To change the electricity market: new draft laws on imports and renewables

Six draft laws with amendments to the Law “On the Electricity Market” were applied to the Verkhovna Rada. The amendments concern imports rules and priorities for renewables.

 

This week was very turbulent in the electricity market. It all started with a round table organized by participants of the renewable energy market, concerned about the retrospective reduction of a feed-in tariff. We wrote about it earlier. The round table was attended by Andriy Gerus, Chairman of the Verkhovna Rada Committee on Energy and Housing and Public Utilities, who assured all participants that he personally was against the retrospective reduction of the tariff, and that during the “next week or two” no draft laws with similar intentions would be registered .

The same Mr. Gerus, being the Chairman of the Committee the day after the round table on the problems of renewables, held a meeting at which a draft law on implementing amendments to the Law “On the Electricity Market” related to both imports and clean generation was introduced.

In general, on October 15-16, the Verkhovna Rada website registered 6 draf laws on amendments to the Law of Ukraine “On the Electricity Market”. The presence of the draft laws themselves, as well as their contents, shocked the market participants.

Draft laws #2233-1, 2233-2, 2236-1, 2236-2 have already been submitted to the Committee and are being reviewed. They are already available on the website of the Verkhovna Rada.

PROPOSALS ON ELECTRICITY IMPORTS

Key proposals​:

  • to limit imports from Russia and Belarus
  • to limit imports only from Russia

During the committee meeting, Andriy Gerus admitted that the draft law, which had allowed imports from Russia a month ago, had been primarily focused on cooperation with Belarus. And “because life is not a bed of roses” but because of the understanding that coal reserves at thermal power plants are 30% less than last year. Gerus said that the lack of electricity in the domestic market at an adequate price was the main reason for the imports:

“Did you want a competitive market?! So compete – satisfy all applications that arise on the market, and then nothing will have to be imported from anywhere. I want to draw attention to the fact that today neither the state nor state companies import electricity. Imports are carried out by those consumers who could not buy electricity here... If there are deficits in the domestic market, there will be imports, if there are no deficits and there is an adequate price, there will be no imports”,Gerus said before presenting his draft law.

Draft law #2236-2, initiated by Gerus, provides not only for refusing to import from Russia (while allowing it from Belarus), but also for selling all purchased electricity on the “day-ahead” market. Now, imported electricity can be sold under bilateral agreements.

“The entire volume of electricity imported from countries, which are not parties of the Energy Community (read Russia – ed.) is sold exclusively on the “day-ahead” market and the balancing market. This provision does not apply to the sale of electricity imported from the Republic of Belarus (which de facto is also not a member of the Energy Community – ed.)”

For the author personally, it’s weird to see a foreign country provided with such preferences, so specifically prescribed by the law.

The draft law also proposes to give the Cabinet of Ministers the authority to temporarily suspend/restrict electricity imports or exports.

Interestingly, this week the Belgian media published an article, on the cover of which Gerus appeared. In a nutshell: Gerus is called Kolomoyskyi’s man, who convinced deputies that imports from Russia will reduce the cost of electricity in the market, after which the company, in which Kolomoyskyi has a stake, bought 100 MW interchange from Russia. But the most interesting question that is being asked is: “If Ukraine is establishing business with Russia, which took Crimea away, then why should the US and the EU continue to impose sanctions on the Russian Federation because it annexed Crimea?”

Electricity imports are being addressed in another draft law, #2236-1, initiated by Olexiy Kucherenko and Yulia Tymoshenko. This document does not make exceptions for Belarus. And he insists on the sale of imported energy on the “day-ahead” market or on a balancing market.

 “Electric energy imported from states that are parties to the Energy Charter Treaty but are not parties to the Energy Community is sold exclusively on the “day-ahead” market or on the balancing market by a balancing service provider.”

The explanatory note also emphasizes that the electricity imports under bilateral agreements distorts market competition. At least because domestic producers, unlike importers, have many obligations that affect the price of electricity. Importers currently have significant advantages.

“In order to ensure equal conditions of competition, one should sell electric energy on the same terms for all sellers; it can be provided by selling electric energy on the “day-ahead” market.

CLEAN GENERATION

Key proposals​:

  • to reduce the rights of renewable energy facilities with a capacity of more than 150 MW
  • to provide first aid to Guaranteed Buyer

Mr. Gerus did not tell lies, and technically there is nothing about the retrospective reduction of a feed-in tariff in the draft law, which he initiated. But there are dispatch restrictions.

If earlier, when scheduling the operation of generating capacities, the “greens” had a priority, now a priority is only for those whose capacities are less than 150 MW. So, does government need to pay too much at the tariff? Turn off the solar station!

The rules for balancing the “greens”, the capacity of which exceeds 150 MW, are also changing:

“The transmission system operator has the right to command to reduce the load to producers who produce electricity at electric power facilities using alternative energy sources whose installed capacity does not exceed 150 MW... only if all available applications from other balancing participants for their load reduction were accepted by the operator”.  

Another draft law, #2233-2, provides for the rescue of the “drowning” state-owned enterprise Guaranteed Buyer. The company pays a feed-in tariff to renewables and sends itself into debts. The loss of the enterprise today, as it is known, exceeds 566 million UAH. Salvation is proposed by entrusting the enterprise with an obligation to direct the difference between income and expenses that arises from the performance of PSOs for “economically feasible” costs of the obligation to pay a feed-in tariff. Since 2020 – according to the results of auctions, for which the company will be responsible.

MARKET PRICE CAPS

Key proposals​:

  • to allow the Regulator to set the price caps for electricity until July 1, 2023
  • to allow the Regulator to set a price caps until January 1, 2022
  • to allow the Regulator to set a price caps without a fixed period   

In a number of draft laws it is proposed to return the reins of government to the National Energy and utilities Regulatory Commission.

So, draft law #2233-1 proposes to provide the National Energy and utilities Regulatory Commission with a “temporary” right – until July 1, 2023 (another 3.5 years) to establish price caps for electricity. In which markets: the “day-ahead”, the “intraday” market or the balancing market for each trading zone”.  But only “in case of violation of the established regime of operation of the unified energy system of Ukraine or its individual parts”, which arose as a result of an emergency”.

The draft law #2233-2 also provides the Regulator with the ability to manage prices in a market that was conceived as competitive. But here the Regulator is given the choice of how to intervene in pricing until January 1, 2022. To set price caps “on the “day-ahead” market, and/or the “intraday” market, and/or the balancing market for each trading zone”. It is suggested setting price caps in conjunction with the average monthly electricity prices, which over the past 24 months have set in countries adjacent to ENTSO-E (Hungary, Romania, Poland, Slovakia) in the relevant market segments. And the prices will be converted into hryvnias at the NBU rate on the date the price caps were set.

Or to make mandatory participation in the “day-ahead” market – each producer or importer will have to submit an application for a sale.

“The maximum volume of proposals (applications) for the sale of electricity on the “day-ahead” market by producers is calculated taking into account the technical capabilities of the generating units, the volumes of capacities reserved for the provision of auxiliary services, the volume of bilateral agreements and other factors”, the draft law says .

A large-scale draft law supported by Gerus, simply proposes to include in the list of the Regulator’s powers “setting the maximum selling price of electric energy on the “day-ahead” market and the “intraday” market, the maximum selling price of auxiliary services, and the maximum selling price of balancing services”. Without any terms.

 

So far, there is only one conclusion: Ukraine is still far from a normal (!) electricity market. Does anyone have an idea of ​​how to establish this pseudo-market without regulating it absolutely? It is not known. Because we want both cheap electricity for the population (because of which we hold on to PSOs and cross-subsidization), and trendy “green” generation (for which the state was flinted to pay, which does not cope with this), and it seems like market rules (which Ukrainians restrain in every possible way).

 

Kosatka.Media

Tags: renewable energy, legislation, electricity market, import

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