On December 14th, 2019, experts of the project „Policy advice on low-carbon policies in Ukraine – Low Carbon Ukraine” (LCU) gave an introduction into aspects of energy and climate policies to a group of experts and parliamentarians, most of them members of the energy committee of the Ukrainian Verkhovna Rada. The aim was to provide newly elected MPs with fundamental expertise on the complex topic of electricity markets, to discuss specific challenges of integrating renewable energy sources into Ukraine‘s energy system, and to look into challenges of coal phase-out in Ukraine.
Dr. Matti Supponen, who has been working for decades for the European Commission as an expert for electricity markets, gave an introduction into basic technological and economic features of electricity markets on the example of European countries. He comprehensibly explained the goal and challenges of market coupling, highlighted the role of the different players, summed up where European countries stand today in market development and presented solutions for future challenges like new forms of trading, sector coupling and the advancing digitalisation.
LCU expert Oleksii Mykhailenko then presented outcomes of the opening of Ukraine’s electricity market in summer 2019 and answered questions like „How can we ensure low prices?“ and „How useful are price caps?“ and „Did the market opening lead to increased imports from Russia and does this pose a threat to Ukraine‘s energy security?“. While deficits are solvable (and LCU is ready to support here), Oleksii Mykhailenko concluded, that the market opening was necessary (if not in 2019), but Ukraine most of all needs a strategic vision of what the market should be like in the future combined with the political will and coordination of all policy makers.
Project leader Dr. Georg Zachmann elaborated on the development of Renewable Energy Sources (RES) in Ukraine. This issue is of high relevance for Ukraine as the country lags behind all European and neighbouring countries regarding CO2 emissions, partly due to an ageing power plant fleet that needs to be replaced in the coming years and decades. Today, RES not only present a climate-friendly alternative, but already come up with competitive costs compared to conventional power plants and thus are attractive for investors. Beside the urgently needed modernisation of the energy system, the expansion of RES would lead to less energy dependence of Ukraine and enhance the countries energy security. Also, the prevalent problem of market power could be addressed by a diversification of energy sources.
Finally, the workshop participants were presented first results of an LCU analysis on the socio-economic implications of a coal phase-out in Ukraine: While the Ukrainian coal industry has been in decline for decades, it still plays a salient role as an employer in some regions. Its contribution to the economy, however, is low and even though the sector is highly subsidised, coal is losing its competitiveness as an energy source against renewable alternatives. In the long-term, a further decline of the coal industry seems inevitable. It is therefore crucial to initiate a well-organised process for supporting a smooth structural change in the coal regions as soon as possible in order to avoid a sudden structural break. This process should be authorised from the highest political level and supported with political commitment as well as extensive funding. While being initiated from the top, the structural change needs to be developed bottom-up at the same time, e.g. with by strengthening regional development agencies. A structural change fund could promote economic development and social stability in the regions. Training programmes for younger miners, transitional decommissioning work and fair retirement schemes can help avoiding a negative impact on the labour market and trigger a successful structural change in coal regions towards a more future-oriented industry.