Why Europe reduced electricity prices by half and Ukraine does not

In Europe, the merger of energy markets has been completed, which allowed to reduced electricity prices, and, accordingly, low tariffs for electricity and heat.

Why Europe has taken such a step on the energy market and why Ukraine does not? Svetlana Sidorenko explains for Hvylya.

Reducing the price of electronic equipment in Europe becomes possible through competition in the wholesale and retail markets of suppliers of relevant services. This model is called the European Price Link (EPC).

For example, in the Baltic region, due to the construction of interconnectors, new connections with Scandinavian countries, the increase of overflows, etc., the wholesale price of electricity fell by half during the four years. It has happened due to the impact of competition in contrast to Ukraine, where this price is constantly increasing because of no competition and between independent (they are not on the market because there is no market itself) retail suppliers of these services.

This is due to the so-called volatility of the price. It is the most important financial indicator and concept in the management of financial risks, which represents the extent of the risk of using a financial instrument for a predetermined period of time. To calculate volatility, a statistical sample of standard deviation is used that allows investors to determine the risk of acquiring a financial instrument.

In fact, this means that the wholesale price of electricity over the course of the day is constantly changing and at the expense of flows between countries whose markets are united, comes to a certain average. All markets in Europe work in a single system, and this brings a great economic effect. This creates a single average price for electricity across Europe. When aggregating energy markets, the price of electricity is significantly reduced. The gas exchange, which is not functioning at the same time, should work, the gas export/import and mutual flows of electricity are formed and functioning, taking into account the availability of its surplus during peak hours.

If synchronization took place, mutual flows of electricity between Ukraine and neighboring countries would be constantly aligned with a market price that would not depend on either the Regulator or the Government of Ukraine. However, nobody proposes variants for the suppliers of these services to Ukrainian citizens. Cynical officials and so-called experts who communicate with the Ukrainian people in Europe argue that citizens are not complaining about the lack of choice. Did our citizens once have this choice, do they understand that they need to demand diversification of supply sources?

What can a Ukrainian citizen demand after the mass privatization of Oblenergos (TPPs) took place? Who is interested in explaining a citizen of his rights? The owner of DTEK (the oligarch No 1 of Ukraine – Renat Akhmetov)? Whatever it is. Government? Whatever it is. Regulator? Whatever it is. Ministry of Energy Coal? Whatever it is. All mentioned are engaged in the export of electricity in their own interests and receive maximum marginal profit.

Government Resolution dated March 22, 2017, No. 187 blocks the retail market and is subject to cancellation. The government has promised to cancel it, but so far this has not been done.

In order to be able to involve the European GTS Partner and in accordance with paragraph 5 of the Plan of Restructuring of Public Joint Stock Company “National Joint-Stock Company Naftogaz of Ukraine” with the purpose of separating the natural gas transportation and storage (loading, selection) approved by the Cabinet of Ministers of Ukraine from July 1, 2016 No. 496, Ministry of Economic Development, Ministry of Energy and Coal Industry, Ministry of Finance, NKREKP (with consent), the Antimonopoly Committee was instructed to develop, with the participation of experts of the Energy Secretariat, by January 1, 2017 Atlantic States and submit to the Cabinet of Ministers of Ukraine the draft law on amendments to the relevant laws, including procedures and conditions of the concession property used to secure transport and storage (pumping, screening) of natural gas and is not subject to privatization. The deadline was set by January 1, 2017.

As of November 1, 2017, the bill was not registered in the Parliament, although the European side, for its part, did everything that was possible. Ukraine ignored this. Why? Because the Government of Ukraine in fact is not interested in implementing the current European values regarding the transparency and fairness of market relations.

EMPR

Image credits: hvylya.

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