Our 5th issue of the MEMO series now takes stock of the first 12 months of operation under the new wholesale market.
NPP electricity generation in May was significantly below the economic efficient level. This cannot be explained by Covid-related demand decrease or a high RES generation share.
On July 22, LCU submitted a draft of the “Integrated National Energy and Climate Plan” to the Ministry of Energy. As a Contracting Party of the Energy Community, Ukraine committed to submit a NECP by the end of 2020.
Curtailing and compensating RES can be cheaper than taking up 100% of RES electricity through investment into conventional plant park or transmission.
Anti-crisis measures in electricity sector. Ukrenergo certification. Gas market. RES support scheme. Electricity market opening. Electricity consumption decrease due to Covid-19.
2020 electricity consumption might decrease by 5% (best case) to 8% (worst-case scenario).
Dr. Zachmann explained that LCU analyses indicate a decoupling of wholesale market prices and marginal costs of production, leading to prices well above those in neighbouring countries.
Frequent changes to the legal framework fail to address the structural problems. Loopholes undermine the market and speed up debts’ accumulation. Extended data transparency is an upside of the reform.
Progress of Ukraine’s 2050 Green Energy Transition Concept. Legislative amendments to the electricity market. FIT restructuring issues. Signing of gas transit deal. Regulatory framework on energy storage. Carbon taxation.
Ukraine’s electricity market does not need state support for energy storage projects. It needs a properly working electricity market aligned with the EU 4th Energy Package to boost the flexibility of the grid.
Basic technological & economic features of electricity markets (in EU countries). Challenges in market development: new forms of trading, sector coupling and digitalisation.
On December 14th, 2019, LCU experts 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.
Further RES expansion is needed to replace the ageing power plant fleet and to sustain energy security. To account for a higher variability in the system, different instruments can be utilized.
Different sets of RES quotas are analyzed. In the best-case scenario, 3 GW wind & solar are built and RES quotas set at 1.6 GW, enabling a RES share above 20% in 2025.
Tax revenues from a potential upstream carbon tax in Ukraine of 27UAH/t CO2 are estimated between UAH 5.6 and 6.1 bln. Price increases from taxation are strongest for coal (+3.5%-4.3%).
Progress on gas TSO unbundling and certification, corporatisation and certification of Ukrenergo, licensing in upstream sector. Analysis and recommendations on ESU action plan implementation.
Assessment of feed-in-tariff, related expenditures for RES, current scheme of financing, impact on state budget and electricity prices. Analysis of risks of retroactive change in support scheme.
Assessment of the progress on the ESU 2035 action plan implementation, analysis of gaps, barriers and the lessons learned, providing recommendations on further improvement of the process.
Increasing electricity imports from Russia can help to improve competition, reduce prices and reduce emissions. But it should be regulated to minimize adverse effects.
Curtailment should be considered as a regular flexibility option. It helps to mitigate the green-coal paradox and to reduce system emisions from 94 to 40 Mt CO2.
Market power remains strong and starts exploiting balancing market. Changes to PSO does not help the competition. Prices in the IPS start to drop as nuclear power ramps up production.
The Ukrainian electricity system can absorb fluctuations of higher RES shares and support a further expansion with RES auctions.
The rising cost of RE support pushes electricity prices beyond affordable level in Ukraine. Yet the revision of the established FIT scheme should be carefully designed and consider potential risks.
Analysis of (inflated) wholesale prices after electricity market opening. What could be done in the short and long run to fix this?
Dr. Georg Zachmann took part in a meeting that President Zelensky held with relevant stakeholders on the situation in the electricity market.
Analysis of curtailment as a flexibility option in the short and long run, including mitigation of the ‘green-coal paradox’ and comparison with hardware solutions. Overview of curtailment experiences across the world.
Recommendations on making energy markets competitive, increasing RES share, structural change in coal sector and regions, investments in infrastructure, energy efficiency in residential sector.
Prices are stable as the market shows no signs of effective competition. Increase of import to the BEI does not affect prices. Price caps are higher than the estimated marginal costs of coal generators.
Progress on ensuring of the NEURC’s independance, unbundling and PSO on gas market, and launching the NECP development process. Key priorities in energy policy for the new administration.
Ukraine has finally opened its electricity market despite many concerns. Prices are high, some market segments do not work properly, and the smaller BEI trading zone is under the reign of monopoly.
Before the deadline for electricity market opening, Ukraine’s official work hard to patch the holes in the upcoming regulatory framework. Does it help or constraints the future market?
Main features of a successful electricity market based on the 20 years’ history in opening the EU electricity market. Lessons learnt and best practises for the Ukrainian context.
A successful structural change can avoid a negative impact on the labour market and trigger an economic shift towards a more future-oriented industry.
Ukraine is about to liberalise its electricity market. Yet the devil is in the details: the rules are far from perfect and key players are not ready. What are the risks?
The market opening on July 1st may have negative impact on final prices for industries and economy as a whole. With little time left, at least critical risks should be mitigated.
Analysis of implementation challenges related to wholesale market reform, in particular preparation, coordination, issues of market design, concentration and liquidity.
Accumulated debt poses a major obstacle on the way towards a new electricity market. A solution to this problem needs to be found before the new market design is introduced.
On April 25, the Verkhovna Rada passed the law introducing renewable energy auctions.
Developments on the law introducing RES-e auctions, launch of daily balancing on gas market and Naftogaz issues. Deep dives into the issue of debts in the Ukrainian electricity system and progress with electricity market reform.
25% of electricity generation can come from Renewables in 2035 when annually installing around 500MW, what seems realistically as of today.
Ukraine’s 2035 electricity demand is estimated based on GDP growth, electricity price and energy efficiency trajectories. Only in a high GDP growth scenario, demand increases substantially.
The concentration of wind and solar plants in high-yield regions increases balancing needs and grid constraints. We recommend introducing a transparent curtailment charge mechanism.
Key messages: Multitude of energy & climate obligations must be coordinatedRES share surpasses unambitious targetsDiffering indicators in national strategies – risk to cause confusionProgress in energy intensity – but still a long way aheadEmission targets are not ambitious
The NECP is an opportunity for Ukraine to reflect on its key energy challenges. But its preparation is complex and requires strong political commitment.
Introduction to the development of National Energy and Climate Plan (NECP) for Ukraine, namely timeline and structure of the document.
Recommendations: Dynamically adjusting FIT based on project duration. Incentives for a smart & grid-friendly location selection. FIT reduction in 2019 to contain costs.
Ukraine is about to adopt changes to the RE support law and introduce auction-based remuneration scheme. But is it not too late? Will the conservative changes to FIT help to contain the expensive boom?
Changes in the environmental taxes and related challenges, new PSO rules on the gas market and supply billing issues. Deep dive into the draft law on new RES support scheme (auctions) and introduction to Ukraine’s National Energy and Climate Plan.
Key Developments in Ukraine’s Energy Sector. Balancing Needs due to RES increase. Introducing the Low Carbon Ukraine Project
Small renewables projects can have important side benefits. Well targeted feed-in tariffs can support a cost-efficient deployment.
Based on a LCU’s Optimised Dispatch Model (ODM), we assess that the current Ukrainian power system can balance fluctuations of up to 15 GW of wind and solar (in-depth analysis).
Wind and solar installations should be distributed over the country. Policy should strive for an optimal mix of wind and solar installations in order to reduce system cost.
Based on a LCU’s Optimised Dispatch Model (ODM), we assess that the current Ukrainian power system can balance fluctuations of up to 15 GW of wind and solar (overview of results).