science

Rotterdam plus

Rotterdam plus is a science topic covered in the lgStudy science library. This page brings together a partial reference excerpt, illustrations, worked examples, real-world applications and a short study plan, so you can understand Rotterdam plus rather than just read about it. In short: "Rotterdam plus" or "Rotterdam+" is a methodology (formula) for determining the steam coal's price for thermal power plants, based on import parity principle, which was used to forecast the wholesale market price of electricity. The formula was in application in Ukraine from May 2016 to June 2019.

Key takeaways

Rotterdam plus belongs to science; place it in that map before memorising details.
Learn the definition first, then one example that makes the definition concrete.
Connect Rotterdam plus to a quantity you can measure, compute or draw — that is where exam questions come from.
Reproduce the core statement of Rotterdam plus from memory before moving on to harder problems.

Reference excerpt

"Rotterdam plus" or "Rotterdam+" is a methodology (formula) for determining the steam coal's price for thermal power plants, based on import parity principle, which was used to forecast the wholesale market price of electricity. The formula was in application in Ukraine from May 2016 to June 2019. The formula was adopted on 3 March 2016, by Ukrainian national energy regulator, National Commission for Regulation of Energy and Utilities and automatically became invalid from 1 July 2019, due to the entry into force of the law "On electricity market."

Etymology In media new methodology was named "Rotterdam plus". In this verbal construction "Rotterdam" means coal index price, and "plus" means logistic costs for delivering coal from port of Rotterdam to Ukraine's thermal power plants.

History and prerequisites Due to the hostilities in certain areas of Donetsk and Luhansk regions, Ukraine lost control of 88 coal mines, which was 60% of the total number of mines in the country. Coal production in 2015 decreased by 38.8% (by 25.2 million tons) compared to 2014 - to 39.8 million tons. Ukraine faced a shortage of anthracite (hard coal) grades before the heating season of 2014–2015. Thus, in the fall of 2014, anthracite was imported for the first time from South Africa. In 2015, according to the State Statistics Service, Ukraine imported 14.6 million tons of coal worth $1.63 billion. Of these, 1.07 million tons of anthracite coal was imported at 99.6 million US dollars. The current tariff for electricity supply by thermal power plants did not cover the cost of purchasing imported coal. The coal price in that time was manually set by the Ministry of Energy and Coal Industry. The new methodology to forecast wholesale market price of electricity calculating with the market determination of coal price was supposed to ensure the independence of thermal power plants from coal supplies from the ATO zone and deprive Ukraine from problems with the accumulation sufficient amount of coal in front the heating season.

General principle According to the methodology, the National Commission for Regulation of Energy and Utilities calculated the forecasted wholesale price for electricity in such a way that the tariff for electricity produced by the thermal power plants would cover its cost. The formula for determining the price consisted of the average price indices for thermal coal in the ports of northwestern Europe (Amsterdam-Rotterdam-Antwerp) for the 12 months preceding the calculation of the FWP, plus logistics costs for the delivery of coal to Ukrainian thermal power plants. The APІ2 index had been adjusted according to calorific value of Ukrainian coal, which was indicated in the predicted fuel structure for thermal power plants. This document was approved by the Ministry of Energy. The logistic costs were based on the average freight rate for the delivery coal from the ARA region to Ukrainian ports, the cost of transshipment in the port (unloading the vessel) and the average railway tariff for shipping coal from the port to the thermal power plants. The "Rotterdam +" formula did not assume that coal would be physically purchased in Rotterdam and transported to the Ukrainian port "Pivdenny" (Odessa region). The APІ2 index was used as an indicative of the European market, and the logistics costs according to the formula were to cover the costs of delivering coal from producing countries - South Africa, Colombia, the US and Australia - to Ukraine. This approach was justified by the European Coal and Lignite Association (EURACOAL) calculations . According to the Association, the cost of delivering coal from South Africa, the United States and Colombia to Ukraine were higher than from these countries in the ARA region.

ICU investigation Ukrainian media reports and the National Anti-Corruption Bureau of Ukraine have alleged that Ukrainian investment firm Investment Capital Ukraine (ICU) benefited from the introduction of Rotterdam+ in 2016 because of its connections with government officials. The formula was approved by a regulator, Dmytro Vovk, who had previously worked for ICU. According to NABU's allegations, Vovk provided early insider information to ICU employees about the Rotterdam+ policy, which enabled ICU to buy DTEK company Eurobonds at a low price when the energy company was struggling. The formula brought in financial gains for DTEK, DTEK owner Rinat Akhmetov, and ICU. ICU denied wrongdoing. DTEK denied allegations that they were involved in creating the formula. Media reports also alleged that ICU used its close ties with Ukrainian President Petro Poroshenko and Minister of Energy Volodymyr Demchyshyn to orchestrate the scheme, and that they benefited from it; they denied wrongdoing. As part of NABU's criminal investigation case, it conducted several searches, including a raid of ICU's offices in Kyiv and equipment seizure from NEURC. In the course of 3.5 years, 10 Ukrainian and 4 international examinations were carried out, which, according to the lawyers, did not reveal any harm or loss from the formula. The investigation was closed on 27 August 2020, due to the lack of evidence of the suspects' guilt and crimes in their actions. On 24 September, the legality of closing a case was confirmed by the Supreme Anti-Corruption Court and on 29 September by the Office of the General Prosecutor.

… excerpt ends here. Continue reading the full article.

Worked examples

Example 1 — a first encounter with Rotterdam plus

Start with the simplest possible case. Write down what Rotterdam plus claims or describes in one sentence, then invent the smallest concrete situation in which that sentence is true. In science, the smallest case is usually a single object, a single equation or a single measurement. Check that every symbol or term in your sentence has a meaning in that case.

Example 2 — changing one variable

Take the situation from Example 1 and change exactly one quantity: double it, halve it, or set it to zero. Predict what should happen to Rotterdam plus before you calculate. Comparing your prediction with the result is the fastest way to find out whether you understand the idea or only the words.

Example 3 — an exam-style question

Typical questions about Rotterdam plus ask you to (a) state it precisely, (b) apply it to given data, and (c) explain a limitation. Practise writing all three answers in under five minutes; the third part is what separates a full-mark answer from an average one.

Applications of Rotterdam plus

In research: Rotterdam plus appears in science research whenever the underlying quantities have to be modelled precisely. Papers usually cite it as a starting assumption and then explore where it breaks down.
In technology and industry: Engineering practice reuses Rotterdam plus in design rules, simulations and safety margins. Knowing the idea lets you read a specification sheet and understand why the numbers look the way they do.
In the classroom: Rotterdam plus is common in secondary-school and first-year university syllabi. It links to neighbouring topics Coal in Ukraine, Corruption in Europe, Corruption in Ukraine, so understanding it makes those chapters shorter.
In everyday life: Look for Rotterdam plus outside the textbook — in sport, cooking, traffic, electronics or the sky above you. An example you found yourself is remembered far longer than one you were given.

Affiliate

Preply — study more efficiently by working with a personal tutor. 50% off.

How to study Rotterdam plus in 20 minutes

Read the reference excerpt below once, without taking notes.
Close the page and write down what Rotterdam plus means in your own words.
Compare your version with the excerpt and mark what you missed.
Work through the three examples above with pen and paper.
Explain Rotterdam plus out loud to somebody else — or to Teacher Smith in the lgStudy chat.

Frequently asked questions

What is Rotterdam plus in simple terms?

Why does Rotterdam plus matter?

Because it connects several science ideas at once: it gives you a definition you can apply, a quantity you can calculate, and a way to check whether a result is plausible.

How should I study Rotterdam plus?

Read the excerpt, restate it from memory, then work through the examples and applications listed on this page. The five-step study plan above takes about twenty minutes.

What does this page cover?

It gives you a compact reference excerpt plus original lgStudy explanations, examples, applications and study material on Rotterdam plus.