With USAID’s support, the country is reducing its dependence on Russian energy
Around 1 a.m. on Feb. 24, 2022, the Ukrainian and Moldovan electric systems disconnected from the Russia-Belarus system. This was a scheduled test in preparation for Ukraine’s and Moldova’s planned synchronization with the European power system the following year, a crucial step toward European Union (EU) integration.
Four hours later, however, Russia began its unprovoked, full-scale invasion of Ukraine.
The moment Russia’s forces crossed the border, Ukraine’s planned electricity synchronization needed to occur in a matter of days, not months.
Nearly a year ahead of schedule and with strong USAID and EU support, Ukraine synchronized its grid with the European system a few weeks later, eliminating reliance on Russia and Belarus. According to energy policy expert Paul Deane: “No power system has ever synchronized this quickly before.”
Even as Russia continues its massive assault on energy infrastructure across the country, Ukraine has persisted in its effort to further integrate with the West, making major regulatory strides in integrating its energy system with the EU. USAID supports Ukraine in its longstanding goal of integrating into European energy markets while also responding to Ukraine’s immediate wartime and future energy supply needs.
Strengthening Energy Market Competition and Transparency
Ukraine began its path toward EU electricity market integration in 2017 — well before Vladimir Putin launched his brutal and unprovoked full-scale invasion. Throughout that process, USAID’s technical experts helped Ukrenergo, the Ukrainian transmission system operator, permanently connect electricity trade with the European system.
This increased Ukraine’s electricity export and import capacity while reducing the country’s reliance on Russia, building Ukraine’s import capacity to 1,700 megawatts, about 10% of the peak winter electricity load. Electricity imports are instrumental in powering hospitals and schools, enabling businesses to run, and keeping homes heated during Ukraine’s brutal winters.
USAID also assisted the Government of Ukraine in 2019 to launch its wholesale electricity market, increasing competition and transparency in this sector.
This system enables multiple buyers to purchase electricity, a crucial pivot from the previous single-wholesale-buyer model that operated in Ukraine and provided ample room for the abuse of monopoly power. The new wholesale market launched without price shocks for consumers. With the wholesale system in place, Ukraine’s National Energy and Utilities Regulatory Commission (NEURC) began monitoring the market for corruption, further strengthening Ukraine’s alignment with EU principles for a liberalized, transparent energy market.
Preventing Corruption and Market Manipulation
With the wholesale electricity market in place, the next step in Ukraine’s energy market integration with the EU was to adopt the EU’s Regulation on Energy Market Integrity and Transparency (REMIT). USAID provided assistance to Ukraine’s regulatory commission, NEURC, in implementing this law, which is aimed at preventing corruption and safeguarding against market manipulation.
REMIT is one of Ukraine’s critical commitments under the EU-Ukraine Association Agreement. A recent roundtable hosted by Ukraine’s NEURC and attended by the U.S. and EU Ambassadors to Ukraine, among other key stakeholders from the Government of Ukraine and the Energy Community Secretariat, highlighted the need to further strengthen REMIT through secondary legislation.
USAID has also fostered stronger transparency in the energy sector by helping create two tools: the Energy Transparency Index and the AidEnergy system. In 2022, USAID helped produce a wartime edition of the Energy Transparency Index, which is an open resource to assess information disclosure in the sector and is used by key actors across the industry. In 2023, USAID continued its support role with Ukraine’s Ministry of Energy in coordinating assistance for energy companies by launching the AidEnergy system. This system provides donors with online access to information about energy sector needs and priorities. In turn, energy companies have open, non-discriminatory access to information about the distribution of assistance and new opportunities to apply for aid.
From Dependence to Self-Sufficiency
With support from USAID, Ukraine is building the tools and legal frameworks it needs to bring the country’s energy sector in line with European standards and practices. These reforms are promoting fair competition, preventing monopolies, increasing private investment, and diversifying Ukraine’s energy supply.
As a result, Ukraine is breaking its longstanding dependency on Russia.
With Russia’s regime continuing to weaponize energy and manipulate markets, energy reforms such as REMIT are absolutely essential to Ukraine’s free and independent westward future.
USAID continues to stand with Ukraine and private sector partners in building resilient infrastructure and institutions that will support the people of Ukraine while advancing the country’s path toward EU integration.
Transparency and accountability of the energy sector is critical not only for this integration, but for Ukraine’s own effective reconstruction. With these tools, Ukraine is now able to buy cheaper and more reliable electricity and natural gas while rebuilding its energy infrastructure.
USAID support is helping Ukraine power its economy — keeping lights on and factories operating — while enabling a prosperous future as part of a free, secure Europe.
About the Author
William Baringer is an Information Specialist with USAID’s Mission in Ukraine.
This article was originally published on USAID’s Medium page