USAID Energy Security Project (ESP) has been working for a long time to facilitate market integration between Ukraine and neighboring countries (European Union (EU) and Moldova). This work has been done in close cooperation with Ukrenergo, the National Energy and Utilities Regulatory Commission (NEURC), the Market Operator (MO), the Energy Community Secretariat (EnCS), the Ministry of Energy of Ukraine (MoE), and other stakeholders. To facilitate the integration of Ukraine’s market into those of Europe, USAID ESP conducted a study on the rules of joint cross-border capacity allocation based on the analysis of existing best practices in EU countries and the specifics of the Ukrainian market and legislation.
The study reviewed several taxation issues and gaps and presented recommendations and proposed changes to the short- and long-term rules for the analysis of joint auctions for the existing auction platform as compared with the EU’s Joint Allocation Platform (JAO).
What is the advantage of introducing joint auctions to allocate increased cross-border capacity?
- Pave the way for further measures to integrate energy markets by fulfilling the EU’s mandatory requirement to reform the electricity market;
- Increase competition and transparency in price of of imported and/or exported electricity;
- Create an efficient, transparent, fair, convenient, and understandable mechanism for market players to purchase access to use of the entire interconnector. In this case, all players can participate in an auction, buy access to export and import electricity, and compete for the entire volume of an interconnector’s capacity that is offered for sale.
- Fair distribution of revenues between adjacent system operators from the sale of the right to access interconnectors. Currently, operators of power systems of neighboring countries divide revenues from the sale of the right to access interconnectors, mainly in half.
On January 16, 2024, the first joint auctions for the allocation of access to the capacity of interconnectors between Ukraine and Poland were held on the pan-European JAO platform. Since then these joint daily auctions are being held by Ukrenergo (E-TSO) and the Polish system operator (PSE) for Polish and Ukrainian electricity market participants.
Joint auctions with Hungary and Slovakia are expected to be launched on the pan-European JAO platform in the first quarter of 2024. Ukraine has fulfilled all the necessary conditions to participate and is waiting for the decision of regulators of neighboring countries. Currently, auctions for access to the capacity of interconnectors between Ukraine and Romania are held on a daily basis on Ukrenergo’s auction platform.
USAID ESP emphasizes the importance and urgency of implementing joint cross-border capacity allocation to maximize the benefits of synchronization with ENTSO-E and facilitate market integration. Joint cross-border capacity allowcation is key to improving the security of Ukraine’s electricity supply, especially in times of war when the country needs help to balance the system, secure electricity supply to consumers, and stabilize the Integrated Power System of Ukraine.