Ukraine on the way to a functioning electricity market


The Ukrainian electricity market is now opening for competition. This paper discusses the main features of a successful electricity market based on the twenty years’ history in opening the EU electricity market. The paper draws lessons from various experiences in the EU countries to help to understand the approaches taken and to choose best practises for the Ukrainian context.

The main issues covered are:

  • Structural measures including unbundling of the grid activities and organising the competitive part of the market, namely generation and retail supply, in such a way that no market player will be discriminated and real competition can take place.
  • Guaranteeing a sufficient number of participants and liquidity in organised markets in all time frames: long term markets, day-ahead and intraday markets and balancing and ancillary services markets.
  • Technical readiness of the metering and settlement systems and the trading systems necessary for an open market to function.
  • Mitigating the risk of market abuse by introducing transparency and market monitoring measures to prevent and detect non-competitive behaviour by market participants.

The paper identifies several risks which might lead the Ukranian electricity market opening to a failure which would be difficult to repair afterwards. These risks are due to the oligopolistic structure of the sector and due to lack of technical readiness of the metering and settlement system and the trading platforms.

The main recommendations are to postpone the market opening until the necessary technical and IT-systems are in place and an appropriate market information and monitoring system is operational.

Dr. Matti Supponen

What is a Policy Paper?

Policy Papers refer to current or possible future policy topics. An in-depth economic analysis of the selected topic is presented, from which policy recommendations and possible actions are derived.