(ICIS)–The European Commission will be working with Ukraine and
Moldova to fast-track reforms with a view to integrate their electricity and gas sectors
with those of the EU, the European Commission said in a statement on February 24.
The support package pledged this week outlines plans to help Ukraine and Moldova
couple their electricity markets with the EU’s by spring 2027 as well as help Ukraine
to buy gas to create stocks for the benefit of the country and the region.
Finally, it also offers support to speed up investments to build 1.5GW of renewable
generation.
Stakeholders active in the Ukrainian power and gas markets welcomed the package
and said Ukraine had to take concrete steps to meet the targets outlined by the
Commission.
PRELIMINARY MEASURES
Olha Yevstihnieieva, advocacy manager of Green Deal reforms in the country said
Ukraine needed to consider several preliminary measures.
Firstly, it would need to pass legislation for the introduction of the nominated
electricity market operator (NEMO), namely the organisation(s) mandated to run the
day-ahead and intra-day integrated electricity market.
Yevstihnieieva said a draft was registered in parliament last year and is under
consideration. An alternative version was proposed several weeks later.
Discussions centre around the designated NEMO and the two options under review
are the electricity grid operator, Ukrenergo and the electricity Market Operator.
Another step includes establishing relevant regulatory provisions for flow-based
market coupling (FBMC), an advanced mechanism that allocates transmission
capacity based on real-time grid conditions.
Yevstihnieieva said the implementation of FBMC would help to optimise exports of
renewable generation.
A third measure would be to ensure the full implementation of REMIT regulations to
bring transparency to the market.
Ukraine has adopted legislation aligning with the EU’s Regulation on Wholesale
Energy Market Integrity and Transparency (REMIT).
However, given current war conditions and martial law, much of the data needed to
forecast demand and supply are not publicly available.
This could create problems in setting correct price signals.
MARKET REFORM
She conceded that Ukraine’s successful market coupling would depend on the
country operating a meaningful market operating on demand-supply signals.
Right now, there are a number of price caps and subsidies in place, which keep
prices artificially low.
Although the full deregulation of the market may not be possible given ongoing war
conditions, she said Ukraine could still adopt critical regulations to define energy
poverty and energy consumers who could become eligible for support to pay their
bills.
This would be the first step towards easing restrictions on prices and ensuring
Ukraine moves towards a liberalised market.
GAS MARKET REVIEW
On the gas side, Andrew Myzovets, CEO of Аssociation “Gas Traders of Ukraine”
said Ukraine needs to undertake a comprehensive review of its gas production,
import needs, and forecast demand.
These would be required in order to create several scenarios that would allow
stakeholders to understand how the market would develop in the mid to long-term.
Another important step is to strengthen the balancing market as a building block for
the creation of a wider spot and forward market.
Ukraine launched its balancing market five years ago but the platform experienced
some initial difficulties in the first two years following the launch.
Myzovets said the disturbances in supply and demand caused by war-related
damages and population displacements softened the issues experienced prior to the
war.
However, he said that as Ukraine prepares to rebuild its economy in a post-war
scenario, it may experience higher gas consumption.
This means it needs to consolidate its balancing market to reflect supply and
demand accurately.