Executive Summary:

1. Market regulations continue to adjust financial flows in the system. This time Energoatom and Ukrhydroenergo are required to provide more electricity at low prices to the Guaranteed Buyer (GB) so that the GB can increase profits from selling this power at higher prices and use these additional revenues to take over financing renewables support costs from the transmission tariff. While this allowed to decrease the transmission tariff for the time being, it may put renewables support at a risk if the profitability of the GB is challenged – e.g., by the discussed reduction in price caps at which the GB can sell its electricity. Furthermore, it implies that more and more electricity is traded at regulated prices – undermining the very idea of market opening.
2. Ukraine’s electricity imports from Russia and Belarus continue to rise (see Figure 1 below). Nevertheless, import volumes remain limited in terms of total market volumes. However, recent changes to the Law allowed to import power from Russia and Belarus under bilateral agreements, which was not possible before. This will clearly lead to increased cross-border flows with these countries. This might be good for competition and market liquidity but due to the highly regulated nature of the system (see above) may lead to problems on other market segments.
3. In Burshtyn trading zone producers execute their market power and maximize their profits by switching volumes to the balancing market segment. This pushed average day-ahead prices to their highest levels since market opening.
4. In the mainland trading zone, making more low-cost electricity available to the GB may have positively affected the liquidity on the day-ahead market, leading to price decrease during last 2 weeks. However, liquidity was slightly boosted by increasing RES output, and this positive effect might decrease in autumn-winter, as Ukrainian RES is mostly PV.
5. Average prices, at which state-owned TPP operator Centrenergo sells on exchange are significantly lower than on organised segments. Press reports indicate that this low-cost electricity is mainly bought by one business group that also allegedly exercises some managerial control over the Centrenergo management.