Olga Kosharna: Energoatom Leadership is Toxic to President Zelensky’s Entire Team

Olga Kosharna: Energoatom Leadership is Toxic to President Zelensky’s Entire Team

Member of the Collegium of the State Nuclear Regulatory Inspectorate of Ukraine discusses the nuclear sector failures and successes, their reasons and consequences for independence of Russia.

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Olga Kosharna: Energoatom Leadership is Toxic to President Zelensky’s Entire Team

Over two decades Ukraine has been trying to overcome the dependence of its nuclear energy sector on Russia. The diversification of nuclear fuel supplies and solution to the issue of spent fuel shipment to Russia were approved as far back as the National Security and Defense Council was chaired by Volodymyr Horbulin [in 1994-99]. He was one of a handful who in those years realized the meaning of nuclear energy for Ukraine’s economy: today it is over 50 per cent of the country’s electricity output, but at that time the share was smaller; he also understood risks of any ties with Russia, regardless of any discounts we would have offered in exchange. Many things have changed since then. The Crimea is annexed. The war on Ukraine’s East lasts for seven years. The nuclear fuel supply diversification rate has been substantially increased since 2015, construction of the Central Storage Facility for spent nuclear fuel was started in 2017. They learned how to make many items of equipment and replacement parts in Ukraine. All the above are the news from 2019. Today, activities in these areas are hampered, either intentionally or because of lack of professionalism, nuclear energy sector expert Olga Kosharna said. Kosharna’s experience includes many years of work at the State Nuclear Regulatory Inspectorate, work with Volodymyr Horbulin at the National Institute of Strategic Studies, she was in charge of the “nuclear” area at the Razumkov Center. Her last position was Communications Director at the Ukrainian Nuclear Forum, an association of major companies in Ukraine’s nuclear energy sector. Now Olga Kosharna is back to her homeworld Nuclear Regulatory Inspectorate taking the position of the Collegium member, she is also an Expert Council member at the Ukrainian Energy Ministry. Mind.ua talked to Olga Kosharna about the future of the nuclear energy sector, current issues, risks and challenges, and also on how to make the country’s nuclear energy sector independent of Russia and revive the nuclear industry.

Couple of weeks ago Energoatom’s Balance Commission sitting took place, they draw conclusions of the past year. Energoatom’s Leader Petro Kotin called 2020 “a fruitful year, successful to the Company in many respects”. However, he did not support this statement with any numbers. You repeatedly posted on your Facebook that all business results have been thoroughly hidden from you since October last year. Nevertheless, I am certain you have an opinion about Energoatom’s progress over the last year. Could you share your opinion with our readers?

Never in Energoatom’s history the results were so awful: the losses are 4.8bn hryvnya [about 171.5m dollars]. However, what frustrates the most is the position of the company's management who attributed the losses to the currency exchange rate fluctuations. This is unprecedented: even in 2015, when the dollar exchange rate tripled, no one resorted to arguments like that.

I also want to point out that the true loss amount would only become known to us after an audit. My sources in Energoatom made it clear that the losses are underestimated and scattered over the coming years.

How could this be otherwise? One of the key results of 2020 was a complete failure of planned maintenance resulting in Energoatom’s actual self-limiting of electricity production and sales revenues, and putting Ukraine’s unified energy system stable operation at threat during the winter time.

Energoatom’s management could not (or did not want to) optimize the maintenance duration given that autumn- winter is the period of the highest load. When the consumption rate dropped, they simply put the reactors on hold rather than reviewing the maintenance schedule considering a reduction in consumption in spring and summer last year and moving most of the maintenance work to this specific period. I even do not know for whom their justification is intended: we could not go for planned outage because of the fuel was burnt incompletely. We see that the Zaporizhzhya Unit 5 after an extra-long 274 days maintenance period due to its lifetime extension will soon be out again for another long maintenance. This must be the very reason why they did not burn the fuel completely and did not manage to complete (in three quarters of the year(!) replacement of the condenser.

Thus said, the reason for the losses was not the currency exchange rate. The effect of planned outages can be checked by comparing the Zaporizhzhya NPP output data for 2016 and 2020 on their website.

Olga Kosharna: Energoatom Leadership is Toxic to President Zelensky’s Entire Team

Of course, special obligations imposed on the company to compensate for the difference between the social tariff for public and the market price of electricity also played a negative role in the formation of last year's losses. But, let's look at the trading results beginning of August last year, when Energoatom was finally able to enter all market segments with almost half of its electricity, including the market of bilateral contracts.

Their sales price did not even compensate for the cost of electricity, and in fact the reduction in the sales price of electricity as part of special obligations from 56.6 to 1 kopeck – this is the initiative of Energoatom itself, which the company has now "forgotten" about. Energoatom-Trading specialists warned the management at that time: don’t sale electricity at price less than 35 kopecks per 1 kW, it is not cost effective. These specialists were sacked immediately. The idea of increasing the volume of free sales by reducing the price of electricity sold under special obligations practically to zero was not understood even by nuclear energy opponents, not speaking about its supporters.

Olga Kosharna: Energoatom Leadership is Toxic to President Zelensky’s Entire Team

Even with a shortage of generation capacity due to, I repeat, a mediocre maintenance campaign, it was possible to gain profit in sales, taking benefit of the market situation. But, most of sales in the autumn-winter period were made at candidly dumping prices.

Do you believe the new team doesn't know how to sell, but they still can run a purchasing campaign effectively? By no means. Tenders were hold using intermediaries, prices were several times overstated. This situation resulted in numerous complains to the Antimonopoly Committee who delayed some procurements and spares required for maintenance were not purchased in time.

These are evidences of Energoatom’s current management been unable either operate reactors normally, create maintenance schedules or trade effectively. To crown it all, they consciously lay off both people who know how to trade, as well as competent engineering staff. In parallel, there is an endless flurry of internal investigations, which, to put it softly, make people, including technicians, nervous.

But Energoatom itself publicly declares this is not their fault … Why?

Energoatom’s leadership policy, both tactics and strategy, is war to all. They continue making guilty of all their failures the Ministry of Energy, the Regulator, the [state company] Garantovanyy Pokupets (the Buyer of Last Resort), other participants in the market. Let’s consider the output reduction. Energoatom’s leadership forget that they themselves, namely it was Mr. Kotin, publicly, without any pressure, signed with the [national energy company] Ukrenergo the balance sheet for 2020 which included the reduced output. The reasons for the reduction were apparent: drop in electricity consumption in combination with an increase in the renewable share which, just like nuclear, are not load-following. Energoatom is not a thing-in-itself.

Here I would like to say that I am surprised with the position of nuclear veterans Mykola Steinberg and Heorhiy Kopchynskyy. It came as surprise that in their policy statement article published at the Censor website last week they repeated Energoatom’s management statements about allegedly “plotted” limitations on electricity output in spring and summer 2020. While reading the article there’s an impression that hey do not understand or do not want to understand how the unified energy system is operated and what problems does it have. They do not want to look at the issue of shortage of the load-following balancing capacities (8 per cent instead of 16 per cent of the total installed capacity) even when the economics functions normally, not speaking about the situation in the last spring and summer, when the industry was hurting the most, and the industry is a steady consumer of electricity. Also, the hydro power plant output was reduced due to the low level of water, and these are the load-following capacities, while the solar and wind generation, whose needs should be backed by the load-following plants, raised from 2 to 9 per cent. How Ukrenergo would be able to balance the energy system in this situation?

That is why today the allegations of the Energy Ministry intentionally limiting the system do not stand up to any criticism… This is not the Energy Ministry: we have the system operator who develops a balance forecast based on modeling and analysis, gets Energoatom endorsement, and only after that the Ministry approves it. And, on the basis of this document, Energoatom was instructed already by the Energy Ministry to optimize the outage campaign, you can check the information on the website. Both the veterans and the nuclear operator [Energoatom] management are supposed to know this, however they continue pushing their agenda.

The rhetoric coming from Energoatom management minds making everyone guilty looks is scaring. Everyone apart for themselves. Particularly, this is the State Nuclear Regulator who allegedly deliberately delayed putting the reactors into operation last autumn.

This is an unprecedented situation not only in Ukrainian history, but in the international atomic energy in general, when a nuclear operator publicly and in official correspondence accuses the nuclear regulator of the fact that the latter does not permit resuming power units operation after maintenance on the basis of inspections and having pending activities important to safety that the operator shall fulfill.

Apart for operational issues, the development projects are suspended, and the Central Storage project is the major one. Do you track this situation, do you know why it happens?

Suspension of construction of the Central Storage Facility in January 2020 is the fail of the year. The project was cosmetically revitalized only in December, meaning one year was lost.

Construction of the Central Storage Facility was suspended at its completion phase, after appointment of Kotin. Do you believe it was a coincidence?

I don’t think so. Today there are no doubts the project was suspended from the top in the interests of Russia. If earlier we could only speculate on the degree of Ukraine’s leadership involvement in satisfaction of the interests of Russia, now, when the USA called Energoatom’s shadow figure Andriy Derkach the agent of Russia, the answer is unequivocal. There are no doubts about the Russian vector of interests of the Ukrainian President Deputy Head of Office Oleh Tatarov who is in charge of the law enforcement authorities and [Ukrainian President Head of Office] Andriy Yermak, based on the progress of the contact team for peace settlement of the situation at Ukraine's East.

The fact that the Central Spent Fuel Storage Facility Project is not good for Russia has been demonstrated through the project’s lifetime since its beginning in 2005. If construction of the storage facility was started as planned, immediately after Holtec International won the tender in 2004, [the US-based] Holtec International was ready to offer good conditions of financing, the cost of construction works and equipment was much less than now, and we would be able to save 2bn dollars which have been paid to Russia. However then, in 2006, [then the opposition leader] Yuliya Tymoshenko raised the wave of counteracting calling the Central Storage “Europe’s nuclear waste dump”, and later Andriy Derkach pushed the law in parliament requiring the project approval at parliament and public hearings despite of no registered population in the eight kilometers control area. Thanks to Derkach the project had been waiting for the parliament approval till 2012… By the way, the Exclusion zone administration repeatedly attempts to launch a tender for construction of a storage for high-level waste coming from Russia after reprocessing of Ukrainian spent nuclear fuel. However, the law on construction of the nuclear installation has not been submitted to parliament yet.

The Central Storage Facility for spent nuclear fuel is important not only from the spent fuel management standpoint, but also for successful implementation of the fresh fuel diversification project. Westinghouse used fuel shall not be stored at cooling pools for more than five years. Now this fuel is loaded at six reactors in Ukraine and soon will be loaded at the seventh reactor. The Central Storage Facility was designed, in particular, to address this issue. Blocking this project is a sort of the Trojan horse: it also creates problems to the fresh fuel diversification project. This is why Russia has been blocking this project during all these years more actively then using the US fuel at Ukrainian nuclear power plants.

This is why non-commissioning of this Storage Facility in December is a complete failure. Today it is already clear that Energoatom will not meet the newly announced schedule for commissioning in May, then in June. As an observer at the meetings of the public council at the SNRIU and as a member of the SNRIU Collegium, I listened to the reports of representatives of Atomprojectengineering [Energoatom’s division in charge of the Central Storage Project] and I was convinced that their schedule is absolutely unrealistic. The reports’ style is typical for Energoatom incumbent leadership: everyone is guilty apart for them, everyone interferes. With God's grace, I hope the first canisters to be put on storage by the Energy Worker Day (22 December) as the earliest. However, I doubt that.

Olga Kosharna: Energoatom Leadership is Toxic to President Zelensky’s Entire Team

It is interesting to note that the press release issued upon the balance commission sitting does not have the Central Storage Project on the priorities list. This list includes the start of construction of the Khmelnytskyy Units 3 and 4, the Tashlyk Pump Storage Power Station Unit 3, the reconstruction of the South Ukraine process water supply system, the data centers and exploring ways for Ukrainian electrify export to the EU countries. But, the Central Storage Project is not there. It is on the list of completed projects, however the commissioning of this facility is still a long way to go.

But, the other joint project with the USA, diversification of fresh fuel supply, does it not face difficulties like that?

The contract for the development of pilot fuel assemblies for VVER-440 reactors was signed in September 2020, we have two reactors of this type at the Rivne NPP. Supply of pilot assemblies is scheduled for 2024. I have no doubts that the project is feasible – Westinghouse possesses this technology, it supplied fuel to the Loviisa Nuclear Power Plant until

In fact, all key discussions on this issue has been ongoing since 2018. In 2020 this team just signed the contract ahead of Energoatom Vice President Herman Halushchenko’s visit to the USA, not going into any details. Probably, the lobbyists who were hired to organize this visit, advised Energoatom management to demonstrate their adherence to the pro-western vector of development. That is why studies made earlier were taken from archives.

I have an impression that diversification, a move away from Russia and cooperation with Europe and the USA now occurs in Energoatom only on paper. Nothing goes beyond the declarations. The year 2020 demonstrated that all the projects aimed at escaping from the influence of Russia were put on hold. The Central Storage Facility project could have been completed the last year.

Do you think the diversification projects were put on hold intentionally or because of lack of professionalism?

First of all, this is done intentionally. This is because Energoatom is under influence of the [Russian security service] agent Andriy Derkach. And I have no doubts about that. I’m not along here: even the Acting Energy Minister Yuriy Vitrenko admitted this speaking to the Radio Liberty recently.

If in May last year, commenting on appointments at Energoatom, I assumed that the company would fall under Russian influence, now I have a clear confidence that Energoatom was given to people from Derkach’s sphere of influence as a reword for the service, for the so-called "Derkach tapes".

Second, I think, this is because of incompetence and unwillingness to look into problems. Energoatom’s leadership every time tries to make a good face at a bad game. But it is precisely unprofessionalism, lack of experience in implementing large projects, and CSFSF is a large and technologically complex project, same as diversification of nuclear fuel.

The fact that projects important for Ukraine’s energy independence are being deliberately slowed down is also evidenced by the fact that under [Former Prime Minister Oleksiy] Honcharuk and [Former Energy Minister Oleksiy] Orzhel they tried to lower the qualification requirements for the appointment of Energoatom President, moving the requirements for professional education and experience at leading positions in the nuclear energy sector to the lower ranks, allowing lawyers and economists without experience and understanding of the nuclear industry and nuclear legislation to take part in the selection process. I believe this attempt was made for the benefit of Energoatom incumbent Vice President Herman Halushchenko who is a lawyer from Derkach’s sphere of influence. Thanks God, the selection process was stopped.

Since 2014, Energoatom has made a significant breakthrough in reducing the dependence on Russia, both in diversifying the fresh fuel supply and storing spent fuel, and also in import substitution with an emphasis on domestic manufacturers, purchasing spare parts and equipment in the EU and the USA. Russia began to lose its market for commercial products and engineering services, and, most important, the Ukrainian nuclear industry dependence on Russia. If earlier Russia’s Gidropress helped extending the nuclear power units lifetime, since 2014 Ukraine has been able to do without it. However, since 2020 the recent achievements began disappearing from the agenda and we began loosing our positions. This particularly applies to cooperation with the REMA Plant in supply of spare components for standby diesel generators earlier purchased from Russian companies, and cooperation with NKMZ as the manufacturer of components for the reactor main joint seal, again an alternative to the Russians.

I will tell you another fact that has not been published so far. In 2017-18 Energoatom purchased equipment for manufacturing nickel gaskets at Energoatom’s division Atomenergomash facilities. Plans were to get the Regulator’s approval and begin manufacturing of the gaskets in 2020. However, today the equipment worth of millions of dollars stands still and they continue buying Russian gaskets in Europe at the price triple the regular price, this is what Deutsche Welle wrote about recently.

Another evidence of the roll back is an actual suspension of operation of Energoatom’s office in Brussels where the most important contract with the American and European companies were signed, including Westinghouse and Holtec International. Energoatom was the first among the Ukrainian companies to open an office like this, it was done earlier than Naftohaz, for communications with the European Commission and Foratom.

Foratom is an association of the EU countries’ nuclear industry companies whose objective is protecting and promoting the industry interests on the European and global markets. Ukraine is one of the two countries members of Foratom but not members of the European Union, participating in Foratom through the Ukrainian Nuclear Forum Association, President is Yuriy Nedashkovskiy – Mind.ua.

The Brussels office operation suspension reminded me of the roll back under President Viktor Yanukovych, of the events preceding the Revolution of Dignity [2013-14].

Last year much was said about completion of construction of Khmelnytskyy Units 3 and 4, but the small modular reactors (SMR) subject disappeared from the agenda. Based not only on the opinion of the nuclear industry workers, but also on Ukraine’s unified energy system needs, do we need to complete construction of 1 GWe reactors, and why they cast a long shadow on SMR?

Since the new team's main tasks are PR and promotion of positive messages about their activities, the idea of completing the construction of the third and fourth units at the Khmelnytskyy NPP based on the feasibility study prepared in 2017 was used as a good advantage. As a result, we hear a lot of news about site cleaning, about the site readiness for construction despite the fact that there is still no design ready, no Regulator’s conclusion, no independent assessment of strength of building structures. I generally doubt that Energoatom’s current leaders and their advisers understands that these are mandatory conditions for completion of construction.

Olga Kosharna: Energoatom Leadership is Toxic to President Zelensky’s Entire Team

Feasibility of this project should be considered based on, first of all, the status of the energy system under variable demands, under rapid uncontrolled growth of generation from renewable sources in the absence of load-following capacities, both operable and redundant. The energy system won’t maintain another 2 GWe of basic nuclear capacity.

While promoting ideas of the necessity to complete construction, Energoatom puts no reliance on the position of the system operator Ukrenergo or on ENTSO-E prospects. The idea of building two large units using essentially Russian technology is being promoted without any economic and technical justifications.

Despite of a reverse tendency observed internationally. Large generation capacities are been built only in authoritarian states, in the Middle East and Asia: India, China, UAE, Pakistan, Turkey. All over the world, they are looking for small and medium power low pressure reactors, with more advanced walk-away safe passive systems. These designs are being adapted now, licensing and certification are in progress. The United States and Canada advanced in this area, the latter has a state program and intentions to implement a pilot project selecting three different technologies as they have a problem with supplying electricity and heat to the northern territories.

In our country, this process is completely frozen, unfortunately. The success that has been achieved, for instance, by signing a memorandum with Holtec International on participation in the SMR-160 project of Energoatom as the Customer and SSTC NRS as the Regulator’s thinktank to develop a joint approach to licensing, was lost. Holtec proposed to set up in Ukraine a hub for production of small modular reactors, since Ukraine has every opportunity to localize production. Not only reactor vessels, but also reactor control systems, because we have many companies, including Radiy and Impulse, which are engaged in the development of such systems, they now supply reactor control systems not only to Ukrainian nuclear power plants, but also to Europe and the USA. To have such opportunities and to shelve such a project beginning of the end of 2019 is more than short-term thinking...

May the Russian factor be present here? But, does not Russia deal with small modular reactors?

Without a doubt, I see the Russian influence here. If we are not to remain an agrarian country, if we are to develop technologies and maintain independence of Russia, we have to develop nuclear energy, especially the small and medium-size reactors sector. This approach would help developing both the engineering school, operation skills and industry. This would also help to resolve the issue of lack of load-following capacities.

Therefore, I see no point in discussing completion of construction of the Khmelnytskyy NPP using structures built in the previous century, whose strength properties are unknown, with a large base output, which definitely will not fit the energy system. And, none will develop fuel suitable for load-following operation, neither Westinghouse, nor TVEL.

What are specific reasons for the issues you’ve mentioned?

The disaster erupted after the [April 2019] presidential election when the team from [stand-up TV show, the incumbent President Volodymyr Zelensky was part of] Kvartal-95 won the office and decided to run everything. They took charge of the Cabinet, courts and other institutions functions. And what was happening in the fall of 2019: attempts to change the management of state-owned companies, which were successful in Energoatom when they removed Yuri Nedashkovskiy including all the vice presidents beheading the company for six months (till May 2020 there was only an acting president appointed – Mind.ua), and failed with respect to Ukrhydroenergo’s Igor Sirota who was protected by the supervisory board. I believe this would not be possible if there was a supervisory board in Energoatom at that time.

Both then and now, the explanations for sacking Nedashkovskiy sound absurdly: insufficient efficiency, low coefficient of installed capacity utilization.

People do not understand the technical requirements. Energoatom could have produced more electricity, but who will allow to do this under the balance restrictions … They both do not understand that Energoatom could have produced more in winter when solar and wind generation was down and thermal plants experienced lack of coal, but the reactors were shut down for maintenance. I stress: this is their own fault.

Thanks to the tapes published by [member of parliament] Geo Leros wiretapping [Andriy Yermak’s brother] Denys Yermak we all know what was the true reason behind the rotations: they simply sold positions.

Do you trust what is on the tapes?

Why shouldn’t I? Beginning of the autumn [2019] Denys Yermak bombarded different authorities with requests regarding ineffectiveness of Energoatom performance. Where does this curiosity suddenly come from?

This means that people from the President’s office started to run the industry while they didn’t have any special knowledge of the nuclear sector and respective legislation, just like [former Prime Minister] Oleksiy Honcharuk and [former Energy Minister] Oleksiy Orzhel did earlier. Having no understanding how the nuclear power plants operator is integrated in international structures and bound by international conventions and obligations in WANO and other organizations. They have combined the Ministries of energy and ecology into a single entity while there was a conflict of interests there, without any legal justification, without coordination with the Western creditors. We also remember [former President’s Representative in the Cabinet and Member of Parliament Andriy] Gerus's famous amendment to the law On Amendments to Certain Laws of Ukraine in the Sphere of the Nuclear Energy Use, which allowed the import of electricity from countries outside the Energy Community. According to Andriy Gerus, electricity should have been imported from Belarus, but on 1 October, Igor Kolomoysky's United Energy began importing electricity from Russia. It was a pure fraud, parliament members did not realize what they voted for, what does this amendment to the law on the electricity market do in the law on nuclear energy?

Therefore, the real reasons for Energoatom’s current downturn are: incompetent attempts to manage the company from the Presidential Office, total violation of provisions of the laws, including international obligations, actual sidelining the Energy Ministry and its independent nuclear energy specialists from managing Energoatom. And, of course, the distorted model of the electricity market, the implementation of which did not fulfill a number of conditions, including the elimination of cross-subsidization.

This is the sources of unbearable social obligations vested on Energoatom and Ukrhydroenergo. And, finally, the green tariff which is unaffordable to Ukraine’s economy.

I would also like to note that transition of Energoatom to the Cabinet of Ministers subordination, which was actively lobbied by the Cabinet leadership, as the last link in this chain of events resulted in the fact that no industry specialist could influence their [Energoatom leadership] acts or omissions. They virtually stay without any control, there is no one to endorse their financial plan, maintenance schedules, to carry out operational management and coordination with other types of generation while endorsing long-term plans. We see a successful attempt of avoiding any control. The Cabinet also took a weak position, since it cannot influence the economics and is fully controlled by the President’s Office.

Although there are few reasons for optimism, I do not want to end up on a negative note. Recently Ukrainian Parliament with 233 votes approved [MP on Yuliya Tymoshenko’s Fatherland Party] Valentyn Nalyvaychenko’s request to Ukraine’s President regarding Energoatom’s leadership abuse in the NPP safety area. More than a half of the votes were given by the [presidential] Servant of the People Party’s fraction.

Moreover, the National Anti-Corruption Bureau, the National Bureau of Investigations and the National Police look at what happens in Energoatom: sales, tenders for procurement of equipment did not go unnoticed to public, members of parliament and embassies. This is why I hope that the critical situation that has reached its climax is now visible to everyone. And the fact that these people [Energoatom Acting President] Petro Kotin, [Vice-Presidents] Herman Halushchenko and Hartmut Jacob still lead the nuclear energy generating company is toxic already to the President’s Office. To [Head of President’s Office Andriy] Yermak, [President’s Aid Sergiy] Shefir, and, the most important, to President Zelensky. Especially today, on the eve of the 35th anniversary of the Chernobyl accident, an anniversary when the international community interest to the status of the Ukrainian nuclear power industry grows. Did Ukraine make conclusions of the Chernobyl accident? Couple of years ago everyone was certain that the answer was “yes”...

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