USAID ESP Helps to Facilitate the Integration of Ukrainian Electricity Market with the European

May 17, 2024

Russia’s full-scale invasion of Ukraine increased the urgency of the Government of Ukraine’s (GoU) decision to improve the country’s wholesale electricity markets and to build a reliable and resilient energy system that ultimately advances Ukraine’s full integration with European markets.  

To help the GoU meet this goal, the United States Agency for International Development (USAID), through its Energy Security Project (ESP), partnered with Ukrainian stakeholders to strategically develop the national electricity market and implement market reform, thus strengthening the country’s capacity to join Europe. These successful partnerships and USAID ESP’s extensive guidance led to a series of developments in the electricity market starting from 2019, including disconnection from the Russian power system, and Ukraine’s historic synchronization to the Continental Network of Europe (ENTSO-E).

To facilitate Ukraine’s full integration with Europe, ESP started assessing the country’s electricity market and how its key players interact across the market segments through its Market Model Assessment and Improvement Project. As Dr. Fatih Kolmek, the ESP Electricity and Renewables Team Lead, stated, “Ukraine has a successful track record of market reform implementation and ESP is proud to have played an instrumental role in this achievement. The Market Model Assessment and Improvement Project complements our activities in the field of electricity market reform and advancement. Accordingly, after more than four years since the market launch in 2019, we’ll take a step back in this project and objectively assess Ukraine’s electricity market model and operations, the roles of key players, and how Ukraine can fully integrate with Europe, given the latter’s new market trends.”  

On April 4, USAID ESP officially launched the Market Model Assessment and Improvement Project at an event attended by senior representatives of the National Energy and Utilities Regulatory Commission (NEURC)​​​, the Ministry of Energy, Verkhovna Rada, JSC “Market operator”, Ukrainian Energy Exchange, and USAID. Opening the event, Kathleen Kirsch, USAID/Ukraine’s Office of Critical Infrastructure Deputy Director​​​, stated, “This work will help Ukraine rebuild its energy sector and contribute to its future economic growth and prosperity, while also safeguarding peace and security in Europe…To fully achieve ​ ​EU market integration, Ukraine must comply with the regulatory, technical, and economic ​​​requirements.”   

Dr. Kolmek added, “Given the successful synchronization of Ukraine’s system to Europe’s and its candidacy as a member state, the country is entering a new phase of full market integration and market coupling. So now, we need to look at how the market will function in the future with increased liquidity, greater competition, and decreased concentration of market power. All is to be aligned with EU practices and realities, especially given the EU’s recent decisions regarding the internal electricity market model.”   

Dmytro Kovalenko, a NEURC Commissioner, echoed Dr. Kolmek and emphasized, “The development of a stable, transparent, competitive market in Ukraine depends on the adaptation of European rules.”  

The project will help Ukrainian policy and decision makers guide future market developments and make required amendments on the regulatory and economic frameworks that govern the electricity market. As a result, the GoU will increase access to energy, promote competition, and enhance security of supply and liquidity for commercial, residential, and industrial customers and as well as support their active participation in Ukraine’s energy market. As next steps, USAID ESP will immediately start to work with key Ukrainian partners to assess the functioning of the wholesale electricity market and the roles of key players and provide regular status updates to stakeholders.  

USAID’s effort is enabling Ukraine to pursue its energy reform agenda, supporting Ukraine’s ​​​full integration into the European Union.