Briefing "Energy and Environment Reforms: Autumn is coming"

OG Briefing

Yesterday, on the 10th of July, during the briefing "Energy and Environment Reforms: Autumn is coming" organized by the coalition of experts "Energy Reforms" within the framework of the project "Increasing the Civil Society Impact on Monitoring and Policy Dialogue on Energy and Related Sectors Reforms in Accordance with the Implementation of the Agreement" experts discussed the state of affairs in the field of energy, energy efficiency, environment and defined a range of issues that Ukraine should focus on in the first place in the next three months. Among the experts was the Director of EUEA Oleksandra Gumeniuk.

In her speech on business climate and energy, Oleksandra Gumeniuk highlighted the following main points:

Positive for the business climate is the abolition in June of the National Bank of the requirement for mandatory sale of foreign exchange earnings (before this business was obliged to sell 30% of foreign exchange earnings) and the limit (it was 2 million euros/ year) to finance its own foreign missions and other segregated subdivisions.

There is an urgent need in coordination of the efforts of experts and market participants in order to find the most optimal solution to overcome the problem of the June decision of the Constitutional Court of Ukraine regarding the unconstitutionality of certain provisions of the Law of Ukraine “On the National Energy and Utilities Regulation Commission”, in which, among others, noted that NEURC “for functional purpose, sphere of activity, authority has the features of a central executive body”.

However, in accordance with the commitments undertaken by Ukraine within the framework of the Association Agreement with the EU, the Treaty establishing the Energy Community, Ukraine implements EU Energy legislation, the key principle of which is the independence of the national regulatory authorities (National Regulatory Authorities).

The position of the Energy Community is that NEURC as the regulator can't be subordinated to the Cabinet of Ministers, because this contradicts the Third Energy Package to which Ukraine is bound by its accession to the Energy Community. Not only do international commitments induce an independent collapse, but also a conflict of interest, since the largest energy companies that have received licenses from NEURC to carry out their activities are directly subordinated to the Cabinet of Ministers of Ukraine.

The resolution of the issue requires a thorough legal analysis, but the time for implementation of the Constitutional Court decision is extremely small - until 31.12.2019, in case of failure to comply with the decision, the NEURC will not be able to operate in 2020 year.

Actually, regarding this issue EUEA met on July 5th with major stakeholders and policy makers, and a position of EUEA will be made public later.

The implementation of the Law of Ukraine "On Amendments to Some Laws of Ukraine Concerning Ensuring Competitive Conditions for the Production of Electric Energy from Alternative Energy Sources" on introduction of a new system of support for generation of electric energy from alternative sources of energy in the form of auctions begins. Namely, the development and adoption of about 20 acts of secondary legislation should be done. At Ministry of Energy and Coal Industry of Ukraine, a working group is being set up on this issue, which includes the EUEA.

Blocking Ukrenergo's operation in the new market due to the temporary cessation of the NEURC Regulations N954 and N995 of 7.06.2019, which set tariffs for Ukrenergo for electricity transmission and dispatch control services for the 2nd half of 2019 as a result of their appeal to the District Administrative Court of Kyiv. Because of this, Ukrenergo is unable to perform all the functions entrusted to it as a result of the introduction of a new market, which will have a negative impact on all without exception of market participants, and first of all, on the Guaranteed buyer and, accordingly, electricity producers at the feed-in tariff. An interim decision on this issue will be considered by the NEURC on its meeting on July 12.

Illia Poluliah, member of the coalition "Energy reforms", noted the following problems:

The necessity of constant supervision of the new model of the electricity market introduced from July 1, 2019, in order to minimize negative financial and technical consequences.

The expert also drew attention to the need to work out a decision on the future status of NKREKP taking into account the significant risks for the business climate and the entire grid, which will be a key issue this fall.

Roman Nitsovych, expert of the coalition "Energy Reforms", research director "DiXi GROUP", on the gas market noted the following:

The long-awaited launch of day-to-day balancing - a regime that is as close as possible to markets in the EU - has become one of the major changes in the gas market. At the same time, government initiatives on regulated prices for the population were political in nature and did not solve the structural problems of opening this market segment for competition.

There is a need in urgent settlement of the payment crisis that arose in Naftogaz.

With the approach of the fall, the issues will be all the more acute: negotiations on gas transit with the Russian Federation, carrying out of "unbundling" and creation of an independent operator of the Gas TSO, on which until now there is no full agreement between the government and "Naftogaz".

Tetyana Boyko, expert of the coalition, coordinator of the energy programs of the OPORA Civic Network, on energy efficiency, said:

Energy efficiency should remain a state priority. Given the artificial reduction in gas prices and utilities, there will be a decline in public interest in energy-efficient measures.

The problem today is the permanent interruption of the single state program "warm loans", as well as delays with the launch of the Energy Efficiency Fund. In the state budget for 2020 it is necessary to provide at least 2 billion UAH. on the program of "warm loans", as well as launching the Fund and full monetization of housing subsidies.

Nataliya Andrusevich, expert of the coalition "Energy Reforms", chairman of the board of the resource and analytical center "Society and Environment", drew attention in the field of environmental protection:

There is a need to prioritize environmental issues to support the implementation of the Association Agreement in the field of environmental protection and climate change. The National Plan for reducing emissions from large combustion plants needs attention and action. It refers to reducing emissions of sulfur dioxide, nitrogen oxides and dust from large combustion plants with a capacity of 50 MW or more.

Gennadii Riabtsev, an expert, professor, said about the oil market:

There is a need in urgent resolution of the choice of a model for the creation of oil reserves and the adoption of regulatory acts regulating the arrangements for the formation of reserves, the conditions for their storage, unblocking (use) and upgrading is needed.

He noted a number of regulatory acts that will need to be finalized in connection with the implementation of the requirements of Directive 2009/119/EC regarding the establishment of obligations to maintain minimum oil and/or petroleum products.

Since the availability of only oil reserves in their present sense does not guarantee the reliable functioning of critical infrastructure, the implementation of Directive 2009/119/EC needs to be implemented simultaneously with the formation of all types of fuel and energy reserves, as well as excessive balancing power in the energy sector.

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