KERI IEC – 2016 has identified the most needed in Ukraine energy reforms for market integration and cooperation with Central European partners

KERI IEC – 2016 has identified the most needed in Ukraine energy reforms for market integration and cooperation with Central European partners

14 April 2016 Premier Palace hotel (Kyiv) hosted the Third international energy conference IEC KERI-2016, on the issues of the energy reforms in Ukraine in the context of energy systems and markets of Ukraine integration with those in the EU.

In a lively panel discussion the issues of energy reform, the integration of the ENTSO-G gas energy infrastructure and the synchronization of the UES of Ukraine with the network ЕNTSO-E were discussed. The need for an independent regulator in the formation of a competitive market and the introduction of the energy ombudsman institution in Ukraine were determined. The ways of the gas sector restructuring were suggested. The expert advice on the formation of legal field of Ukraine in the context of integration of power systems and regulation of natural monopolies were formed in the course of the conferences. The positions of Poland, Hungary, Slovakia, Romania and Germany about the further development of energy partnership with Ukraine were exposed.

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Alexander Narbut, opening the conference, said: “We live in times of great challenges that Ukraine faces. Energy is the most serious of them. We need to think about how it would turn out not only next year, but in the long term. A conversation about strategic prospects, and the energetics potential, the tasks that need to be addressed to turn the potential into reality are the main focus of attention of experts today.” According to Mr. Narbut, the Ukrainian energy sector potential expantion in a broader market space is of strategic importance for Ukraine. “The underestimation of assets, their work under their full potential, starting with the planned but permanent repairs of nuclear reactors, whereby they don’t give their full power; the problems with thermal generation, which reduced its’ sales and nowadays its’ export is non-competitive on the global market, said Narbut - All these problems require serious strategicly orientated conversation between professionals. Those are the goals by set by Kiev Institute of energy research starting KERI IEC 2016”.

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The Minister of energy and coal industry of Ukraine Volodymyr Demchyshyn said: “The Cooperation with the EU requires Ukraine to implement of the current rules operating in the markets of Europe, and to develop new approaches to the management of the sector and regulate its’ activities in Ukraine. We need to understand and implement new models of energy markets, to secure the possibility of companies competition on liberal principles and to protect the rights of consumers”.

The main condition of Ukrainian energy sector integration is competitiveness of the energy market, joint decisions in creating a well-developed market infrastructure, the adoption and implementation of relevant laws, learning the lessons of recent history.

Competitiveness

The key to energy security is diversification of supplies and the ability to sell a product, in other words – integration with larger markets. To integrate with energy markets in the EU we need the reforms following the European model, namely the standards of the Third energy Package and Energy Community.

Privatization of state-owned energy companies would attract the necessary investment. Due to the change of ownership, command-administrative system transforms, an effective economic mechanism starts to run. Constructive management will lead to competitiveness, essential to the existence of the free market.

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Until the end of 2016 the privatization of a 70% stake in Mykolaiv, Cherkasy and Kharkiv regional power, 99% of Centrenergo is planned. The privatization will be based on three principles: transparency, compliance with legislation and reduction of risks, due to the discovery of information, free access to the assets of clear contracts of sale” – emphasized the Chairman of the state property Fund of Ukraine Igor Bilous during the conference.

According to him, privatization will work when there is a clear and reliable way of adequate investment returns particularly in the energy sector. However, capital risks should be identified and reduced or eliminated. Among the factors of successful privatization the Chairman of the state property Fund has named the political will and working of the energy laws and an effective regulator.

The conference participants noted that the absence of the law on the national Regulator significantly hinders the creation of favourable conditions for the development of a competitive energy sector of Ukraine. The adoption of the Law on the National Commission for regulation of energy and municipal economy of Ukraine will allow to unify the regulation of all natural monopolies, but also to strengthen pricing control, ensure the balance of interests between producers, consumers and government. The national regulator will be able to guarantee an uninterrupted supply of high-quality services to consumers at fair prices, ensuring diversification of the energy market.

In addition to tasks which require immediate action and have positive results: “First, we can talk about the beginning of energy independence from Russia thanks to energy imports diversifying: anthracite supplies from Russia lowered by half, but has doubled from RSA. Gas supplies from the EU exceeded the Russian, and we began purchasing alternative to Russian fuel for nuclear power plants” – said Volodymyr Demchyshyn.

Gas market integration

The experts of the discussion panel noted that the European partners are interested in expanding cooperation to ensure energy security in case of problems with gas supplies. Gas storage is very important in this context. So, the approaches to ensuring reliable gas supplies vary widely between countries and regions. Thus, the European Commission in February 2016 has published the legislative package “SoS”, which covers regional cooperation, regional risk assessment and preventative or crisis management in case of problems of gas deliveries. The region of Central and Eastern Europe: Czech Republic, Germany, Poland and Slovakia are committed to helping vulnerable consumers in times of crisis, developping schemes of cooperation on the principles of energy solidarity. The Commission recommends the member countries to collaborate and consult more closely with neighbouring countries on this issue. The role of Ukraine is determined by the necessity and availability of adequate gas storage capacity. Ukraine has the opportunity to offer mutually beneficial terms of cooperation, thus becoming a part of regional and European energy security plan.

Ukraine needs reforms and implementation of EU legislation (the independent energy regulator, further introduction of market rules, improving standards), and to end the political conflicts in the government,” commented Adam Janczak, Deputy Director at the Ministry of foreign Affairs of Poland for climate and EU energy policy.

Hungary is aware of the importance of Ukraine and considers it a key partner in energy security. We work on improving our relationship and see great prospects for cooperation in the energy sector,” said Pal Sagvari, the Ambassador-at-large for energy security, Ministry of foreign Affairs and trade of Hungary.

Synchronization of electric power systems

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The prospects of synchronization of the United energy system of Ukraine with the European power systems largely depends on how successfully the Ministry of energy will complete a joint study with a consortium of European electric systems’ operators, which is currently performed. The result of this work, in the near future should be the conclusion on the possibilities of integration of power systems of Moldova and Ukraine to ENTSO-E. It is today a key issue on which to focus in order not to miss a chance for the Ukrainian power”, – says Vadim Ulida, President of the Ukrainian public association “The Supreme Council of energy auditors and energy managers of Ukraine”, Deputy Minister of energy and coal industry of Ukraine (2014).

Daniela Balboriichi, head of the development networks department, Transelectrica, Romania, told how in the course of work on the synchronous continental European area expanding process there were three phases of testing synchronization of Ukraine and Moldova with ENTSO – E were conducted. Implementation mechanisms of synchronization of power grids during November 2014 – January 2016 identified some problems and challenges, the overcoming of which will contribute to further cooperation.

Problematic issues remain:

  • The lack of a coordinated programme of activities of public authorities and subjects of electric power industry on the integration of IPS of Ukraine in the energy grid interconnections of the European countries (ENTSO-E).
  • There is no “road map” or full list ranked by the degree of need and the priority of implementation of measures aimed at ensuring the technical, legal and regulatory synchronization capabilities of IPS of Ukraine with the energy Association ENTSO-E, besides, appropriate funding is unidentified.
  • Misallocation of time and financial and human resources during the implementation of a separate sample of works on harmonization of technical condition of IPS of Ukraine and legal field of Ukraine to the modern requirements in the European electricity sector.

The events in Ukraine lead to a significant reduction in energy generation capacity involved. The power export is the optimal solution which will allow to charge Ukrainian power plants and to increase the flow of income into the country. In addition, higher capacity, synchronized with the European power system, corresponds the United power grid of Ukraine integration in ENTSO-E.

The interests of energy consumers

A special focus of the conference was the introduction of the energy ombudsman institution. “In Ukraine there is a necessity to create the Institute for the protection of household consumers of gas and electricity – energy ombudsman. This way one can quickly and effectively protect the interests of consumers”, – emphasized Svetlana Golikova, member of the Strategic Council KERI, Director of Transenergo consulting, Ukraine. “For example, continues Mrs. Golikova,in EU countries the law requires the establishment of an appropriate institution for the protection of rights of household consumers of gas and energy, the so-called energy ombudsmen (section 3 paragraph 13 of the EU Directive 96/92/EC). By signing the Association Agreement between Ukraine and the EU, our government has assumed the obligation to establish a legislative framework and introduce the energy ombudsman institution in Ukraine“. The main principles of energy ombudsman are transparency, accessibility and efficiency, the main task is to explain to the consumer his rights, and in case of their violation – to ensure the effective and extrajudicial protection.

Two lessons from recent history

Energy sector reforms and energy systems integration into the European market slowdown is caused by inability to learn two lessons from recent history. The first “unfinished page lesson” means not to conclude any agreements with the members of the international energy market by the state. Second, “not implementing reforms lesson”.

“Important things should be done in advance. The actual specifics of the Ukrainian market must be distinguished from the specific interests and lack of consensus, which is prevented from moving forward,” said Ilka Lewington, senior consultant for DNV GL Energy.

The mechanism is that performing these steps will allow to integrate/synchronize the energy sources in the future, and the buyer will be able to choose the most profitable subscription plan and energy supplier, that means to de-monopolise the market. Besides, strategic implementation of changes will solve the pressing issues of the energy market of Ukraine and, most importantly, will reduce the energy intensity of the Ukrainian economy, according to which the indicator takes the first places in the world rankings.

About the conference

According to the participants KERI IEC plays a significant role in shaping the Ukrainian energy system, outlines the most urgent tasks and the solution of which depends the energy security of Ukraine.

The conference was attended by about 150 high level representatives both from governments and industry including top energy experts from Ukraine, Poland, Slovakia, Hungary, Czech Republic, France, Germany and other European countries, as well as from EU institutions, including representatives of  the European Commission and Energy Community Secretariat, of the leading energy industry companies, international financial institutions, representatives of the International Energy consulting and law firms, as well as independent experts.

KERI IEC is now in its third consecutive year and is the main professional platform for dialogue between representatives of government, business and expert community from different countries, whose main purpose is to promote the unification of energy markets of Ukraine and EU and energy security of Ukraine.

Following the conference, KERI IEC-2016 the proposals for the subjects of energy policy and energy sector, public authorities of Ukraine will be developed. The brochure will be published with conclusions and recommendations.

Reference to the source is obligatory when using the conference materials.

For additional information, please use the following contacts:

office@keri.org.ua

+38 (044) 467 5123