The global electricity market has entered a period of “turbulent” changes. According to the January report of the reputable IEA, global demand for electricity increased in 2021, creating tension in major markets and raising prices to unprecedented levels. Against the backdrop of record growth in global energy prices, Ukrainian energy tariffs have also risen. For example, the price of electricity for domestic businesses has doubled over the year, and tariffs for electricity distribution have increased (up to 30% depending on the voltage class and territorial unit). According to IEA forecasts, such price volatility may last for about three years and may reach “new heights” due to uncertainty in the production of renewable assets and a tight supply-demand balance in energy systems. In this context, what are the main energy cost-saving strategies for industrial businesses, and what role does the construction of transformer substations play among them?

Participants in the Ukrainian energy market today, more than ever, understand that something needs to be done about rising energy tariffs. This means finding business solutions to global energy challenges. In this context, top management of enterprises faces three options. First, building solar power plants for their own needs (autonomy and energy efficiency without connection to the grid). Second, modernizing existing power grids (saving energy costs by replacing outdated equipment to improve the quality and reliability of electricity supply). Third, constructing additional transformer substations to change the voltage class of the enterprise’s connection to the distribution network, which reduces the financial burden of electricity costs at the facility. From the perspective of visualization, concrete numbers, and the customer’s desire for a quick and tangible financial result, the third option is the most rational for enterprises looking to expand their production capacity. Let’s delve into it in more detail.

Why Has Building Transformer Substations Become One of the Solutions for Saving Energy Costs?

In Ukraine, electricity distribution tariffs are set for enterprises according to the 1st and 2nd voltage classes. Essentially, the 1st class is for consumers receiving electricity at 27.5 kV and above, while the 2nd class includes the rest, primarily small and medium-sized enterprises. Distribution tariffs in each region vary significantly due to management “nuances,” the number of consumers, and the overall condition of the grids.

The rise in distribution tariffs between the 1st and 2nd voltage classes is disproportionate. The tariff for the 2nd class is significantly higher than for the 1st (for example, in Vinnytsiaoblenergo, the tariff set by the NEURC for the 2nd class is six times higher than for the 1st). Therefore, switching to a higher voltage class is strategically sound and the right decision for saving and optimizing energy costs for industrial businesses. It’s clear that this step will reduce the cost of produced goods and create additional competitive advantages.

This transition is made possible by constructing transformer substations, which transform and redistribute electricity. Building such substations “turnkey” is a clear algorithm where customers value cost optimization and alternative options at each stage:

1. Pre-project stage
2. Project stage
3. Construction stage
4. Commissioning stage

Each of these stages has its specific “nuances” and a range of issues that need to be addressed comprehensively. The pre-project stage includes obtaining all the initial data regarding the land plot for the substation, urban planning conditions and restrictions, engineering-geodetic and engineering-geological surveys, and obtaining all initial data from the DSO and TSO. Quality data collection is critical here.

The project stage involves developing the working project according to current standards and norms. The main sections of the documents include the general plan, construction solutions, electrical solutions, relay protection and automation, telemetry and SCADA, and electricity accounting (ASKOE). At this stage, the project documentation undergoes expertise, and a construction permit is obtained.

Construction involves performing a full range of construction and installation works according to current standards and norms, preparing the site, building foundations for equipment and buildings, and installing power, relay protection, telemetry, and SCADA equipment.

Commissioning includes a full range of organizational and technical procedures for adjusting the installations of the newly built facility, issuing adjustment protocols (by the own electrical laboratory). At this stage, a certificate of completion of construction works is obtained.

The quality of the work carried out affects the cost and speed of constructing transformer substations and the convenience of their further operation.

Preliminary estimates indicate that the payback period for such a project is three years. Given the expected global increase in electricity prices, it’s clear that this figure will decrease and become increasingly “attractive” for optimizing energy costs for Ukrainian industrial businesses.

February 11, 2022