Executive Summary:

Most progress was made in the fields of New Electricity Market Design and Renewables & Energy Efficiency. Several activities, however, are already overdue and threaten a timely implementation of the first stage of the Energy Strategy 2035. In our view, most attention should be paid on overhauling the system of balancing on the gas market. By switching from a monthly to a daily mode of balancing, Ukraine wants to enhance financial liquidity and competition. Delays in this process were due to disputes between the transmission system operator, the distribution system operators as well as the regulatory authority. Speedy implementation of daily balancing is crucial to set the basis for a functioning gas market.

Moreover, we think that the implementation of a well-designed Renewable Energy Auctioning Law is particularly important. The law proposed by the Parliament aims at replacing the excessively high feed-in tariffs that are currently in place. Without changes to the current feed-in tariff system, even the modest goals of 2020-2025 will not be achievable. Yet, neither the basic law nor other alternative drafts submitted by parliamentary groups propose solutions for problems of the current system such as the restriction of its duration until 2030. It is hence important that the necessary urgent fixes of the tariff levels do not prevent the establishment of a well thought through system that enables a cost-effective deployment of RES in line with the Energy Strategy.

A recent study by Low Carbon Ukraine (see summary on pp. 5-6) provides a promising outlook on the expansion of renewable energies in Ukraine. Contrary to previous assumptions, a simple electricity system model shows that the existing system could successfully balance increasing shares of fluctuating renewable energy sources up to an installed capacity of 15 GW.