On July 6, 2023, the USAID Energy Security Project (ESP) held a roundtable titled “Energy markets: a pathway to standardized trading.” The event was dedicated to the current status and challenges of the wholesale energy markets in Ukraine, the market survey results, best international practices of energy trade surveillance in organized and OTC markets, and USAID ESP recommendations on the next steps to develop the markets.
The participants, who came to discuss this important topic, included representatives of the Ministry of Energy of Ukraine, Rada’s Energy and Utilities Committee, National Energy and Utilities Regulatory Commission (NEURC), Antimonopoly Committee of Ukraine (AMCU), National Securities and Stock Market Commission (NSSMC), Market Operator, LLC Ukrainian Energy Exchange (UEEX), and others key participant of the energy sector.
Welcoming the attendees, Kathleen Kirsch, Energy Officer at USAID/Ukraine, emphasized that building integrity and transparency in the energy markets is crucial for Ukraine’s EU integration and economic development. “Today’s event highlights ESP’s work and plans to strengthen transparent and liquid energy markets, both in gas and electricity. With the ongoing integration of Ukraine into the European Union, the development of energy markets is the foundation for building a resilient and stable economy,” she said.
In his remarks, Deputy Minister of Energy for EU integration Yaroslav Demchenkov emphasized the necessity of further improvements in the energy markets. “As the energy industry develops, we face some challenges, including the complexity of regulation, fragmentation, and volatility of markets, lack of trust among market participants, absence of standardized exchange products, unclear functions of different regulators, which leads to problems of unpredictability, and so on. Objectively, we need solutions that can help optimize the trading processes for energy products,” said Deputy Minister Demchenkov.
According to the survey findings presented at the roundtable, the major challenges in energy trading are the lack of standardized long-term products, the need for improvements in market transparency and surveillance, high market volatility, a need for consensus between regulatory authorities, and the absence of payment guarantees and centralized clearing system in the marketplace.
USAID ESP experts developed four pillars for improving the energy products trade:
- First, the legal framework should be harmonized. There are different definitions and provisions in organized commodities and sectoral laws, USAID ESP will create a harmonized matrix of definitions and prepare respective amendments to the legislation.
- Second, the market participants need standardized products and practices. It will allow the introduction of long-term products, including forwards and futures, proper hedging, and smooth integration into the EU trading environment. In September t, USAID ESP will start developing a book of standardized products for both organized and OTC trading using best EU practices.
- Third, unified trading rules recommended by regulators and platforms will be developed.
- Fourth, the regulators should be additionally empowered and their capacity strengthened. USAID ESP will help to draft respective legal amendments to the NEURC Law and support effective communication and information exchange between regulators.
“This is the first in a series of events USAID ESP plans to organize dedicated to the energy market developments, exchanging ideas and opinions, reaching consensus, and setting common targets. These forums will better support our project activities for further enhancement and growth of energy markets and their ultimate integration into the European one. We are thrilled about the work ahead of us and, more importantly, of the results that we and Ukraine will achieve,” said Mike Trainor, Chief of Party at USAID ESP.