Volodymyr Shvedkyi: The situation in the energy sector is close to catastrophic

All spheres are threatened in the Ukrainian energy sector. There are a number of problems that need to be solved – from debts to tariffs. Volodymyr Shvedkyi, CEO at ETG.UA, commented on the current situation for Kosatka.Media.

There are actors, which affect the state of Ukrainian energy most negatively:

Firstly, it is the cashflow deficit of SC Guaranteed Buyer and the debts for the generated electricity by all sources of generation.

Today we are already observing a decrease in coal production by DTEK, which was the result of a decrease in coal generation.

Energoatom does not enter the market because of Guaranteed Buyer, which owes more than UAH 5 billion, but goes directly to the DAM in order to receive money. These are important markers that indicate a deep crisis. But the key problem of this market is an imbalance both financially and technically.

Neither on July 1, 2019, when the market was launched, nor now there are any main tools for its functioning: the law on debt repayment and electricity metering, which would give at least a minimal chance to launch a balancing market. In addition, the situation was aggravated by subsidies of non-market tariffs of household consumers.

What are the real threats?

When it becomes unprofitable for a producer to sell his goods, he stops his work. When the level of electricity production becomes lower than the level of consumption, a deficit arises in the system, which in turn can lead to emergency situations.

What energy sectors suffer the most and what is the reason – quarantine, reduction of industry, insufficient legislative framework?

Today there is not a single sphere of energy that would be successful. The quarantine also influenced the state of affairs, but it was not critical. All sources of generation - both public and private – have become hostages to the situation that has developed on the market. Traditional sources of generation are now at risk of being shut down due to late payments and the lack of a guarantee of compliance with contractual obligations.

A separate topic is a feed-in tariff and renewable energy sources. They require immediate government intervention in order to protect the rights of investors. If we neglect today those who invest in renewable energy, we can leave Ukraine without any investments for the next 7-10 years. In addition, the market suffers from the desire of the government to control prices. Installing a price cap and linking pricing policies to them in a free market is nonsense.

What issues should be solved first?

First of all, this is the abolition of PSO, which is detrimental to the system and lead to the bankruptcy of SC Guaranteed Buyer.

It is necessary to revise the price of electricity for the population upwards and leave the basic volume of use at the level of 300 kWh per month for unprotected layers of the population. Everything that exceeds this indicator should cost at least twice as much.

The third is the abolition of the subsidy system for network companies, which at one time led to the fact that there are actually no incentives on the market to modernize networks and, consequently, reduce losses. They need to buy energy on a common basis and be on an equal footing with other market players.

And the last – to ensure the stabilization of cash flow of Guaranteed Buyer at the expense of the tariff of the TSO (transmission system operator) NPC Ukrenergo at the level of UAH 0.35 per kWh.

Tags: NNEGC "Energoatom", legislation, electricity, energy market, feed-in tariff, electricity market, Guaranteed buyer, debt, PSO, investors

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