January 2019 Quarterly Monitoring Report on the Implementation of Ukraine‘s Energy Action Plan

January 2019 Quarterly Monitoring Report on the Implementation of Ukraine‘s Energy Action Plan
February 20, 2019 Monitoring Reports, Publication

Executive summary

In the fourth quarter of 2018 certain progress was made on implementing measures on Electricity Market Design and Natural Gas. The corporatisation process of the state-owned electricity system operator Ukrenergo was finally unblocked allowing its unbundling to continue. On the other hand, the privatisation process of Centrenergo – the last state-owned operator of coal fired power plants – was temporarily halted due to participants’ violations of the auctioning rules. On the gas side, a new government regulation has paved the way for prices increases for households and district heating companies. However, the move has been criticised by the Energy Community as maintaining a regulated price hinders the development of a true retail gas market.
Moreover, Parliament adopted a 24-fold increase of the carbon tax to UAH10/tCO2. Still, this is less than the originally intended UAH 30/tCO2 and probably not sufficient to induce behavioural changes. Tax rates, together with implementation and monitoring standards, should be further improved.
An important step forward was taken with the draft law on renewable energy sources passing the first reading in Parliament. The foreseen move from fixed feed-in tariffs to competitive auctions could allow a cost-efficient increase in the share of renewables. Furthermore, the reform poses an important window of opportunity to overhaul details of the support mechanism. Low Carbon Ukraine proposes (see pp.5-7) to improve the current RES support scheme by incorporating a dynamically adjusting feed-in tariff for small projects as well as providing incentives for grid-friendly location selection of renewables.
Another urgent issue for Ukraine is to develop its own National Energy and Climate Plan (NECP) by the end of 2019, as requested by the Energy Community. These plans can help streamline Ukraine’s energy and climate policy and are necessary for Ukraine to join the Energy Union. Hence, the process of working on the NECP should start immediately.

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