The largest electricity producers about the launch of the market: DTEK has glass half full and Energoatom is ready for special obligations

As part of the discussion on whether Ukraine’s electricity market is ready to switch to a new market model of work, the main generating companies DTEK and NNEGC Energoatom – which together supply about 85% of electricity to the market – expressed their positions regarding the postponement of the new market model launch.

Position of DTEK

“You can look at the glass and say that it is half empty, or half full. I will speak from the perspective of a person who sees that the glass is half full. We believe that the successful launch of the electricity market is absolutely possible from July 1”, said Vitaly Butenko, the General Director of DTEK-Trading LLC, during a round table “Whether there will be a competitive energy market from July 1”.

According to him, DTEK took an active part in the testing processes, and today, in their view, “in general, the level of preparation for the launch of a new market is more than 90%”. The regulatory framework, according to Butenko, is ready for 98%: “because 39 regulatory acts have already been adopted, the other 5 acts are at the final stage”:

“In terms of technical readiness, the level of training is also high. In the test mode, more than 70% of electricity is already being traded... Fundamentally, the infrastructure necessary for the market to work is already on a high degree of readiness”.

At the same time, the Head of DTEK-Trading said that the competition in the new market “will be significantly ensured” by the electricity imports:

“With the launch of a new market, imports begin, primarily in Burshtynsky Island. And we support this initiative, with the condition that there should be equal conditions. Importers can sell electricity from Europe in the Burshtyn Island, and producers from the Burshtyn Island should have the same rights to sell electricity to them... From 2023, the competition of European producers will already concern the entire market”.

Until 2023, when Ukraine has to integrate into the European network ENTSO-E, electricity can only be imported from Russia and Belarus (technically also from Moldova, but generating facilities there are only in Pridnistrovya, and Ukraine itself exports electricity to Moldova). Electricity from Europe can only be imported to Burshtyn Island, which is actually owned by DTEK: Burshtyn TPP is part of the energy holding, and DTEK exports from the Island.

As for the risk of “price shock” (uncontrolled price increase for the consumer), which everyone talks about when discussing the launch of a new electricity market model, DTEK allows temporary manual regulation and price caps:

“The participants from the part of thermal generation agree and are ready to work in the conditions of a temporary limitation of the price of electricity supply, in order to avoid undue jumps. Therefore, prices for consumers will not increase. It won't affect the population at all”.

75% of thermal generation in Ukraine is concentrated in DTEK.


“With a new market, an environment of a completely different level of transparency and control arises. Prices will be regulated openly and any attempts to manipulate the market will immediately be fixed”, Butenko noted another plus of the launch of the market model.

Position of NNEGC Energoatom

“Our opinion does not coincide with DTEK, it is parallel. We have been waiting for the opening of the electric power market for a long. Everyone knows what tariffs are set by NNEGC, that they are several times lower than the wholesale market price, and that SOE Energorynok owes us more than 11 billion UAH. This is the biggest debt at the lowest price in the energy market. Therefore, we are looking forward for the opening of the market, we expect to receive our increased price, and we expect to receive solvent traders, suppliers and consumers who will provide us with 100% payment”, said Serhiy Bedin, the General Director of the Energoatom-Trading, in his commentary.
According to Bedin, the increase in the price of atomic energy will allow the company to implement a number of crucial projects for energy security – the construction of a storage for spent nuclear fuel, the modernization and continuation of the operational life of existing power units, the filling of the decommissioning fund for power units, and the construction of new power units.

“On the other hand, we share the fears of society and consumers that with the launch of a new market model a rise in electricity prices is possible. Therefore, we are ready to participate in maintaining prices for the population at the level that operates in the current market. That is, from our point of view, a new market should not lead to a rise in prices at least for the population, and to a moderate increase in prices for industry”.

“Energoatom fully supports the launch of a new market model from July 1, 2019 in a protected mode, so that neither the consumer nor the manufacturer will suffer. But it is necessary to start the market”, the Head of Energoatom-Trading emphasized.

Position of Ukrhydroenergo

Ukrhydroenergo will become the largest beneficiary of the new market model, based on the increase in business profitability.

The company provides balancing services and the price for it can grow the most.

“In a competitive free market, the income of Ukrhydroenergo can grow by several times. But at the same time, a company’s representative at a meeting of the working group in the parliamentary committee yesterday officially stated that he assesses the risks as high and considers it necessary to make a short delay of the market launch, which corresponds to our position”, said Vsevolod Kovalchuk, the Head of NPC Ukrenergo.

You can find the position of NPC Ukrenergo here.
 

Position of distribution system operators

At the same time, distribution system operators (DSOs) do not share optimism among generating companies. The absence of a normal commercial accounting system puts these companies at great risk of bankruptcy (especially suppliers of universal services that must provide electricity to both the population and government institutions, including problem water utilities with huge debts already accumulated). Given that they are the link in the market through which electricity reaches the final consumer – both industry and the public.

“We declare out loud that distribution companies are not ready to launch the market from July 1, 2019. This is primarily due to the fact that the creation of commercial accounting failed in two years... Until there is no calculation method, operators will have to take into account every hour the consumption of each consumer and transfer to the supplier, which will then be taken into account in balancing, we are not ready to take on this responsibility. The technique is being prepared, but whether it will be fully worked out by July 1, 2019 cannot be said”, said Natalia Kostysheva the Director of Ukrenergo consulting department.

In general, electricity market players say that this is one of the weakest areas that should be neutralized in the remaining 2 months.


 

“The question is the relationship between risk and opportunity.  I estimate this ratio in favor of risks. And they need to be neutralized. In the current political situation, I assess the determination and quality of decision-making by the Parliament and the Government very low so that these risks will be neutralized in the best way”, Vsevolod Kovalchuk said.

Kosatka.Media

 

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Tags: DTEK, NNEGC "Energoatom", electricity

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