Global Reform of Ukrainian Electricity Market — Opportunities for Importers

Global Reform of Ukrainian Electricity Market — Opportunities for Importers

On 1 July 2019,  a new model of the wholesale electricity market was launched in Ukraine within the frameworks of the EU’s Third Energy Package.

Before the introduction of the reform, all electricity was purchased by the state-owned company Enerhorynok. According to legislation requirements, this company is divided into three legal entities:

Harantovanyi Pokupets must purchase the energy produced according to the green tariff.
Enerhorynok remains a legal entity and shall collect debts accumulated for the consumed energy.
Operator Rynku, which is responsible for operation of electricity exchanges.
The share of exchange trade is up to 20% in the EU. In Ukraine, nearly a half of all consumed electricity is sold in the Day-Ahead Market (DAM) and in the Intraday Market (IDM).  It happened because the price restrictions are still in force, and it is more profitable to purchase and sell on these platforms instead of entering into annual bilateral agreements. Biddings are successful as a rule.  On 3 July 2019, more than 230 orders were received in the DAM. Almost the same number is recorded every day in Poland’s similar segment.

The importers had no great wish to work in Ukraine before, because the system stipulated a lot of manual control, created bureaucratic obstacles and caused non-payments. From now on, the price is formed by supply and demand, and there are already positive changes. In the Burshtynskyi Island trade zone, an importing company, which had supplied electricity from Slovakia to Hungary, helped to reduce prices. Even the import of small amounts provides the market players with the opportunity to correctly get oriented in the situation.

The advantages of the new model include the use of escrow accounts (temporary saving accounts) for mutual settlements. After the agreements are implemented, Operator Rynku transfers money from escrow accounts to its own special account. Then an electricity sales e-contract is signed with the companies, which have sold their electricity, and the funds are transferred to the accounts of producers.

Thus, these new tools become attractive for the suppliers. Now, the importers from the EU have a window of opportunities in the Burshtynskyi Island zone, and soon they will have it in the whole Integrated Power System of Ukraine.