Ukrainian electricity market does not stimulate investment in generation - expert

Due to price restrictions and administrative interventions, the Ukrainian electricity market does not stimulate investment in the development of any generation.

Volodymyr Omelchenko, Director of Energy and Infrastructure Programs at the Razumkov Center, said this in a commentary for Ukrinform.

“The model of our electricity market does not stimulate investment in distribution generation (or in any generation at all), and without investment, no state budget can cope with such a load, let alone ours. The model is limited by various price caps (a price cap is the highest or lowest price of electricity set by the National Energy and Utilities Regulatory Commission on the market – ed), and administrative interventions. As a result, over the past five years, it has been generating not so much investment as debt,” the expert said.

According to him, without changes to the market, Ukraine will be unable to fully leverage opportunities for importing electricity from Europe, developing decentralized generation, and increasing gas production. Omelchenko believes that the way out of the situation is to ensure the compatibility of the energy markets of Ukraine and the EU - the so-called market coupling.

“It is unprofitable to buy and sell electricity if the price is lower than in the EU, where there are no blackouts and no shortages. Without market coupling (harmonized rules for calculating capacity, congestion management, and electricity trading, which have been in place in the EU since 2015 – ed.), I do not see a quick and efficient construction of decentralized generation in the volumes we need," Omelchenko emphasized.

As reported, Ukrenergo CEO Volodymyr Kudrytskyi stated that in order to ensure an energy system that can withstand enemy attacks, Ukraine needs to build more than 12 GW of capacity in the coming years, which requires EUR 12-13.

Photo: ANASTASiiA Sirotkina/uacrisis.org