New transmission tariff: fundamental market problems persist

December 14, 2023

On Saturday, December 9, 2023, the Regulator approved the transmission and dispatching tariff of NEC "Ukrenergo" for 2024. This time, the Commission abandoned the practice of changing the transmission tariff every quarter, as in 2023, and therefore we have a flat tariff for the whole year.

Of course, the change in the tariff for the Transmission System Operator (TSO, Ukrenergo) caused heated debate. According to market participants and branch associations, the tariff is insufficient for Ukrenergo to fulfil all its obligations (under the existing market model) — loans and financing of the "green" tariff to raise the share of RES in the overall electricity generation structure.

In fairness, it should be noted that significant easing of administrative pressure on the market this year (in particular, thanks to higher marginal prices) allowed wind energy companies to leave the balancing group of the Guaranteed Buyer and to focus on market competition, pursuing their own trading strategy. In this way, the wind power sector in Ukraine has become more resistant to Ukrenergo's tariff battles.

WPPs can already operate on the market without the "green tariff", but for SPPs the situation remains critical due to manual regulation of the market, price caps, regulatory unpredictability, etc. As a matter of fact, with liberalization of the market, support for the construction of every new generation will not be necessary.

For example, the two largest producers of green energy, Elementum Energy and DTEK, operate in the market and do not plan to return under the Guaranteed Buyer’s umbrella. Even more, the latter plans to start construction of the second phase of the Tylihul wind farm, set to work in the market environment from the very start.

On the other hand, the so-called “special duties” remain a problem for the electricity market in Ukraine — for households, "green generation" and pseudo special duties on the balancing market, with more than 5,500 enterprises, to which the law allowed to get electricity regardless of the level of settlements.

Furthermore, there has been much talk recently about the introduction of "special duties for imports", where Ukrenergo will be forced to subsidize electricity importers at its own expense.

Despite all the difficulties, both external and internal, there is a real opportunity to get rid of these market distortions with the gradual cancellation of the "green special duties", but for this it will be necessary to set the price caps in accordance with EU Regulation 1222/2015 and not to change them permanently, relying on the rather dubious methodology of the NEURC.

Then, "special duties for imports" will not be needed. It is also advisable to shift the social security system for the population from subsidizing the rich and poor alike through a "cheap" price to providing targeted cash subsidies exclusively to the poor.

Abandoning rudimentary state planning methods of the sector management and transition to market regulation, first of all, responding to anti-competitive actions with REMIT, is the only way in the right direction for producers and consumers alike, while preservation of administrative practices will only lead to the ultimate ruination of the investment climate, deficit of capacities, monopolization and, in the end, to higher electricity prices than those formed in a transparent, competitive environment under the EU rules. I don't even want to talk about the power system stability under this scenario. It remains to be hoped that next year the NEURC will find the will and responsibility to remove non-market restrictions.

Volodymyr Omelchenko

Director, Energy Programmes

Born in 1967 in Kyiv

Education: Kyiv Politechnic Institute, Department of Chemical Engineering (1992)

Author of over 50 scientific works and op-ed publications. Took part in development and implementation of international energy projects and scientific research in international energy policy


1992 – 1996 — worked in different positions in the mechanical engineering industry

1997 – 1998 — Head Expert of the Division of Oil, Gas and Petroleum Refining Industry of the Ministry of Economy of Ukraine

1998 – 2003 — Naftohaz Ukrayiny National Joint-Stock Company, in Charge of Oil Transportation Section

2004 – 2007 — Chief Consultant at the National Institute of International Security Problems of Ukraine’s NSDC

since February, 2007 — Leading Expert, Razumkov Centre. Director of Energy Programmes since 2013

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