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As the second-largest European country (by area) and with a population of 41.9 million, Ukraine has high energy consumption and is home to one of Europe’s largest energy markets.[1] In terms of its energy mix, natural gas contributes nearly 33%, followed by coal at 30%, and nuclear at 21 percent. Petroleum, other liquids, and renewable energy sources together account for the remaining 18% of primary energy consumption.[2]
Ukraine has historically imported most of its natural gas, but also has reserves of its own – as of 2021, it held 39 trillion cubic feet of proven natural gas reserves.[3] To enhance energy security and reduce dependency on imports, Ukraine is working to increase domestic gas production and diversify its energy supply sources.[4] It has made renewable energy generation a key priority for the energy sector, with the goal of sourcing 25% of its total energy mix from renewables by 2035.[5]
Additionally, as a member of the European Union (EU) Energy Community (EC) since 2011, Ukraine is working to take its regulatory frameworks and energy sector to a higher standard to integrate with Europe more fully. Ukrainian officials are introducing more intense competition as well as higher technical standards and regulations, while at the same time creating a better environment for investment. More broadly, Ukraine has been on a path to build its capacity to regulate its electricity and natural gas sectors more effectively in order to harmonize with EC regulations and eventually link with the EU market. A major step in realizing this this goal was taken in March 2022, when the Ukrainian and Moldovan grids were successful synchronized to the EU power grid.
Energy utilities in Ukraine are regulated by the National Energy and Utilities Regulatory Commission (NEURC). NEURC was created in 1994 and is responsible for the regulation of natural monopolies’ activities in the power, oil, gas, and heat generation sectors was well the protection of consumers’ rights and overseeing pricing policies in those sectors.
Supported by the United States Agency for International Development (USAID), NARUC’s Ukraine Energy Regulatory Partnership is designed to help enhance NEURC’s ability to effectively regulate the electricity and natural gas sectors in Ukraine by drawing on international practices and relevant U.S. experience in market restructuring to encourage greater competition. The partnership currently supports the regulator in developing and strengthening multiple regulatory market monitoring capacities.
Specifically, NARUC is assisting NEURC in aspects of monitoring the electricity wholesale market and the natural gas retail market to ensure the success of the reformed market structures. NEURC also participates in NARUC’s regional initiatives in the Europe and Eurasia (E&E) region, such as the Electricity Market Performance Initiative, the Europe and Eurasia Cybersecurity Initiative, and the Improving Service Quality through Investments Initiative.
Electricity Wholesale Market Monitoring
Following the opening of Ukraine’s retail electricity market and wholesale market in 2019, the country has been focused on developing new market structures and improving existing ones, including a bilateral market, day ahead (DAM) and intra-day market (IDM), ancillary services market, and a balancing market. As these nascent markets emerged, electricity market monitoring became an increasingly important topic for NEURC as it looks to improve market efficiency, competitiveness, and transparency.
In 2019, NARUC conducted a partnership exchange that provided NEURC participants with an opportunity to learn best practices from the U.S., Hungary, and Bosnia and Herzegovina on electricity market monitoring, ensuring transparency of the regulatory commission’s activities, and ways to improve and further develop NEURC’s current regulatory and legal framework. Following the activity, NEURC participants expressed interest in learning more about market indicators and noted the importance of having access to real-time, reliable, and publishable data – especially for the purpose of increasing market transparency and participants’ confidence in the market.
As of 2021, NARUC has worked with NEURC on electricity wholesale market monitoring by holding frequent meetings and workshops in order to produce a tailored set of market monitoring procedures and an accompanying manual. As a result, NEURC will be better equipped to grow its market monitoring oversight and elevate the sophistication of tools at its disposal.
Natural Gas Retail Market Monitoring
In the Ukrainian gas market, all customers are eligible to choose their suppliers and household prices have been deregulated since August 1st, 2020. With the opening of retail markets, establishing and enforcing the necessary code of conduct and supervising unbundling have become increasingly important. As with electricity, customers look to NEURC to ensure that the market playing field remains fair, and to ensure that their choice of supplier will not affect the quality of supply. Through monitoring and evaluating suppliers’ conduct and competency, retail market monitoring will improve NEURC’s regulatory oversight and provide consumer protection by ensuring effective unbundling. By disclosing any resulting information related to monitoring activities with the public, NEURC will provide further transparency for the markets.
Since 2021, NARUC has been working with NEURC on gas retail market monitoring and is collaborating with it to develop a natural gas retail market monitoring report. Through building its knowledge on this topic, NEURC will be in a stronger position to exercise its regulatory authority transparently and independently.
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[1] “Ukraine Energy Profile.” International Energy Agency. https://www.iea.org/reports/ukraine-energy-profile
[2] “Ukraine.” U.S. Energy Information Administration. https://www.eia.gov/international/analysis/country/UKR
[3] Idem.
[4] “Ukraine Energy Profile.” International Energy Agency.
[5] “Ukraine - Renewable Energy.” International Trade Administration. https://www.trade.gov/energy-resource-guide-ukraine-renewable-energy
Ukraine Energy Regulatory Partnership
Project Dates: 2010-Present
Primary Partners:
National Energy and Utilities Regulatory Commission