Ukraine: Preparing for EU Integration by Building a Flexible Ukrainian Power System

dropped

The proposed Project will consist of the following three components: (i) Back to Back interconnect and network strengthening forENTSO-E integration; (ii) introduction of battery storage; and (iii) technical assistance.Component 1: B2B interconnect andnetwork strengthening for ENTSO-E integration (estimated cost: US$ 220 million).This component will finance the design, purchase,installation, and construction of the proposed B2B interconnection, which will allow electricity exchanges between European andUkrainian electricity markets. The interconnect will be developed, operated, and owned by Ukrenergo. The 600 MW capacity B2Bstation (2 units of 300MW), is proposed to be built on one of two proposed plots adjacent to the existing 750kV Zakhidnoukraniskasubstation, located approximately 70 km south of the city of Lviv. The proposed B2B will be located at an electricity transmissionhub on the border between Ukraine’s main grid and western part of the system, called Burshtyn Island (BI). BI is alreadysynchronized with ENTSO-E systems. The proposed location of the interconnection is considered optimal, given land availability andblueprint of the power system. The proposed B2B station will consist of High Voltage Direct Current (HVDC) converter valves and itsbuilding, high voltage AC equipment such as transformers and circuit breakers, protection and control equipment and its building,and other auxiliary facilities. A short distance (less than one kilometer) of high voltage (330 or 750kV) transmission lines willbe constructed to connect the B2B station to the existing Zakhidnoukraniska substation. The proposed B2B station would requireapproximately seven hectares of land; two vacant plots adjacent to the 750kV substation have been identified for the proposed B2Bstation. It is found that one of the sites is owned by the newly created Amalgamated Territorial Community (Local Council), whilethe other is owned by Ukrenergo. Further review will be conducted to identify land transfer acquisition procedures andenvironmental and social impacts.This component would also finance other necessary grid strengthening infrastructure, spcificscope of which will be discussed and agreed with Ukrenergo during project preparation, to achieve the Ukrainian power system’sintegration with Europe. Some examples of potential investments include reinforcements and expansion of transmission lines andsubstations, and upgrades of monitoring and control systems.Component 2: Introduction of Battery Storage (estimated cost: US$ 40million).This component will support Ukrhydroenergo’s (UHE’s) new battery storage infrastructure, which could be combined withsolar photovoltaic (PV) plants. The proposed battery storage and PV will contribute to satisfying the necessary frequencyregulation reserves that Ukraine must prepare before the ENTSO-E synchronization, through provision of grid ancillary services.Both PV and battery storage will be installed within the precincts of the company’s hydro power plants (HPPs). The proposed PVplants will supply electricity to the battery storage facilities and also cater to auxiliary consumption within the HPP facility.The proposed battery storage facilities and PV plants will be developed and operated by UHE. The component will be designed in amanner that supports commercial arrangements between UHE and Ukrenergo for ancillary services. A preliminary feasibility study forthe component has identified three HPP sites for the PVs and battery storages and those capacities, exact locations of the batterystorage facilities and potential PV plants, as well as technical characteristics including capacity will be identified during theproject preparation.Component 3: Technical Assistance and Project Management (estimated cost: US$ 10 million).This componentwill support project supervision, management, and coordination and will build Ukrenergo and UHE’s capacity and experience inoperating and maintaining the proposed B2B station and battery storage facilities. The component would consist of (i) projectimplementation support and coordination (US$ 4 million); (ii) capacity building and technical studies; and (iii) technicalassistance on regulatory and commercial aspects. The first subcomponent (i) will support hire a supervision consultant forComponent 1 to support Ukrenergo in overall project management and supervision including procurement, design, contract management,and preparation for operation and maintenance (O&M) of the completed investments. Additionally, it will include support forsupervision and monitoring of the implementation of the Environmental and Social Management tasks including establish andmaintaining of Grievance Redress Mechanism. The subcomponent will also support Ukrenergo’s interaction with key stakeholders suchas ENTSO-E to mobilize for EU integration. The second subcomponent (ii) would provide capacity building and training to Ukrenergoand fund system studies for integration with the European grid including technical studies to evaluate potential measures for theENTSO-E integration; market modeling work to identify potential market inefficiencies; and assessment in capacity allocationmethodologies for the interconnection. The third subcomponent (iii) will support studies, training, and advisory services onregulatory and commercial aspects of the proposed Project.