1. The day-ahead prices in Ukraine increased as expected, and probably everyone would be very surprised if this did not happen against the background of the shortage of generation (occupied, damaged and destroyed generating enterprises) and a seasonal increase in consumption (summer heat). However, I personally expected a slightly smaller increase due to the low purchasing power of the commercial sector in wartime.
2. Compared to June 2023, the July day-ahead prices rose by 20% — from EUR 73/MWh to EUR 86/MWh. In general, prices have become much closer to those of the neighbouring European countries, but another indicator points to qualitative changes: the price curve has also become more similar to European trends, that is, the market has taken a confident step towards price synchronization and real market coupling. The graph clearly shows that the price trends of Ukraine and Europe move almost synchronously — they are driven by the market, not by somebody’s hand.
Dynamics of spot prices of electricity on European and Ukrainian markets
3. Another important conclusion is that prices have become more volatile and began to correspond to the current market situation in Ukraine. However, there is a question of the ability of the industrial sector to pay market prices without a significant reduction in production volumes.
4. An interesting indicator of a healthy market is the price differentiation on weekdays and weekends. Indeed, weekend prices have become significantly lower than on weekdays. While before the change in price caps, the prices of the day-ahead market on weekends were only about 2% lower than on working days, in July, the difference between a day off and a workday reaches about 25%. Such changes correspond to the normal dynamics of prices on the European electricity markets.
5. In general, in July, the prices for the day-ahead market in Ukraine began to reflect the real current overall balance of electricity in the country. Say, when in the 3rd week of July one NPP power unit returned to work after repairs, and there was more electricity from NPPs in the system, the day-ahead market in Ukraine fell below UAH 3,800/MWh. Next week, when another NPP unit was repaired, and consumption increased due to the heat, the prices of the day-ahead market increased to nearly UAH 4,000/MWh.
6. During one month after their introduction, the new price caps made it possible to import electricity to cover the deficit, especially in the evening hours. Say, in July, 60 million kWh were imported from Slovakia, Poland and Moldova. This is approximately equivalent to the work of 1 coal-powered unit.
7. Imports help Ukraine’s energy system to pass peak loads more easily, but in addition to the limited physical volume of the interstate flows, electricity imports are restrained by the artificial price restrictions on the market — because the price in neighbouring European countries is usually higher than the set price caps, and this hinders imports of deficient and badly needed electricity.
8. Forecast for August–September. The prices for the day-ahead market will be set on the basis of covering the costs of the most expensive thermal generation and the deficit in certain hours and will amount to UAH 4,000 per MWh, on average.
In general, it can be said for sure that the easing of the pressure on price caps improved the market mechanisms and the price began to be set with account of the real balance of supply and demand.
However, the level of price restrictions still artificially limits real price setting, which is clearly visible from how often market prices reach the "ceiling" of price caps.
