The 2023 Energy Transparency Index. 3rd International edition
The Energy Transparency Index has been devel- oped as a universal tool to assess the availability and quality of information in the energy sector, diagnose gaps, make in-depth analyses, inter- national comparisons and rankings, and track progress.
This international edition is the third compre- hensive comparative study to examine energy sectors’ transparency and accountability in Georgia, Moldova, and Ukraine. It also covers the EU member state Romania as an appropriate benchmark for the Eastern Partnership coun- tries and the Energy Community Contracting Parties on their pathway towards European integration.
The Index’s ultimate beneficiaries are consum- ers, as their awareness improves the possibility of protecting their rights and helps rationalize eco- nomic behavior in the market. More transparent and competitive energy markets promote the improvement of energy services for consumers and fair pricing. The Index will be helpful to com- panies and potential investors seeking an open, competitive environment, a better relationship with the government and local communities, and reducing business risks. The Index will also support public authorities responsible for infor- mation disclosure, indicating particular gaps and helping to improve their transparency and respective regulations. Foreign partners will get a deeper understanding of countries’ energy policies and markets.
The 2023 Index includes 124 indicators (+7 indica- tors compared to the 2021 Index study) grouped into eight categories and based on EU regulatory requirements and best global practices regard- ing information disclosure. Compared to the 2021 Index, this study was extended with four new indicators stemming from the EU Clean Energy Package (CEP). Also, four irrelevant indicators (related to the Energy Efficiency and Renewable Energy Action Plans) were substituted with six indicators based on CEP, namely Directive (EU) 2018/2001 on the promotion of the use of energy from renewable sources. To improve the quality of the assessment, each of the two indicators dedicated to the minimum requirements for the quality of gas and electricity supply were divided into two separate indicators. Two other related indicators were merged into one for convenience of assessment.
Another novelty of the 2023 Index is assessing public authorities and companies responsible for information disclosure in the energy sector. To ensure the Index’s applicability to countries covered, the team assessed only those public authorities that exist in all participating countries and unified their naming as follows: “Regulator”, “Ministry of Energy”, “Competition Authority”, “TSO gas” and “TSO electricity”.
The assessment is based on the analysis of open sources, focusing on the energy sector perfor- mance along the value chain, i.e., from produc- tion to consumption. The study covers electricity and gas markets and cross-sectoral issues.
Transparency analysis by category is divided into sectoral and cross-sectoral parts. The sectoral part covers the assessment of four categories – “Balances”, “Natural monopolies”, “Supply”, and “Reliability and security” made by two energy markets. The cross-sectoral part encompasses “Reporting”, “Policy”, and “Public authorities” as categories related to the whole energy sector. The “Consumption” category is split into sectoral and cross-sectoral parts.
Information gaps (so-called “black boxes”) and drawbacks in data disclosure discovered by the Index provided the basis for targeted recom- mendations for public authorities and energy companies mentioned at the end of each coun- try-specific Index section.
Key Findings
• According to the assessment made in 2023, the final scores for Georgia (73, B-), Moldova (57, and C-), and Ukraine (38, F) indicate good, medium, and unacceptable transparency of their energy sectors, respectively. The drastic decline in Ukraine (-31 points compared to 2021) was caused primarily by the full-scale Russian aggression in 2022 and related rapid and indiscriminate closure of most data on the energy sector due to security risks. Meanwhile, Georgia and Moldova continued their pro- gress, improving their scores by 12 and 2 points, respectively, compared to the 2021 results. Yet, there is still significant room for improvement for all countries. This is proved by Romania’s scores, which was assessed as a benchmark country that reached excellent transparency (86, A-) by the Index’s scale. Given the ambitions of Georgia, Moldova, and Ukraine to become EU Members, Romania’s result should be deemed an appropriate indic- ative benchmark and incentive for them to improve transparency and accountability.
• Transparency strongly depends on the progress towards liberalization of energy markets and the maturity of legislation and regulation. The intensity of internal reforms towards the EU market model defines the applicable rules and transparency require- ments for public authorities and energy com- panies. Romania, which took the longest path of reforming its energy markets and ensured its integration with the EU single market, legit- imately demonstrated the best results com- pared to the Eastern Partnership countries and can serve as a benchmark. Moldova is on its way to liberalizing energy markets, while Georgia – the country that joined the Energy Community last among the assessed coun- tries – is rolling out reforms (therefore, some Index’s indicators could not be yet applied and assessed).
In turn, Ukraine represents a unique case in this regard as it has transposed most of the related EU requirements and rules into its national legislation. Yet, the full implemen- tation of these requirements is considerably complicated by the ongoing Russian aggres- sion and the constant risk of destruction of crit- ical energy infrastructure. In such unfavorable circumstances, transparency and physical security of energy assets became conflict- ing interests. In Ukrainian circumstances, security was prioritized over transparency as the former is a precondition not only for the normal functioning of the economy but for covering the basic needs of millions of citizens. Nevertheless, it should be noted that further successful restoration and recovery of Ukraine’s energy sector will be conditional on transparency, which can create the basis for trust among stakeholders (state, business, foreign partners) and opportunities for invest- ment in the sector.
• The level of transparency varies significantly across the categories and sub-categories, indicating the gaps and shortcomings where national governments should make particular efforts to implement reforms and improve information disclosure. The countries (not including Ukraine) demonstrated the best results in the “Balances”, and “Natural monop- olies” categories, which can be attributed to stringent legislative requirements and reg- ulations in those areas and notable national and international accountability of dedi- cated authorities and companies, particu- larly transmission system operators (TSO). In Ukraine’s case, the best results were shown in the “Consumption” and “Public authori- ties” categories, which covered prices, com- mercial offers, budget programs, etc., and are attributed to the lowest security risks for critical inf rastructure. The worst results (Ukraine scores not included) were shown in the “Policy” and “Public authorities” categories and were mainly caused by deficient reporting on policy implementation, public spending and administration transparency. Also, Energy Community countries are transitioning to new strategic documents (National Energy and Climate Plans, etc.), which may explain lower scores in the “Policy” category. As for Ukraine, the categories with the lowest scores include “Balances”, “Reporting“, and “Reliability and security”. The reason behind such dynamics is also the high security risks of disclosing some information due to the Russian aggression supplemented with deliberate and systemic attacks on Ukraine’s energy infrastructure.
• Having that overall transparency headway, Moldova and Georgia demonstrated quite controversial results within the Index’s cat- egories and subcategories, showing a partial decline. E.g., Georgia progressed in 6 cate- gories and 11 subcategories; simultaneously, its scores declined in 1 category and 4 sub- categories, while the transparency of 1 cat- egory and 9 subcategories remained on the same level as in the 2021 assessment. Moldova advanced in 4 categories and 7 subcategories while declined in 3 categories and 7 subcat- egories; performance in 1 category and 10 subcategories remained unchanged. Ukraine expectedly showed a drop in 7 categories and 19 subcategories. Yet, even in times of war, Ukraine managed to achieve minor progress in 1 category and in 4 subcategories; the scores for 1 subcategory remained unchanged. Thus, regular assessment and analysis are instru- mental and critical in pushing for consistent progress of countries’ energy sector transpar- ency and accountability.
• The national gas and electricity markets, assessed by a set of sector-related indicators, demonstrated a different level of trans- parency – f rom unacceptable (Ukraine) to excellent (Romania). At the same time, the transparency level of Georgia, Moldova, and Romania’s energy markets advanced by 1-6 points compared to the 2021 assessment. The greatest progress was shown by Georgia in gas (+6 points), which is primarily related to the completion of unbundling of DSOs and TSOs and the publication of compliance programs and related annual reports.
• This is the first international Index study that assesses public authorities and compa- nies. Such an assessment can give a general understanding of how information disclosure responsibilities are distributed among differ- ent public authorities and entities in differ- ent countries and how effective they are in fulfilling these responsibilities. For example, in Moldova, the Regulator is entrusted with more obligations to disclose information (42 indicators) than in other participating coun- tries (32-35 indicators). The other peculiarity is that in 2 countries (Moldova and Romania), Regulators tend to be more transparent than the Ministries of Energy, while in Georgia and Ukraine, the situation is reversed. In Georgia and Moldova, electricity TSOs are more trans- parent; in Romania, they are almost equal, while in Ukraine, due to war, the situation is reversed – gas TSO is much more transparent (primarily due to the continued functioning of the Transparency Platform) than the TSO in electricity.
Georgia
• Georgia demonstrated excellent performance in the publication of energy statistics. Also, the country started to disclose information on the independence of transmission and distribu- tion system operators in gas (TSOs and DSOs). The significant increase in transparency was also related to the publication of data on smart metering penetration in electricity and better disclosure of companies’ reporting through the consolidated platform Reportal, the first public information resource in Georgia con- taining financial and management reports of companies registered in Georgia. Other posi- tive developments include adopting the Long- Term Low-Emission Development Strategy by 2050 in April 2023 and fulfilling reporting obligations under the Large Combustion Plants Directive in March 2023. Yet, Georgia could still improve energy markets’ transpar- ency by publishing exhausted data regard- ing registers of market participants, market concentration, annual reports on the costs of electricity and gas by consumer bands, and full-fledged market monitoring results. Other black boxes include data on the pen- etration of meters and smart meters in the gas sector. Besides, Georgia should drastically improve the transparency of public spending and decision-making of energy-related public authorities.
Moldova
• Moldova should improve data disclosure by the gas TSO, particularly on available trans- mission capacity and its allocation, system balancing, etc. Besides, the electricity TSO should publish complete data required by Regulation (EU) 543/2013. Moldova could enhance market transparency by publishing data on switching suppliers, complete regis- ters of market participants, and retail markets’ price mark-ups. Also, it should update moni- toring reports on electricity and gas security of supply. Transparency in consumption could be improved by disclosing smart meters penetra- tion data, commercial offers of electricity sup- pliers, and related price comparison tools. The government should pay attention to the cor- porate reporting of energy companies as there is ample space for improvement. In terms of policy, it should ensure the development and publication of NECP, Long-term renovation strategy for national building stock, and the Comprehensive assessment of the potential of high-efficiency cogeneration and efficient district heating and cooling. Besides, Moldova should considerably improve the transparency of public authorities’ expenditure and the reg- ulatory acts’ impact assessment.
Ukraine
• Ukraine is facing the greatest challenge among all of the participating countries. On the one hand, it should ensure the security of its critical energy inf rastructure facilities by minimizing the disclosure of sensitive information, which may be used by Russia for planning its attacks. On the other hand, transparency is the main prerequisite for the effective restoration of the Ukrainian energy sector, as it addresses many corruption risks and enhances the trust of potential inventors. Given this ‘security vs. transparency’ dilemma, the recommendations to Ukraine on eradicat- ing existing transparency gaps were divided into three types: 1) “general” recommenda- tions, which may be implemented irrespec- tive of martial law without posing security risks; 2) recommendations “for the martial law period”, which are aimed at transparency gaps, which occurred following the Russian full-scale aggression and which may be elim- inated even during the war without posing any security risks, and 3) recommendations to be implemented following the termination of the martial law, which may be deemed high- risk in circumstances of war but can be freely implemented after it ends.
“The event will be held within the framework of “Strengthening transparency and accountability in the Eastern Partnership through the application of the Energy Transparency Index” supported by the European Union through Open Government Partnership Europe under EU for Integrity Programme. This publication was funded/co-funded by the European Union. Its contents are the sole responsibility of and do not necessarily reflect the views of the European Union.”
