Experts call for a continuation of the European course of reforms in energy and environment sectors after parliamentary elections

10 July 2019

On the eve of the parliamentary elections in Ukraine, the experts of the Energy Reforms coalition identified the priority tasks for the implementation of the Association Agreement in the energy and environment sectors. This was discussed during the Briefing “Energy and Environment Reforms: Autumn is Coming” organized by the Energy Reforms coalition of experts within the framework of the project “Enhancing impact of civil society in monitoring and policy dialogue on energy and related sectors’ reforms in line with the Association Agreement implementation” financed by the European Union and co-financed by the International Renaissance Foundation.

 One of the significant changes in the gas market was the long-awaited launch of daily balancing – a regime that is as close as possible to the functioning of markets in the EU. 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.

 “The payment crisis faced by Naftogaz also requires immediate decisions. As autumn comes closer, not only these issues will become more pressing. The unbundling and establishing an independent GTS operator, where there is still no full agreement between the government and Naftogaz, as well as conducting gas transit negotiations are the challenges that require coordination both within the country and internationally,” said Roman Nitsovych, the Expert of Energy Reforms Coalition, Research Director at DIXI GROUP.

 From 1 July 2019, a new model of the electricity market has been launched in Ukraine without a preliminary full testing. “The implementation is not in line with the Law on the Electricity Market and may have serious financial and technical consequences. The expert community should work on minimizing the negative consequences and on ways of proper implementation of the Law,” stressed Illia Populiakh, the Member of Energy Reforms Coalition.

The expert also drew attention to the need for elaborating a decision on the future status of NEURC, taking into account the significant risks for the business climate and the entire energy system. In coalition members’ opinion, the issue of the Regulator's (in)dependence will be one of the key issues this autumn.

 Energy Reforms experts believe that energy efficiency should remain a state’s priority, along with market/market parity prices for energy resources. Given the artificial reduction in gas and utilities prices, there will be a decline in public interest in energy-efficiency measures.

 “Current problem is regular interruptions of the single state programme “Warm Loans”, as well as delay in the launch of the Energy Efficiency Fund. In the state budget for 2020 there should be made provisions for at least UAH 2 billion for “Warm Loans” programme, as well as launch of the Fund and full monetization of housing subsidies,” said Tetiana Boiko a Coalition Expert and Coordinator of the Energy Programmes at Civic Network OPORA.

 In the field of environmental protection, the National Emissions Reduction Plan for Large Combustion Plants requires attention. This document is important for reducing emissions of sulfur dioxide, nitrogen oxides and dust from large combustion plants with a capacity of 50 MW and above.

 “The analysis of environment stances of political forces that will replace the existing parliament and government does not inspire much optimism about the priority of environmental issues for them, but we nonetheless hope for the irreversibility of already implemented reforms and support for the implementation of the Association Agreement in the field of environmental protection and climate change,” noted Nataliia Andrusevych Expert of the Energy Reforms Coalition, Chairman of the Board of Resource and Analysis Center “Society and Environment”.

 “The issue of choosing a model for creating oil reserves and adopting regulatory acts regulating the mechanisms of reserves formation, conditions for their storage, unblocking (use) and upgrading needs to be resolved as soon as possible,” said expert Hennadii Riabtsev.

 According to experts, the implementation of Directive 2009/119/EU will require modification, submission and approval of the following regulatory acts:

  • Resolution of the Cabinet of Ministers of Ukraine on approval of the selected model of minimum oil and petroleum products reserves;
  • the Law of Ukraine “On Minimum Reserves of Oil and Petroleum Products”;
  • amendments to the Tax Code of Ukraine No. 2755-VI of 2 December 2010 concerning the target direction of a part of the excise tax on sold petroleum products to the formation and maintenance of minimum stocks;
  • amendments to the Law of Ukraine “On Licensing of the Types of Economic Activity” No. 222-VIII of 2 March 2015 concerning the inclusion in the list of licensed types of economic activity consisting in maintaining minimum stocks of oil and petroleum products;
  • amendments to the Law of Ukraine “On the State Material Reserve” No. 51/97-VR of 24 January 1997 and the Resolution of the Cabinet of Ministers of Ukraine “On Approval of the Regulation on the State Reserve Agency of Ukraine” No. 517 of 8 October 2014 concerning the establishment of responsibility and duties the State Reserve in the system of formation and maintenance of the minimum stocks of oil and petroleum products;
  • The Government decree on approval of the regulation on the central company for managing the minimum stocks of oil and petroleum products.

 As the availability of only oil reserves in their present sense does not guarantee the reliable functioning of critical infrastructure, the experts of the Energy Reforms Coalition advise that the implementation of Directive 2009/119/EU be carried out simultaneously with the formation of all types of fuel and energy reserves, as well as excess maneuvering capacity in the energy sector.

Expert opinions are based on the results of regular monitoring of Ukraine's implementation of the Association Agreement with the EU in the areas of energy and environment. The members of six working groups are responsible for the expertise and provide the latest information on reforms and related analytical products.

The Coalition consists of: Civic Organization Dixi Group, Civic Network OPORA, All-Ukrainian Civic Organization Energy Association of Ukraine, Resource and Analysis Center “Society and Environment”, and Association “European-Ukrainian Agency”.

The results of regular monitoring of Ukraine's implementation of the Association Agreement with the EU in the areas of energy and environment, as well as analytical note “Creation of Oil Reserves: One Can No Longer Delay” are available on the official website of the Energy Reforms Coalition (http://enref.org/)

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