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Ukrainian associations call on regulator to remove price cap on power market

The European-Ukrainian Energy Agency (EUEA) and Ukrainian Wind Energy Association (UWEA) have emphasised that a recent draft decision on price caps would lead to negative consequences for the renewables sector and the market as a whole in a joint letter to Ukraine’s National Energy and Utilities Regulatory Commission (NEURC).

On 8 June, the NEURC approved a draft resolution on establishing price limits on the day-ahead, intraday and balancing markets, which proposes a 35 per cent increase in the maximum price limit and the cancellation of the minimum price limit.

In the letter, the EUEA argued that the Guaranteed Buyer would not receive funds from the sale of electricity during the hours of maximum SPP generation and minimum consumption (daily summer hours) – the market would have a maximum offer with a minimum price due to the actual absence of a lower limit price, the two associations said.

“As a result, this will lead to a decrease in the commercial revenue of the Guaranteed Buyer and will have a negative impact on the level of payments with RES producers and will lead to an increase in the size of the RES development service fee paid to NPC Ukrenergo and an increase in the load on the tariff for electricity transmission services,” EUEA’s press release read.

Renewables producers would have no incentive to leave the Guaranteed Buyer’s Balancing Group and sell electricity on the market, the joint letter said.

Given these concerns, the joint letter “strongly” advised the NEURC to consider an alternative approach. They recommended abandoning the establishment of maximum prices in the electricity market to further liberalise it and align it with the markets in the EU.

However, if the NEURC decides to proceed with price limits, the letter suggested including a minimum limit price. This minimum limit price should ensure the payments of the Guaranteed Buyer to renewables producers under the “green” tariff, at a level of at least 60 per cent as outlined in the tariff cost structure for electricity transmission services in 2023. Specifically, the lower limit price should be maintained at the same level as it was on 30 May 30 or be set even higher, the joint letter read.

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