Luxembourg: Kinstellar Energy & Natural Resources Digest Ukraine, May 2019 In Review
Last Updated: 18 June 2019

June 2019 – Kinstellar Energy & Natural Resources Digest Ukraine, May 2019 in Review

ELECTRICITY: Ukraine set to postpone launch of new energy market by three months

On 29 May 2019, members of parliament registered Bill No. 10343 (the "Bill") that, if adopted, would postpone the launch of the new energy market envisaged by Law of Ukraine "On the Energy Market of Ukraine" by three months, from 1 July 2019 to 1 October 2019. The Bill also introduces a change to the wording of Article 9-1 of the Law of Ukraine "On Alternative Energy Sources" to regulate the feed-in tariff for "prosumers" – households and other customers. The feed-in tariff rates for renewable energy producers remain unaffected.

The Bill provides for the following:

  • within the first year of the functioning of the new energy market, Ukraine's National Energy and Utilities Regulatory Commission (the "Regulator") will have the right to establish maximum prices on the intraday market, the day-ahead market, the balancing market and through bilateral contracts;
  • on 1 August 2019 at the latest, market players (except customers) must carry out the purchase of electricity under a pilot regime, which is to be regulated by rules approved by the Regulator;
  • the Regulator must approve the rules for the energy market pilot regime within a month from the date the Bill enters into effect.

To become a law, the Bill must be finally approved by the Parliament, signed by the President of Ukraine and published. If passed, it will enter into effect on the date following its publication.

Ukraine's readiness to launch its new energy market is frequently discussed, with the majority of market stakeholders in agreement that a short delay in its launch will be beneficial for the market. However, the Government insists on opening the market on time and announces adoption of the required secondary legislation on 5 June 2019.

RENEWABLES: e-Auction law enters into effect

On 22 May 2019, the Law of Ukraine "On Ensuring Competitive Terms of the Production of Electricity from Renewable Sources" (the "e-Auction Law") came into effect.

The e-Auction Law obliges the developers of renewable energy plants with capacity equalling or exceeding 1 MW (solar) and 5 MW (wind, except for three-turbine plants) to undergo a compulsory bidding process to win the quasi-feed-in tariff, unless exceptions apply.

According to the e-Auction Law, the first e-auction is to take place by 31 December 2019.

OIL&GAS: Potential winners of production sharing agreement competitions to be determined in June

On 28 May 2019, the deadline to submit applications to participate in the current tender for production sharing agreements expired.

The Interagency Commission on Production Sharing Agreements reported receipt of 22 applications from 13 participants in relation to nine oil and gas fields. Within one month, the Interagency Commission is to recommend the winners of the competition to the government for confirmation. Negotiating production sharing agreement takes up to one year, though this term may be prolonged at the investor's initiative for another six months.

ENERGY: Ukrainian energy hubs. First steps towards preparing the regulatory base

On 24 May 2019, the National Securities and Stock Market Commission approved the action plan to create the necessary conditions for the functioning of energy hubs in Ukraine. The plan contains step-by-step measures to harmonize national legislation with the corresponding European Union standards, which would allow the operation of multilateral commodity trading systems for the sale of energy products and related financial products.

Creating energy hubs is expected to promote the transparency and competitiveness of Ukraine's energy market and strengthen the country's energy security.

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