DIXI Group together with the Reforms Delivery Office of the Cabinet of Ministers of Ukraine launches the Energy Reform Alphabet Project. Twice a week we will publish our ironic texts, in which we will explain how things work in our energy sector in an understandable and clear language.
The energy sector of Ukraine has had many changes and transformations in recent years. Some of them have become success stories, some were a test for society, and some are still at the stage of implementation. Whatever it was, but all these changes may be described by the keywords that we so often hear around us when it is about the Ukrainian energy sector.
Today, the team of DIXI Group together with the Reforms Delivery Office of the Cabinet of Ministers of Ukraine starts the Energy Reform Alphabet Project. The purpose of this project is to familiarize those interested in energy with the key concepts that form the modern agenda of the industry, and those well-informed in the topic – to be able to see them at a slightly different angle.
We start with one of the most fearful concepts – unbundling.
Unbundling is a scary word that marks one of the key processes of reforming the energy markets of Ukraine. It is a demanding aim for domestic officials and an integral part of the Ukraine’s efforts of joining the EU’s energy markets.
Ukraine seeks to make its energy markets part of the EU’s single energy markets. However, the lack of reform of the Ukrainian energy sector in terms of the principles of its operation remains an obstacle in this area. In particular, the urgent need for Ukraine is to implement the principle of unbundling provided by the EU norms, i.e. the separation of natural gas extraction, gas supply and generation of electricity from natural gas transportation and distribution of electricity. The essence of this idea is to secure energy markets from monopolization by vertically integrated companies and to increase competition, which should increase the security of ordinary consumers of energy resources in the end.
Unbundling in the Ukrainian electricity market can be considered as implemented as of today. But the gas market, where the gas transportation system should be separated from NJSC Naftogaz of Ukraine, a state-owned company, still falls behind. The main thing to remember is that extraction and generation – separately, and transportation and distribution – also separately. Just like apples and oranges.