see any alternative to green energy at all. Competition and market economy will do their job.
What international projects and partnerships is Energy Club implementing to improve the energy sector’s operation?
The active phase of Russia’s aggression against Ukraine forced companies to go beyond Ukraine. Energy Club also works at the international level and establishes connections with partners, with energy companies from other countries, primarily Europe. This is one of the main tasks today, as Ukraine needs help from the world community in supplying not only weapons but also energy equipment.
