1. Ukraine energy policy
outlook
Ildar GAZIZULLIN
International Centre for Policy Studies
May 25, 2012, KSE Alumni congress
2. Summary
Energy is important for sustaining macroeconomic
fundamentals in Ukraine: it affects trade balance,
prices and industrial output
Over 2012–2015 Ukraine can do very little to
change energy supply and demand, but, it can do
much more in terms of policy design
If Ukraine succeeds with a right policy mix it will
implement the ambitious objectives of the Energy
Strategy to 2030
3. Ukraine’s Energy Strategy to 2030
The revised Strategy, which is to be launched this
year, sets objectives, which are broadly in line with
the EU energy policy aims:
– Having less negative impact of energy on environment
– Becoming less vulnerable from imported energy
– Achieving affordable energy for consumers
However, to meet the Strategy’s targets Ukraine will have
to invest annually 10-20 times more than it does today
4. Current supply-side
energy projects face risks
Supply-side energy projects are most popular in
Ukraine:
– Building LNG terminal at the Black Sea
– Welcoming majors to explore shale gas
– Stimulating renewables through green tariffs
– Substituting gas with coal (and nuclear)
These are considered to be less effective than
demand side measures, like increasing energy
efficiency
5. Energy policy has to change
Despite greater openness to FDI in the energy
sector, the business climate has not improved:
– Policy making is not consistent which increases
uncertainty
– Favoritism distorts competition
Energy prices for most of the consumers are below
cost recovery, while energy prices for most
producers have reached the EU levels
Ukraine already faces a risk of power deficit due to
generation capacity constraints
6. European Energy Community
framework
Ukraine’s membership in the Energy Community of
South East Europe (ECT) is a key factor of reforming
Ukraine’s energy markets
Originally designed for the Balkan countries, ECT
ultimate goal is to create a common energy market
by connecting energy networks but also through
regulatory convergence
Given a delay with the signing the EU-Ukraine
Association Agreement, ECT is currently the No 1
framework agreement with the EU in the sector
7. Energy reforms=Implementing
the Energy Community Treaty
Ukraine has to implement about 12 EU
Directives and Regulations by 2018
Most of Ukraine’s commitments deal with
competition (liberalizing gas and power
markets) and environmental protection
(reducing emissions, making environmental
impact assessment, increasing fuel quality)
8. Reform outlook
Ukraine’s Action Plan to implement the President’s
Economic Reform Program for 2012 has taken into account
most of the requirements of the Energy Community. Still,
the timeframes in the Plan are not being adhered to
Unless five key conditions are met, any reform will be
impossible:
– public support
– reform advocacy groups
– two-way communication with voters
– administrative and regulatory capacity to turn all political objectives into
administrative procedures and policies
– monitoring and oversight
