Legislative changes in the energy sector of Ukraine
Let us consider the adopted legislative drafts in the field of natural resources and energy and their impact on the development of the industry, taking into account the martial law in Ukraine
On July 2, 2023, the Law of Ukraine No. 3141-IX, which defines strategic directions in the field of energy and responds to modern challenges, entered into force. This law aims to implement the adapted Regulation (EU) No. 1227/2011 on integrity and transparency of the wholesale energy market in accordance with Ukraine’s European integration obligations. An important part of the innovative legislation is the implementation of the main principles of the European energy market in Ukraine, in particular the principles of integrity and transparency.
One of the key aspects of the new law is the definition of abuses in the energy market and the definition of sanctions for their violation.
Abuses in the energy market include:
- violation of established restrictions on the use of insider information;
- manipulation and attempts to manipulate the market;
- non-disclosure or disclosure of insider information in violation of the requirements established for the disclosure of such information;
- carrying out operations with wholesale energy products without registration as a participant of the wholesale energy market in the electricity and gas markets, as well as liability.
Sanctions are provided in the form of fines, which can amount to significant amounts of tax-free minimum incomes of citizens.
- up to 27,000,000 tax-free minimum incomes of citizens – for economic entities conducting economic activity on the natural gas market in accordance with the legislation in the field of functioning of the natural gas market:
- for violation of established restrictions on the use of insider information;
- for manipulating the natural gas market;
- up to 2,700,000 tax-free minimum incomes of citizens – for economic entities conducting economic activity on the natural gas market in accordance with the legislation in the field of functioning of the natural gas market – for non-disclosure or disclosure of insider information in violation of the requirements established for the disclosure of such information;) for such abuses.
For the effective implementation of the new norms of the law, the National Commission for State Regulation in the Energy and Utilities Sectors (NKREKP) approved a number of important regulatory acts. In particular, the Procedure for registration of wholesale energy market participants and the Procedure for investigating abuses have been introduced. In addition, the method of determining the amount of fines for violation of license terms and market abuse has been determined.
These innovations are an important step on the way to stability and transparency in the energy sector of Ukraine. They will contribute to the development of a competitive and efficient wholesale energy market, ensuring fair conditions for all participants and increasing investor confidence in the country’s energy sector.
New horizons in the development of renewable energy: What does Law No. 3220-IX propose?
From July 27, 2023, a new stage of the development of the energy system of Ukraine started with the help of the Law of Ukraine No. 3220-IX. This law defines key changes in the field of renewable generation aimed at recovery and “green” transformation.
One of the important innovations is the introduction of a market premium mechanism for electricity generators from renewable energy sources (RES). This alternative incentive system gives RES electricity producers the opportunity to choose its use, renouncing the “green” tariff mechanism. Under this system, the guaranteed buyer pays the difference between the “green” tariff and the estimated market price.
This innovative solution introduces the concept of flexibility for renewable energy producers, giving them the opportunity to choose the optimal support system. This approach will contribute to a more efficient and flexible integration of renewable energy into the energy system of Ukraine, stimulating green development and providing stable conditions for investors in the field of renewable energy.
A new level of sustainable development: Creation of the National Energy and Climate Plan (NECP)
According to the resolution of the Cabinet of Ministers of Ukraine dated August 19, 2023 No. 924, an important stage in the development of the national energy strategy has been initiated – the formation of the National Energy and Climate Plan (NECP). This is defined as an important step in European integration and fulfillment of obligations to the Energy Community.
The development of the NECP became a necessity in the context of adaptation to the European Regulation (EC) 2018/1999 of December 11, 2018, which establishes clear requirements for the content and procedures for coordination, acceptance and approval of the plan. This plan is defined as a key road map for decarbonizing the country, achieving carbon neutrality and meeting energy and climate goals.
NECP is not only a strategic document, but also a mandatory element in the European integration process, which emphasizes Ukraine’s responsibility to global challenges in the field of sustainable development and environmental protection. This plan not only guides the country’s energy future, but also represents an important step towards building a sustainable and responsible energy sector.
Energy stability: Ukraine is improving measures before the season
The decree of the President of Ukraine No. 737/2023 implemented an important decision of the National Security and Defense Council of Ukraine dated November 7, 2023. This decision, called “Regarding additional measures to strengthen the stability of the energy system and prepare the national economy for work in the autumn-winter period of 2023/24”, sets itself the task of ensuring the stability and efficiency of the energy system of Ukraine in the coming autumn-winter period.
This decision indicates the great attention of the authorities to the reliability of the energy infrastructure and the readiness of the national economy to work in the conditions of the winter season. The measures introduced in accordance with the decree indicate a strategic approach to ensuring energy security and avoiding possible challenges that may arise during periods of high energy consumption.
This decision is an important stage in the country’s preparation for the most demanding period of energy consumption, testifying to the high level of responsibility of the authorities for national security and the efficiency of the energy system.
Commitment to the future: Ukraine joined the important UN COP28 initiative
Ukraine recognized the critical role of nuclear energy in the global effort to combat climate change by joining the COP28 Declaration at the UN Climate Change Conference. More than 20 countries have recognized the importance of tripling nuclear power capacity by 2050 as a strategic step in achieving global zero greenhouse gas emissions.
This decision, adopted at the United Nations World Conference on Climate Change (COP28), which took place from November 30 to December 12, 2023 in the United Arab Emirates, becomes a key milestone for the global community in efforts to reduce the impact of our activities on the climate. The declaration of the participating countries defines the goal of achieving carbon neutrality by 2050, which is a strategic recognition of the need to transition to sustainable and ecologically clean energy.
By joining this initiative, Ukraine demonstrates its commitment to global environmental challenges and active participation in shaping the future energy paradigm on the planet.”
Green leader: Ukraine is stepping into the future of “green” energy in the European Community
The Minister of Energy of Ukraine, Herman Galushchenko, at the UN Climate Change Conference COP28 in Dubai identified Ukraine as a key hub for the development of “green” energy in the European Community. He noted that the country is solving the challenges of the energy sector not only due to the increase in energy production, but also due to the active development of “green” technologies.
This designation of Ukraine as a leading hub in the field of “green” energy demonstrates the country’s readiness to take responsibility in global efforts to combat climate change. Ukraine not only produces “green” energy, but is also defined as an innovation center that combines energy production with the creation of advanced technologies to ensure an environmentally clean and sustainable energy future. This direction of development confirms the recognition of Ukraine as a key player in the field of green energy in the international context.
Conclusions from BDO in Ukraine
In 2023, the Ukrainian energy industry went through a period of significant legislative changes that will determine its development in the future. In particular, the enactment of Law No. 3141-IX (REMIT Law) was a step towards the implementation of European standards on the wholesale energy markets of Ukraine. This law establishes key principles of integrity and transparency, prevents abuse, and provides investigative and sanctioning mechanisms.
Law No. 3220-IX, aimed at green transformation, as well as the development of a national energy and climate plan, testify to Ukraine’s serious commitment within the framework of the European Community. These steps indicate an intention to achieve carbon neutrality by 2050 and address energy and climate challenges. An important aspect is the integration of market fundamentals to stimulate the development of renewable energy sources (RES).
Decentralization of generation opens up new opportunities for consumers, allowing them to actively participate in shaping the supply and demand balance. This contributes not only to reducing costs for consumers, but also to active influence on energy markets. In general, the latest changes in the field of energy are characterized by increased transparency, expansion of opportunities for the development of RES and establishment of the foundations for a sustainable energy system in Ukraine.
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