Economic Consequences of the Dam Destruction at the Kakhovka HPP
Press-releases
| 8 June 2023
Economic Consequences and Assessments of the Dam Destruction at the Kakhovka Hydroelectric Power Plant.
In this publication, we have gathered preliminary assessments of the economic consequences of the destruction of the Kakhovka Hydroelectric Power Plant (HPP) and the Kahovka Reservoir dam by the Russian army.
Most of the facts are based on official government announcements or statements from officials. The government, as well as the World Bank, are currently assessing the direct losses resulting from the disaster. Updated data will be posted on the Centre for Economic Strategy webpage.
Taking into account the importance and long-term impact of the economic consequences of the dam breach for the future of Ukraine, the most severe impact of this disaster falls on the local population residing in southern Ukraine. We have placed information about this in a separate section at the bottom of the page. If you are able to provide financial support for the evacuation and humanitarian assistance to those affected by the disaster, please follow this link.
Also, we have closely followed the foreign media coverage of the tragedy and would like to share an article by Timothy Snyder, an American historian and professor at Yale University. His insights are regarded as significant and credible in this matter.
Energy Sector
– The current impact of the Kakhovka HPP loss on Ukraine’s energy system is minimal. Since September 2022, after the evacuation of Ukrainian personnel from the station, the station has not been utilized to supply the needs of Ukraine’s electricity network (Ukrenergo). Destruction of the Kakhovka HPP has not disrupted the functioning of the energy system.
However, the destruction of the Kakhovka HPP means the loss of 335 MW of renewable energy capacity (cumulative capacity of hydroelectric power stations in 2020 amounted to 5,849 MW), so the losses are noteworthy, but moderate.
According to data from Ukrhydroenergo, the construction of a new power station would necessitate an investment ranging from $800 million to $1 billion. In addition to the station, it will be necessary to build a bridge and a railway crossing. According to preliminary estimates, the construction process could extend up to 5 years.
The destruction of the dam also raises concerns regarding a potential decrease in the water level of the Kakhovsky Reservoir, posing a possible threat to the temporarily occupied Zaporizhzhia nuclear power plant (NPP). Presently, the Zaporizhzhia NPP is not generating electricity for the Ukrainian energy system.
Kakhovsky Reservoir serves as a vital source of water for the NPP, supplying replenishment to its turbine capacitors and safety systems.
As on 08:00 June 9, the situation at the Zaporizhzhia NPP remains stable. Some reactors are undergoing repairs, while others are in a state of cold idle. One reactor is currently in hot shutdown. The cooling pond’s water level stands at a normal reading of 16.6.
As of 08:00 on June 10, the water level in the Kakhovka reservoir near Nikopol is 10.42 meters, and in the cooling pond of the Zaporizhzhia NPP – 16.67 meters. This is sufficient to meet the needs of the plant.
However, the commissioning of the Zaporizhzhya NPP will be possible only after the restoration of access to water resources, specifically, after the reconstruction of the Kakhovsky Reservoir or finding the alternative if feasible. As a result, the power plant will be disconnected from the Ukrainian grid, and Ukraine will lose 6 GW of nuclear power (43% of the total nuclear generation capacity of Ukraine).
– The dam explosion caused the flooding of the Kherson combined heat and power (CHP) pumping station. Main capacities of Kherson CHP remain outside the risk zone. 129 transformer substations in the city have been flooded and damaged as of this morning. Additionally, two solar power plants in the Mykolaiv Oblast have also experienced flooding.
As of 11:00 a.m. on June 7, nearly 20 thousand consumers in Kherson and neighboring settlements remained without electricity due to flooding, 129 transformers were flooded and damaged in the city substations.
By June 10, the number of settlements in Kherson region without power due to flooding had decreased to ten. 162 transformer substations are flooded. In Kherson, more than 15,000 consumers are without power. In Mykolaiv region, 13 settlements are flooded, and more than 2,000 consumers are without power.
Despite all the challenges, the energy system of the country continues to operate in a stable manner, with no shortage of electricity reported thus far (except of peak hours) . However, the destruction of the Kakhovka HPP raises concerns about potential difficulties in the future with restoring and establishing a stable electricity supply to consumers in the adjacent territories, particularly after their de-occupation and subsequent economic recovery.
According to Ukrhydroenergo, the reservoir will be drained over the course of four days since the explosion, and all accumulated water will flow out, leaving only the natural course of the Dnipro River.
Agricultural sector
– According to preliminary estimates by the Ministry of Agrarian Policy and Food of Ukraine, 10 thousand hectares of agricultural land on the right bank of the Dnipro river in Kherson region have been affected. Additionally, a considerably larger area on the left bank of the region, which is currently under occupation, has also suffered from the impact.
Man-made catastrophe will cease the water supply of 31 field irrigation systems of Dnipropetrovsk, Kherson and Zaporizhzhia regions. In 2021, these systems provided irrigation on 584 thousand hectares of land, which contributed to Ukraine’s harvest of approximately 4 million tons of grain and oil crops, valued at around 1.5 billion dollars.
These regions play a pivotal role in the production of vegetables and fruits destined for the domestic market. Lost harvests is poised to exert upward pressure on food prices within Ukraine.
In 2023 on the right bank of Dnipro river, only 13 irrigation systems are working. The terrorist act at the Kakhovka HPP effectively left 94% of irrigation systems in Kherson, 74% in Zaporizhia, and 30% in Dnipropetrovsk regions without a reliable water source.
Much more than half a million hectares will be left without quality irrigation. According to the Minister of Agrarian Policy, up to one and a half million hectares will not be able to be fully utilized in agriculture. It will take several years to restore irrigation.
– In addition, the Ingulets irrigation system in the Kherson and Mykolaiv regions, which takes water from the Dnipro River downstream of the Kakhovsky Reservoir, may also face the risk of flooding.
-The destruction of the Kakhovka HPP has also resulted in significant losses to the fishing industry, with estimates suggesting that the death of adult fish alone may amount to 95 thousand tons, equivalent to approximately 4 billion UAH. The overall losses from the death of all biological resources are projected to reach up to UAH 10.5 billion.
A full assessment of the damage to the fishing industry is impossible until the water level is fully stabilized. However, it can already be stated that the entire ecosystem of the Dnipro-Bug estuary system and the Black Sea will be significantly negatively affected.
– The State Fisheries Agency said that losses to the fishing industry as a result of the destruction of the Kakhovka reservoir could reach UAH 11 billion.
– Global markets have already reacted to the dam’s collapse. On June 6, wheat quotes on the Chicago Board of Trade (CBOT) reached a three-week high at $230.6 per ton (+$1.3).
However, it is too early to judge the consequences for global food security, given that only 20% of grain and leguminous crops in Ukraine were grown in the affected regions.
– The grain terminal of the company “Nibulon” (one of the largest grain market operators of Ukraine), which is located in Kozatsky, Kherson region, was flooded. The grain storage capacity at the “Kozatske” terminal was 76,000 tons.
– According to preliminary estimates by the National Bank of Ukraine, the explosion will contribute about 0.3 percentage points to this year’s inflation due to the difficulties in the work of a number of enterprises and partial loss of crops, especially vegetables.
Logistics, housing and infrastructure
– Prospects for river navigation on the Dnieper to the Black Sea may worsen significantly.
– The network of roads in the Kherson region, with a total length of up to 300 km, which is in close proximity to the Dnieper downstream from the dam, may be severely damaged.
– As of 15:00 on June 7th, up to 20 settlements, partially including the large city of Kherson, have been flooded. It is likely that the municipal infrastructure, including power lines, water supply, and sewage systems, have been damaged in these settlements, as well as housing.
– The Dnipro River, flowing downstream of Zaporizhia, will cease to be navigable for a long time. Around 50 vessels are endeavoring to relocate upstream along the Dnieper, striving to find refuge prior to the water level precipitously plummeting below the acceptable threshold.
-Damage to hydrotechnical reclamation from the explosion of the Kakhovka hydroelectric power plant exceeded UAH 150 billion. The Ministry of Agrarian Policy notes that the exact amount will be determined after the de-occupation of the territories.
Industry
– Companies in Kryvyi Rih report a decrease in water consumption. ArcelorMittal Kryvyi Rih (Ukraine’s largest steel plant) has limited water consumption and has already put a number of steelmaking processes on hold. Almost all water-cooled equipment has been temporarily suspended.
– The destruction of the Kakhovka Hydroelectric Power Plant will lead to a reduction in ferroalloy production. The Zaporizhia Ferroalloy Plant is located above the level of the Dniprohes Dam, but the Nikopol Ferroalloy Plant may have to extract water from the old riverbed and will have to significantly reduce its volumes.
Ecological and humanitarian consequences
-The estimated amount of environmental damage caused by the Russians’ explosion of the Kakhovka hydroelectric power plant has already exceeded UAH 55 billion. Ukraine continues to lose water.
-As of the morning of June 10, 62% of its volume, or 12.24 cubic kilometers of water, has leaked from the Kakhovka reservoir, and the water level in the reservoir is 10.55 meters and continues to decline
–According to the Ministry of Environment, on June 11, the Kakhovka reservoir went shallow by 70% – 13.95 cubic kilometers of water were lost.
-The Russian-occupied Oleshky Sands are threatened by rising groundwater. About 1,200 hectares of the Kinburn Peninsula have already been flooded due to the undermining of the Kakhovka hydroelectric power station dam.
-Up to 80 settlements are at risk of flooding, many of them are temporarily occupied and evacuation there is complicated.
– As of 08:00 a.m. on June 11, the water level in the Dnipro River at Kherson is 4.18 meters. Over the day, the figure dropped by 0.54 meters. The average outflow rate is 4-5 centimeters per hour. This is due to a decrease in the reservoir’s head (pressure).
–As of June 12, the water level in the Dnipro at the Kherson mark was 3.6 meters. On average, the trend is for the level to drop by 1-5 cm per hour. However, the situation is difficult to predict and requires further monitoring.
-32 settlements and 3784 houses in the de-occupied territory are currently flooded. The water is gradually receding. 2716 people have been evacuated. There is no such positive dynamics on the left bank. The water level has decreased there, and the occupiers are not carrying out evacuation measures, robbing locals and taking property from their homes.
– Although the government has not yet provided centralized assessments of the casualties caused by the destruction of the Kahovska Dam, the mayor of the temporarily occupied city of Oleshky in the Kherson region reported on June 7th that three people have died as a result of the flood.
– As of 13:00 on June 12, ten people have been reported dead as a result of the Russians’ explosion of the Kakhovka hydroelectric power plant. 42 people are reported missing, including seven children.
– The Ukrainian authorities are evacuating over 17,000 civilians, which increases the number of internally displaced persons in the country. Unfortunately, more than 25,000 civilians remain in the temporarily occupied territory, where no evacuation is being carried out.
– After the recession of the floodwaters, a grim task will ensue, involving the retrieval of not only the deceased individuals, particularly the elderly and disabled, who tragically perished in their homes, but also the bodies of animals that succumbed to drowning. The flooding is expected to wash away cemeteries and waste disposal sites. The availability of potable water from the downstream sections of the Dnipro River will likely be severely compromised for a significant duration, thereby heightening the risk of epidemic outbreaks.
– The destruction of the Kahovka dam could result in the fields in southern Ukraine turning into deserts already next year.
– A large amount of freshwater contaminated with pesticides and other agrochemicals from the flooded areas may find its way into the Black Sea via the Dnipro River. This could have far-reaching consequences not only for Ukrainian waters but also for fishing activities in the territorial waters of other countries within the Black Sea basin, contingent upon the prevailing currents.
– There is another risk of hazardous substances from the affected industrial facilities infiltrating the water system. The National Security and Defense Council of Ukraine has already reported that at least 150 tons of machine oil were spiller into DniproRiver, with a looming risk of further leakage exceeding 300 tons.
– Water currents erode and displace minefields, posing a threat to the safety of agricultural activities in all downstream areas. The Ministry of Defense warns of increased danger from explosive objects due to the flooding.
– Mines and unused ammunition have already been found in the sea off the coast of Odesa region due to the terrorist attack on the Kakhovka hydroelectric power plant