Executive Summary

The past months were characterized by the government reshuffle, the Covid-19 pandemic, and a debt crisis in the electricity market. The government under new prime minister Denys Shmyhal decided to create the Ministry of Environmental Protection and Natural Resources separating it from the Ministry of Energy and Environmental Protection. This was preceded by a change in the leadership of the ministry, which was provisionally handed over to Olha Buslavets.

Due to Covid-19, we estimate a contraction in electricity consumption from 4.7% in the optimistic, 5.5% in the baseline to 8.1% in the pessimistic scenario. This contrasts with a predicted increase in demand of 1.1% for the forecast before the crisis. The decrease in demand only had a modest impact on Ukrainian wholesale prices indicating a non-functioning market.

The pandemic has deepened the existing debt crisis in the electricity sector. Already before Covid-19, electricity market players accumulated UAH 30 bln debt. This problem is magnified by the pandemic-induced economic recession and payment discipline decline. In fact, the quarantine measures were not the reason of the payment crisis in the Ukrainian electricity market – they were merely a catalyst.

The above-mentioned turbulences further delay the implementation of the actions foreseen in the energy strategy. While some long-overdue measures – like the ten-year network development plans – got finally approved, many urgent measures – such as the restructuring of unprofitable mines – saw little progress.