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Donbasenergo offers a number of measures to overcome the systemic problems of the Ukrainian energy market

Ukraine

The Commercial Director of Donbasenergo stressed that the imperfection of a number of regulatory acts led to price distortions in the electricity market, and this was facilitated by dumping by market participants.

Donbasenergo offers a number of measures to overcome the systemic problems of the Ukrainian energy market

On March 23 this year, Oleg Larionov, Commercial Director of Donbasenergo PJSC, as part of a discussion at the Energy Freedom talk show, revealed the systemic problems of the energy market and proposed specific ways to stabilize it.

So, according to the top manager of Donbasenergo, the fundamental problems of the new market include, firstly, an uncharacteristic decrease in demand for electricity caused by a number of crisis phenomena, including those caused by COVID-19 quarantine measures.

Secondly: the presence of cross-subsidization between different categories of consumers, which is about UAH 50 billion and which should have been eliminated on July 1 of last year. Now low tariffs for the population are provided due to regulatory restrictions for state producers (the so-called “commodity” PSO). Today, the economically unjustified tariff for the population in Ukraine is the lowest among European countries.

Third: Ukraine has the highest renewable energy tariff in Europe. The uncontrolled growth of RES electricity volumes and the priority of their sale leads to an increase in the financial imbalance of the market.

The Commercial Director of Donbasenergo, during his speech, stressed that the imperfection of a number of regulatory acts led to price distortions in the electricity market, and this was facilitated by dumping by market participants, price caps, price caps, “commodity” PSO.

O. Larionov proposed a number of measures to overcome the problems of the electricity market. Priority measures not requiring amendments to the legislation of Ukraine:

  • revise the current price caps, and it is better to completely liberalize the market;
  • to postpone the implementation of measures according to the National Plan for the Reduction of Emissions from Large Combustion Plants from 2023 to a later date due to the lack of a financing program for the environmental modernization of TPPs.

O. Larionov dwelled separately on the proposals of Donbasenergo, requiring amendments to the legislation of Ukraine:

  • review the existing PSO mechanisms and switch to a financial model that will stimulate manufacturers to optimize production volumes and submit bids for sale on PCBs at economically justified prices;
  • resolve the issue of insolvency of the supplier of "last resort", state-owned enterprises of the coal mining industry and water supply;
  • resolve the issue of SE Energorynok's debts to power generating companies, which were formed under the old market model;
  • to introduce a capacity market for generating companies in Ukraine on the model of the existing European mechanisms by amending the Law of Ukraine on the Electricity Market and regulations.
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