Electricity market reforms in Ukraine. Challenges and opportunities

Challenges and opportunities
MARKET REFORMS IN UKRAINE
Electricity
Kyiv 2018

Mission of the Ukrainian Institute for the Future is about designing successful
Ukrainian Institute for the Future is an independent analytical center, а think
tank, aimed to provide an expert analysis of what happens in Ukraine, to
create a discussion space, which goal is to give recommendations for the
Ukrainian government and politicians, on the one hand and to deepen the
understanding of it by the Ukrainian society on the other.
future for Ukraine through experts’ research and discussions, which are
supposed to stimulate acceptation of qualified decisions for domestic and
foreign policy.
Institute’s fields of research:
Foreign and domestic policy
National security
Economics
Law enforcement and the judicial system
Institute implicates well-known international and national experts, who share
values of the Institute to realization of projects:
Supporting of modernization of Ukraine
Independence – Institute has to be an independent from political and
business influences
Deliberate of materials – materials and events, produced by the Institute
are supposed to be deliberate and objective, in accordance to independent
experts’ opinions
Quality – Institute endeavors to offer to Ukrainian society and to
international community new quality of researches
Tolerance – tolerate opinions and views, which are contradictory to its and/or
not support and criticize its activity, and endeavors to constructive dialogue
Openness – Institute welcomes new people, who can make their productive
contributions, to join to its team
Free access – all researches and events has to be in free access for both
Ukrainian society and international community
Institute will produce analytical exploring, reports, questionnaires, forecasts, and
more in even different ways (discussions, debates, presentations, conferences
so on) with further publication of conclusions and decisions.
Founders of the Institute: Yuriy Romanenko forotide,ycilopngierofnotrepxe,
web-site «Hvulya»; Taras Berezovets, political consultant, an expert on national
security; Igor Liski, businessman; Anton Gerashchenko, deputy of the Verkhovna
Rada, Adviser to the Minister of the Interior; Anatoly Amelyn, businessman;
Oleksiy Skrypnyk, Member of Parliament.
The Institute is open to new proposals.

CONTENT
SUMMARY
1. RISK ASSESSMENT OF NON-INTRODUCTION OF REFORM
1.1. The essence of electricity reforms in Ukraine
1.1.1. The current electricity market model
1.1.2. The transition to a new model of the electricity market
1.2. The state of implementation of the plan-schedule of reforms
1.3. Ukraine's losses during the delay of the reform introduction
2. FORECAST OF DEVELOPMENT OF ENERGY SECTOR AND ECONOMY OF UKRAINE WITHOUT REFORM AND AS
A RESULT OF ITS IMPLEMENTATION
2.1. Forecast of macroeconomic indicators and net electricity consumption
2.1.1. Forecast of macroeconomic indicators
2.1.2. Forecast of net electricity consumption
2.2. Plans for generation development
2.2.1. Without reform
2.2.2. As a result of the reform
2.2.3. Investment needs
2.3. Plans for development of power grids
2.3.1. Plans
2.4. Gross consumption and generation balance
2.5. Sufficiency assessment of generating capacities
2.6. Forecast of the wholesale prices
2.7. Assessment of competitiveness of electricity export. Forecast of export and import volumes
2.8. Forecast of investments in the electricity generation sector
2.9. Forecast of investments in the electricity transmission and distribution sector
2.10. Forecast of retail tariffs
2.11. Assessment of the effects of the reform
3. ASSESSMENT OF RISK AND OPPORTUNITIES ARISING DUE TO REFORM INTRODUCTION
3.1. Without reform
3.2. As a result of the reform
4. RECOMMENDATIONS FOR THE AUTHORITIES
LIMITATION OF LIABILITY
ACRONYMS
03
05
05
05
07
10
15
18
19
19
19
25
26
28
29
32
32
41
42
43
45
53
53
54
55
55
58
62
66
67
70
70
72
73
73
75
82
82
85
88
97
97
100
104
105
106

The electricity market reforms provide for the establishment
of separate market sectors (formal and informal) with the
competition-based pricing, the separation of distribution
companies from suppliers and the introduction of
incentive-based tariff for the transmission and distribution
system operators. The commencement of the new electricity
market works is scheduled on 01.07.2019.
The electricity market reforms will have a positive effect on
the macroeconomic situation in Ukraine. Due to the reforms
introduced in 2019-2030, an additional GDP of USD 72.1 bln will
be created. There will be additional state budget revenues
from taxes in the amount of USD 12.1 bln, the population will
additionally receive USD 17.7 bln of income.
For each year of delay of reforms Ukraine will lose on average
USD 3.66 bln . of capital investments, USD 7.4 bln of GDP, USD
1.16 bln of the state budget revenues.
As a result of market reforms, the generating companies will
be able to invest USD 29.8 bln in 2019-2030, which is 11.5 times
more funds than without the reform being introduced. This
will allow to finance the full introduction of new power units
and prevent a deficit of baseload capacity, which without
reform being introduced will occur after 2029. If the reform is
not introduced, the state regulator's influence on pricing
remains and the risks of untimely payments for electricity to
producers remain.
As a result of the transition to incentive-based tariff, the
distribution and transmission system operators will be able to
accumulate EUR 7.5 bln of investment resource, which is
almost twice more than without reform being introduced. Due
to an increase in investment volumes, losses in distribution
grids are expected to decrease – from 8.6% in 2017 to 7.2% in
2030, in transmission grids – from 2.6% to 2.1%. In case the
reforms are not introduced, the distribution companies hold
the risks of deterioration of the grids and increase in
consumer average interruption frequency index.
03
SUMMARY
SUMMARY
ELECTRICITY MARKET REFORMS IN UKRAINE: CHALLENGES AND OPPORTUNITIES

uifuture.org
SUMMARY 04
The introduction of reforms in synchronisation with ENTSO-E will increase the export of electricity by
almost 5 times – from 5.6 billion kWh in 2017 to 25.0 billion kWh in 2030. Consequently, the surplus export
earnings in 2019-2030 will make USD 6.7 bln. In case of failure to carry out synchronisation, the dependence
on imports of electricity from the Russian Federation and Belarus remains at the time of crisis.
The absence of market reforms will lead to a greater load on TPPs – their capacity utilization index will
increase from 20.9% in 2017 to 37.6% in 2030 (36.5% in case of reforms). As a result, the impact on the
environment will be increased, which will not be minimized in the underfunding conditions for the
environmental modernization programs.
The implementation of market pricing and incentive-based tariff will lead to a faster growth of tariffs for
ultimate consumers during the first two years than without reform being introduced. We assume that the
residential tariffs in 2019 will increase by 28% (from 1.40 UAH/kWh in 2018 to 1.78 UAH/kWh in 2019), and in
2020 – by another 84%. For industrial consumers, tariffs will increase in 2019 by 45% (from 1.80 UAH/kWh
to 2.60 UAH/kWh) with a decrease of 5% in 2020. The industrial tariffs will be decreased due to cancellation
of subsidized certificates. In the future, the tariff growth rates under the conditions of reform introduction
will not exceed this figure without reform being introduced.

Since 1995, the electricity market in Ukraine has been functioning under the model of “mandatory pool” or
“single buyer”. Generation companies produce electricity and sell it to State Enterprise “Energorynok”, which is
then sell it to its suppliers at a regulated tariff (oblenergos and independent suppliers (suppliers at unregulat-
ed tariff)). Further oblenergos and suppliers at unregulated tariff supply electricity to retail consumers,
including residential and large industrial consumers.
RISK ASSESSMENT
OF NON-INTRODUCTION OF REFORM
05
Scheme of the existing model of the electricity market in Ukraine (until 01.07.2019)
THE ESSENCE OF ELECTRICITY REFORMS IN UKRAINE
1.1.1. The current electricity market model
011.1.
Wholesale electricity market
(State Enterprise “Energorynok”)
Main electric grids
(SE “NPC Ukrenergo”)
Supply + distribution of electricity
Consumers (residential and industrial)
TPP CHPP HPP and HPSPPWEP SPPNPP
GENERATION OF ELECTRICITY
Source: State Enterprise “Energorynok”

uifuture.org
RISK ASSESSMENT OF NON-INTRODUCTION OF REFORM 06
The price at which TPP sells electricity to SE “Energorynok” is calculated for each billing period (time)
according to the rules of the wholesale market and it is mainly formed at the level of the price bid for the
operating generating unit with the highest production expenses. The unit-wise price bids of the producers are
submitted daily to SE “Energorynok”, which defines the list of units that will operate in the power system.
The lower the cost of electricity generation at a specific unit of TPP, the more often it is involved in the
operation and the higher is its profit (margin) when selling electricity in the wholesale market. In turn,
economically inefficient units are of low demand and have fewer loads during the year. The TPP tariffs are
monthly approved by the NEURC and are formed by residual principle.
Producers and operators of NPP, HPP and CHPP sell electricity in the wholesale market at the tariffs regu-
lated and established by NEURC. The producers of renewable energy sources (mainly solar and wind power
plants) sell all electricity generated by SE “Energorynok” under the feed-in tariffs set by the state regulator of
NEURC in accordance with the Law of Ukraine “On Alternative Energy Sources”.
Problems of the existing electricity market model:
1. The absence of direct long-term contracts concluded between consumers and electricity producers
does not allow market members to hedge the risks and this fact limits the development of competition in
the electricity market.
2. The influence of the Regulator on the establishment of a forecast wholesale market price and tariffs for
all electricity producers limits the development of competition between different types of electricity
producers and does not stimulate the reduction of costs in the economics.
3. Electricity tariffs are determined by the Regulator, which does not contribute to effective pricing and
leads to general welfare gap.
4. The imperfect mechanism of pricing leads to insufficient payments to generating companies for the
electricity produced and, as a result, does not allow them to invest in modernization or construction of
new capacities. Particularly with regard to NPP and HPP the profitability of which is limited to the greatest
extent, causing a deficit of investment resources.
5. The non-market mechanism for determination of amounts and directions of investments: until 2017. The
regulator set investment premiums in tariffs in accordance with the approved investment programs.
6. Volatility of cash flows of market members, which restricts access to financial resources of market
members and prevents attracting foreign investors, including international financial institutions.
7. Industry subsidizes the population, which slows down the development of the economy.
8. The current model “single buyer” does not allow the synchronization of the UES of Ukraine with the Euro-
pean network of transmission system operators for electricity (ENTSO-E).
9. Non-payments between market members. Thus, as of 01.01.2018, the total debt of SE “Energorynok” to
electricity producers and SE “NPC Ukrenergo” amounted to UAH 29.2 bln. Insufficient receipt of funds leads
to the suspension of investments in the modernization and reconstruction of both power plants and grids.

The Law of Ukraine “On the Electricity Market” (No. 2019 dated 13.04.2017) provides for the introduction of a
liberalized electricity market in accordance with the norms of European electricity legislation, namely
Directive 2009/72/EU on common rules for the internal market of electricity, Directive 2005/89/EU on
measures to ensure security of electricity supply and infrastructure investment and Regulation (EU) 714/2009
on conditions for access to the grids of cross-border exchanges of electricity. As in European countries, the
new model of the Ukrainian electricity market provides for the creation of various market sectors for formal
and informal electricity trade.
The informal market sector is represented by bilateral agreements, which are concluded directly
between the market members for different terms of electricity supply (from one hour to several years). The
regulator has no right to interfere pricing and the relationship between the parties hereof.
Electricity producers, the share of the state in the authorized capital of which is 50% or more, will be able
to sell electricity under bilateral agreements only on electronic auctions.
The formal market sector includes the day-ahead market, the intraday market and the balancing market.
Relationship between the members of the formal market sectors are determined by the relevant market
rules, which are approved by the Regulator.
Day-ahead market is an electricity market sector in which the electricity is purchased and sold on the day
next to the bidding day (day of delivery).
Intraday market is an electricity market sector in which the electricity is continuously purchased and sold
after the completion of bidding on day-ahead market and during the day of actual supply of electricity for the
billing periods of day of delivery.
The electricity price on the day-ahead market is determined as per the principle of marginal (limit) pricing
on the basis of the balance between aggregate demand and aggregate supply, and on the intraday market
the pricing principle will be introduced at the posted price. These pricing principles in the formal market
sectors are also characteristic of EEX.
The formal electricity trading provides some benefits to market members. The system of payments on the
day-ahead market and the intraday market will require the prior deposition by the bidders of a certain amount
of funds on the account of the market operator to secure payments on the market. Accordingly, market
members will duly receive payment for the electricity supplied in the formal market sectors and reduce the
counterparty risk.
Balancing market is an electricity market sector in which the electricity is purchased and sold by the
transmission system operator to balance demand and supply in real time, to settle possible system
constraints in the energy system of Ukraine, and to settle market members' unbalances (deviation of the
actual production schedule / consumption of the market member from his schedule that was sold/purchased
on the market).
The ideology of the new electricity market suggests that market members will be able to provide most of
their electricity sales or purchases through bilateral agreements with different delivery terms (year, month,
week, etc.), and then adjust their positions on the eve of the day of delivery (day-ahead market) and during
07
1.1.2. The transition to a new model of the electricity market

uifuture.org
the day of delivery (intraday market). After the day of delivery, the accounts are already in the process of
settling for the unbalances with the transmission system operator (balancing market).
Under the reforms, the electricity distribution companies (oblenergos) will be divided into distribution
system operators (responsible for the transmission of electricity by local electric power grids) and electricity
suppliers that will perform the function of universal service providers (responsible for guaranteed electricity
supply to residential and small non-residential consumers at regulated prices, which are calculated in
accordance with the method approved by the Regulator).
By separating the electricity distribution function from market functions, all suppliers will have equal
access rights to distribution grids. Accordingly, the market will create conditions for the extensive
development of independent power suppliers, which will stimulate competition in the retail market sector.
The synchronization of the United Energy System of Ukraine with the ENTSO-E will allow the free flow of
electricity between Ukraine and other members of the European Community. On the one hand, under the new
market model, this provides new opportunities for electricity exports. On the other hand, it provides
opportunities for imported electricity supplies and increased competition between electricity suppliers and
producers.
Within the framework of the energy market reforms, the incentive-based tariff is set for transmission and
distribution system operators – the so-called RAB-regulation (Regulatory Asset Base – regulated investment
capital base). According to it, tariffs should incentivize transmission and distribution system operators to
increase their efficiency, reduce costs and invest in their grids. The distribution and transmission system
operators will be able to receive compensation for the investments made inclusive of the rate of return
established by the Regulator.
The market reforms also involve the following organizational measures:
Transformation of SE “Energorynok”, creation the market operator on its basis and the selection of a
guaranteed buyer from it, which will be responsible for purchasing electricity from producers from
renewable sources at a feed-in tariff;
Transformation and corporatization of SE “NPC Ukrenergo” with significant extension of authorities,
namely, functions of balancing market management, settlement administrator and commercial
accounting administrator.
A guaranteed buyer purchases electricity from producers who have a feed-in tariff, and subsequently sells
it at market prices in the day-ahead market or the intraday market. The difference between market prices
and established feed-in tariffs is compensated at the expense of the transmission system operator.
In order to ensure stable and reliable operation of the United Energy System of Ukraine and to ensure the
appropriate quality of electricity, the transmission system operator will introduce a new sector – the market
of ancillary services. The transmission system operator shall purchase ancillary services under market
conditions with the purpose of:
1) regulation of frequency and active capacity, maintenance of capacity balance and power in the United

Energy System of Ukraine, namely:
a) render of services of primary, secondary, tertiary regulation with provision of reserve of the
corresponding regulating capacity;
b) render of services in provision of reserves of new and/or reconstructed generating capacity;
2) maintenance of parameters of reliability and quality of electricity in the United Energy System of
Ukraine, namely:
a) voltage and reactive capacity regulation services;
b) services to restore the functioning of the United Energy System of Ukraine after systemic accidents.
09
The new electricity market model in Ukraine
Source: Law of Ukraine on the Electricity Market
Guaranteed buyer
Transmission system operator
Main electric grids
Ancillary services market
Electricity distribution
Consumers (residential and industrial)
Electricity Suppliers
Balancing
market
Market operator
Day-ahead market
Intraday market
100%
DIRECTAGREEMENTS
TPP NPP HPP and HPSPP WEP WEPCHPP
GENERATION OF ELECTRICITY
100%

uifuture.org
The launch of the new market model was planned on July 1, 2019. At present, this deadline will be unlikely
met.
In accordance with the Law of Ukraine on the Electricity Market, the coordination of actions on the new
market introduction is assigned to the Coordination Centre responsible for the introduction of a new
electricity market. According to the plan-schedule made by this coordination centre, the electricity market
reforms involve the implementation of 205 measures and the adoption of 119 statutory acts. As of June 2018,
only 14 statutory documents were approved.
The directions of the electricity market reforms
Source: Coordination Centre responsible for the introduction of a new electricity market
THE STATE OF IMPLEMENTATION
OF THE PLAN-SCHEDULE OF REFORMS
Direction
Number
of events
including
the approved
Separation of the transmission system operator
and its work
Separation of the distribution system operator
and its functions
Retail market and supply
Introduction of market sectors
Production
Market operator
RES and Guaranteed buyer
Traders
CHPP
Other measures
Total
24
16
23
16
4
2
12
2
4
16
119
35
41
25
35
8
7
21
2
9
22
205
4
2
2
–
1
1
1
1
–
2
14
Number
of statutory acts
1.2.

ELECTRICITY MARKET REFORMS IN UKRAINE: CHALLENGES AND OPPORTUNITIES11
Source: NEURC
Statutory documents approved by the regulations of NEURC (as of 06.06.2018)
Direction Statutory act
Separation of the transmission
system operator and its work
Separation of the distribution
system operator and its functions
Retail market and supply
Production
Market operator
RES and Guaranteed buyer
Traders
Other measures
10.08.2017
09.11.2017
14.03.2018
14.03.2018
27.12.2017
27.12.2017
14.03.2018
27.12.2017
27.12.2017
27.12.2017
27.12.2017
27.12.2017
14.03.2018
14.03.2018
Procedure for certification of the transmission system
operator for electricity
License provisions for conducting business activity on
electricity transmission
Transmission system code
Electricity commercial accounting code
electricity distribution
The procedure for the preparation, submission,
approval, disclosure of the compliance program of the
distribution system operator, the report on its
implementation and the approval of the authorized
person on compliance issues
Rules of retail electricity market
electricity supply to a consumer
electricity generation
fulfilment of market operator functions
fulfilment of guarantee buyer functions
electricity resale (trading activity)
Market rules
The rules of day-ahead market and the intraday
market.
Date
of approval
The most important measures that are to be implemented during the reforms are presented below. The
implementation of most of the listed measures is the responsibility of the regulator – NEURC.

uifuture.org
Measures by implementation directions
Directions Measures
11.06.18 11.12.18 20.06.19
No
date
Separation of the
transmission
system operator
(TSO) and its work
Separation of the
distribution system
operator (DSO) and
its functioning
The electricity transmission charging methodology
The dispatching (operational-technological)
management services charging methodology
The methodology for determining the value of
available capacity and assurance factor
Forms of reporting for the transmission system
operator
The separation of the transmission system operator
(delineation of powers for the management of TSO
and assets in production, supply of electricity and
gas) between the various central government
authorities
TSO Certification
Approval of the tariff for electricity transmission
services
Approval of tariff for services of dispatching
(operational-technological) management
Confirmation of transfer capacity distribution
structure
Issue of a license for the transfer
Quality indicators of DSO services and the procedure
of compensation
Procedure for the development and submission for
approval of plans for the development of distribution
systems and investment programs of DSO
Creation of new suppliers (to perform the functions of
universal service providers)
Implementation Deadline
Directions Measures
11.12.18 20.06.19 01.07.20
No
date
Separation of the
distribution system
operator (DSO) and
its functioning
Calculation methodology for DSO charges commercial
accounting services
Calculation methodology for DSO charges commercial
accounting services
Separation of DSO
Approval of tariffs for the distribution
Revocation of licenses for the supply as per
regulated/unregulated tariffs

Directions Measures
11.12.18 20.06.19 01.07.20
No
date
Separation of the
distribution system
operator (DSO) and
its functioning
Abolition of regulated retail tariffs by companies
Abolition of statutory acts on the regulated retail
tariffs
Holding of a competitive tender for selection of
universal service providers
Issue of new distribution licenses
Approval of connection fee rates and fee rates for the
linear connection
Issue of new licenses for supply
Approval of tariffs for universal service provider
services
Holding of a competitive tender for last resort
suppliers
Directions Measures
11.12.1811.06.18 20.06.19 01.07.19
No
date
Retail market and
supply
Procedure for the selection of universal
service providers
Procedure for the selection of last resort
suppliers
Procedure for providing consumers with
information on sources used for
electricity generation
Supply reporting forms
Quality indicators of service providers
and compensation procedure
Procedure for supporting vulnerable
consumers
Methods (procedure) of pricing policy for
universal services
Methods (procedure) of pricing policy the
last resort supplier
Ensuring that no cross-subsidization
between different categories of
consumers
Development of typical graphs (profiles)
of load

Directions Measures
11.12.1811.06.18 20.06.19 01.07.19
No
date
Production Generation reporting forms
The procedure for publication by
producers of the information on the
share of each power source used for the
production of electricity and the impact
on environment caused by electricity
generation
The procedure for conducting tenders
for the construction of generating
capacity and for the implementation of
demand management program
Cancellation of generation licenses
Issue of new generation licenses
Directions Measures
11.12.1811.06.18 01.04.19 20.06.19
No
date
Market operator
(MO)
RES and
Guaranteed Buyer
(GB)
Traders
Other measures
MO forms of reporting
Establishment of Market operator’s
company. Preparation of the documents
required for registration. Getting a
license
Rules for purchasing electricity at the
feed-in tariff, including the work rules of
the balancing group and the GB
GB reporting forms
The decision of the imposition of public
service obligations on the GB and the
TSO related to feed-in tariffs and the
conditions (procedure) of their provision
Issue of GB licenses
The decision of termination the fulfilment
of public special obligations related to
electricity purchases at the feed-in tariff
by guaranteed buyer from 2030
Traders reporting forms
Procedure for electricity market
monitoring
uifuture.org

Directions Measures
11.12.1811.06.18 20.06.19 01.07.19
No
date
Other measures Requirements for the security, reporting,
disclosure and publishing of information
by market member
Standards of information exchange on
the Ukrainian electricity market in
accordance with ENTSO-E requirements
Procedure for the construction of
interstate lines by investors (other than
TSO)
Procedure for the imposition of public
special obligations to ensure the public
interest and the conditions for the
performance of such public special
obligations
Supply safety monitoring report (every 2
years)
Source: Coordination Centre responsible for the introduction of a new electricity market
UKRAINE'S LOSSES DURING THE DELAY OF THE REFORM INTRODUCTION
On 01.02.2011, Ukraine became a Contracting Party to the Energy Community after signing the relevant
minutes of meeting and ratifying it by the Verkhovna Rada. Joining the energy community means introducing
and enforcing common rules for the energy sector in all member countries.
The decision of the Council of Ministers of the Energy Community D/2011/02/MC-EnC stipulated that as of
01.01.2015, the member countries should implement most of the provisions of the Third Energy Package aimed
at liberalizing energy markets and stimulating the development of competition among energy suppliers. In
particular, 16 independent suppliers entered Estonian market after the liberalization. Estonians have the
opportunity to change the supplier once a month, and there are three specialized websites for comparing
price offers and contracting.
According to the Plan of actions as to the implementation by Ukraine of its obligations under the Treaty
Establishing the Energy Community, all regulatory acts concerning the new (free) electricity market should
have been elaborated well before 2015.
In 2013, there was enacted the Law of Ukraine On the basics of the electricity market performance which
did not take into account all the norms of the Third Energy Package, and in addition, in fact, was not imple-
mented. Therefore, the development of a new law on the electricity market, which takes into account all Euro-
pean practices, has begun.
1.3.

uifuture.org
* - for the period from the planned commencing date to the estimated date of implementation
Thus, by the beginning of 2015, the domestic electricity sector had already to be reformed. So, the
reference point for assessing the losses due to the delayed implementation of the reform is set as follows:
01.01.2014 – for introduction of incentive-based tariff;
01.01.2015 – for the introduction of the electricity market.
Thus, the legislative framework for the transition to incentive-based tariff was adopted in 2013. At the
moment, there is 5 years delay, during which Ukraine has lost USD 2.3 bln of investments, USD 4.5 bln of
additional GDP, USD 0.76 bln of budget income.
The potential loss rate is calculated as the economic effect of the implementation of the reform for the
delay period. The calculation is made using an economic model that allows us to assess the effects of the
reform (see clause 2.11).
Similarly, the transition to a competitive electricity market, initially was envisaged from 01.01.2015. For 5
years of delay, Ukraine has lost USD 16.2 bln of capital investment, USD 32.4 bln of GDP, USD 5.4 bln of budget
income.
Potential losses of Ukraine due to the delay in the transition
to incentive-based tariff setting, USD bln
At average annually
For the period
of 2014-2018*
Capital investments
GDP
Budget income
0,46
0,90
0,16
2,3
4,5
0,8
* - for the period from the planned commencing date to the estimated date of implementation
Potential losses of Ukraine due to the delays in the transition
to a competitive electricity market, USD bln
At average annually
For the period
of 2015-2019*
Capital investments
GDP
Budget income
3,2
6,5
1,0
16,2
32,5
5,4

Consequences of the delayed implementation of the reform for key stakeholders
Consequences for electricity producers:
Deficiency of investment resource to the amount of more than USD 2.5 bln every year, especially for
Energoatom and Ukrhydroenergo, the state operators of nuclear and hydro power plants;
lack of transparent pricing mechanism, artificial limitation of profitability;
an increase in the amount of debt of SE “Energorynok” to producers, which as of 01.01.2018 is more than
USD 1 bln;
increase in voltage due to lack of energy resources in the heating period.
Implications for distribution companies:
deficiency of investment resources to the amount of USD 0.46 bln every year;
lack of a transparent tariff formation mechanism that does not allow to attract investments in the
development of grids, including the use of debt instruments, and integrate modern solutions of Smart
Grid;
an increase in the amount of consumer debt to suppliers to the amount of USD 440 mln compared to
2015.
Implications for industrial companies:
deficiency of investment resources to the amount of USD 0.4 bln every year;
lack of fair pricing and hedging mechanisms when purchasing electricity, while maintaining
cross-subsidization between consumers.
Implications for households:
increase in the duration of power failures: SAIDI has increased from 354 minutes in 2014 up to 728
minutes in 2017;
maintaining a low level of customer service quality;
constant risks of power failures during periods of peak load;
maintaining of air pollution level due to insufficient investments in environmental protection.
Implications for the budget of Ukraine:
the budget of Ukraine has not received USD 1.16 bln of income annually;
the absence of new jobs and new businesses due to the development of related industries.

uifuture.org
FORECAST OF DEVELOPMENT OF ENERGY SECTOR AND ECONOMY OF UKRAINE 18
FORECAST OF DEVELOPMENT OF ENERGY
SECTOR AND ECONOMY OF UKRAINE
WITHOUT REFORM AND AS A RESULT OF ITS IMPLEMENTATION
02
Scheme for an economic model development
Investment appraisal
(RAB-tariff)
Forecast for
EXPORTS/IMPORTS
Marginal (wholesale)
price
Coal price,
USD exchange rate
Plans for input /
output of capacities
Forecast for
grid losses
E-vehicles
consumption
Specific consumption
by population
Retail tariffs
(reform)
Calculation of effects
Retail tariffs
(without reform)
Forecast for
LOAD
WMP Generation BALANCE
Generation BALANCE
Producer price
index
Calculation of effects Calculation of effects
Distribution tariff
(without reform)
Transmission tariff
(without reform)
Transmission tariff
(reform)
Distribution tariff
(reform)
Forecast for
GROSS consumption
BALANCE of capacities
(sufficiency assessment)
Forecast for
NET consumption
MACRO forecasts Population change
(RAB-tariff)
for generation sector

In order to assess the effects of the reform, a comprehensive economic model of calculations was
developed.
This model examines the results of Ukraine's energy development by two scenarios:
1) without reform being introduced;
2) as a result of the reform introduced. Comparing the results by two scenarios gives an opportunity to
determine the consequences and economic effects of the reform.
Forecasts of macroeconomic indicators used in the model are based on the consensus estimates:
Real GDP growth rates, manufacturer price index, USD/UAH exchange rate – consensus forecast of the
following organizations: BMI, EIU, IHS, Focus Economics, Oxford Economics, IMF, Ministry of Economic
Development and Trade of Ukraine, National Bank of Ukraine;
Average annual EUR/USD rate, USA manufacturer price index – Bloomberg consensus forecast;
Coal Price – forecast of eex.com on futures API2 (up to 2025) with the subsequent adjustments for the US
manufacturer price index; is used only as a price index to take into account the dynamics of coal prices
in the calculations.
According to the forecast, the average growth rate of real GDP in Ukraine is 3.5%, which is a realistic result.
The UAH/USD rate after 2022 is calculated on the basis of the parity principle of the price indices in USD in
Ukraine and the United States.
Demand for electricity is formed by two main groups of consumers – households and non-residential
consumers. The main part of net consumption (over 70%) falls on the non-residential consumers, which are
industry, agriculture, transport, construction, and other economic sectors.
FORECAST OF MACROECONOMIC INDICATORS
AND NET ELECTRICITY CONSUMPTION
2.1.1. Forecast of macroeconomic indicators
2.1.2. Forecast of net electricity consumption
2.1.

uifuture.org
Net electricity consumption by the economic sectors, million kWh
Regression model for forecasting net electricity consumption by non-residential consumers
0
20 000
40 000
60 000
80 000
100 000
120 000
140 000
160 000
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Industry Agricultural consumers
Transport sector Construction
Public utility consumers Other non-industrial consumers
Households
Source:MinistryofEnergyandCoalIndustryofUkraine
Source: State Statistics Service of Ukraine, Ministry of Energy and Coal Industry of Ukraine, UIF calculations
The electricity consumption structure depends on the dynamics of development of a specific industry and
the economy as a whole. Thus, in recent years a trend has been observed in reduction of electricity
consumption by the industry due to decline in production. At the same time, the share of electricity
consumption by the agriculture is increasing, which confirms the existing structural changes in the Ukrainian
economy.
In this regard, forecast of demand of non-residential consumers is made based on the regression model,
which shows the direct dependence of electricity consumption by various economy sectors on the real GDP
growth rate.
y = 0,8253x + 15,004
R² = 0,7988
80,0
85,0
90,0
95,0
100,0
105,0
110,0
80 85 90 95 100 105 110 115
Thepaceofgrowthof
electricityconsumptionby
non-residentialconsumers,%
The pace of real GDP growth, %

Determination of the population needs for electricity is made based on the forecast of average electricity
consumption per person and the projected population size of Ukraine.
Also, spreading of e-vehicles shall be taken into account in the forecast of net electricity consumption by
the public. On the basis of the study of the Ukrainian Institute for the Future “Future of the Oil Market”, the
assumption is made that the trend of the e-vehicle market in Ukraine will be in line with the global trend,
namely:
the car fleet will grow by an average of 2.2% annually;
the share of battery electric vehicles (BEV) in the car fleet will gradually increase from 0.1% in 2017 to 12.6%
in 2030;
the average annual mileage of 1 car will be 20 thousand km, electricity consumption per 100 km of run will
be 18.1 kWh.
As a result, the forecast of a gradual increase in electricity consumption by BEV from 17.6 million kWh in
2017 to 5.6 billion kWh in 2030 was obtained.
Study of electricity consumption by non-residential consumers was divided into industries, taking into
account projected structural changes in the Ukrainian economy. The net consumption forecast is used for
both scenarios of the electricity market development (with and without reform).
Dynamics of e-vehicle fleet (BEV) and electricity consumption
Source: AUTO-Consulting, UIF calculations
Electricity consumption by BEV, million kWh
BEV fleet in Ukraine, thousand pcs.

uifuture.org
Forecast of net electricity consumption in Ukraine, million kWh
UIF forecast of net electricity consumption in Ukraine compared
to the target forecast of NEC Ukrenergo, million kWh
Source: Ministry of Energy and Coal Industry of Ukraine, UIF calculations
Source: Ukrenergo, UIF calculations
2022Е
UIF Ukrenergo
2020Е
UIF Ukrenergo
2025Е
UIF Ukrenergo
2027Е
UIF Ukrenergo
Consumers
Manufacturing industry
and construction
Agricultural consumers
Transport sector
Public utility consumers
Other non-industrial
consumers
Households
Total demand
52 566
3 779
7 034
15 110
5 553
39 353
123 395
53 101
4 069
6 866
15 258
5 213
42 644
127 152
53 152
4 020
7 497
16 528
6 255
38 163
125 615
53 872
4 107
7 088
15 648
4 681
48 348
133 744
54 839
4 270
7 229
15 616
4 449
52 993
139 395
55 798
4 503
7 956
17 540
6 522
40 439
132 758
58 434
4 894
8 277
18 338
6 755
42 445
139 143
52 000
3 790
7 300
15 964
6 180
37 080
122 314
Industry Agricultural consumers
Transport sector Construction
Public utility consumers Other non-industrial consumers
Population incl. BEV

In general, UIF forecast of net electricity consumption is very similar to the target forecast of NEC Ukren-
ergo, which is presented in the report on generation sufficiency assessment.
Difference is in the consumption structure: according to the UIF forecast, electricity consumption by the
population will grow faster than specified in the forecast by NEC Ukrenergo. However, this growth is compen-
sated by the lower electricity consumption by transport and public utility consumers. This difference in the
forecasts is explained by the fact that in the UIF calculations of the electric vehicle consumption is taken into
account in section “Population”.
Forecast of macroeconomic indicators
Real GDP growth rate
in Ukraine, %
Producer price index, %
Average annual USD/UAH rate
Average annual EUR/USD rate
USA producer price index, %
Coal price, USD/t (API2)
Real GDP growth rate
in Ukraine, %
Producer price index, %
Average annual USD/UAH rate
Average annual EUR/USD rate
USA producer price index, %
Coal price, USD/t (API2)
2018E
3,0%
10,3%
27,8
1,18
2,0%
95,8
2019E
3,1%
8,4%
29,4
1,23
2,2%
87,6
2020E
3,1%
8,0%
30,5
1,25
2,2%
83,1
2021E
3,2%
7,5%
30,7
1,25
2,2%
80,2
2022E
3,5%
7,0%
32,2
1,27
2,2%
79,2
2023E
3,4%
6,3%
33,5
1,27
2,2%
78,0
2024E
3,4%
5,0%
34,5
1,27
2,2%
76,7
2025E 2026E 2027E 2028E 2029E 2030E
3,4% 3,4% 3,5% 3,5% 3,5% 3,4%
5,0% 5,0% 5,0% 5,0% 5,0% 5,0%
35,5 36,6 37,6 38,7 39,9 41,1
1,27 1,27 1,27 1,27 1,27 1,27
2,2% 2,2% 2,2% 2,2% 2,2% 2,2%
76,7 78,4 80,1 81,9 83,7 85,5

uifuture.org
Detailed UIF forecast of net electricity consumption in Ukraine
2015 2016 2017 2018E 2019E 2020E 2021E 2022E 2023E
Industry
Consumption,
million kWh
Consumption,
million kWh
50 198 49 994 50 952 51 142 51 284 51 703 52 059 52 211 52 497
Agricultural consumers 3 202 3 259 3 642 3 685 3 731 3 779 4 005 4 069 4 006
Transport sector 8 708 8 878 7 044 6 859 6 943 7 034 6 758 6 866 6 979
Construction 895 912 892 902 853 864 876 890 905
Public utility
consumers 15 194 15 192 15 016 15 042 15 184 15 110 15 142 15 258 15 379
consumers 4 048 4 105 6 361 6 285 5 969 5 553 5 349 5 213 5 040
Households 36 481 35 916 35 020 36 419 37 850 39 353 40 954 42 644 44 428
Total
Industry
Transport sector
Construction
Public utility
consumers
consumers
Households
Total
Industry
Transport sector
Construction
Public utility
consumers
consumers
Households
Total
118 725 118 257 118 927 120 334 121 814 123 395 125 143 127 152 129 233
2024E 2025E 2026E 2027E 2028E 2029E 2030E
52 691 52 963 53 282 53 526 53 698 53 849 53 955
4 035 4 107 4 185 4 270 4 364 4 469 4 454
7 096 7088 7 222 7 229 7 247 7 350 7 473
894 909 927 945 966 990 1 016
15 505 15 648 15 535 15 616 15 631 15 573 15 661
4 862 4 681 4 546 4 449 4 476 4 507 4 484
46 317 48 348 50 575 52 993 55 718 58 802 62 416
131 400 133 744 136 273 139 027 142 101 145 539 149 459
2015 2016 2017 2018E 2019E 2020E 2021E 2022E 2023E
42,3% 42,3% 42,8% 42,5% 42,1% 41,9% 41,6% 41,1% 40,6%
2,7% 2,8% 3,1% 3,1% 3,1% 3,1% 3,2% 3,2% 3,1%
7,3% 7,5% 5,9% 5,7% 5,7% 5,7% 5,4% 5,4% 5,4%
0,8% 0,8% 0,7% 0,7% 0,7% 0,7% 0,7% 0,7% 0,7%
12,8% 12,8% 12,6% 12,5% 12,5% 12,2% 12,1% 12,0% 11,9%
3,4% 3,5% 5,3% 5,2% 4,9% 4,5% 4,3% 4,1% 3,9%
30,7% 30,4% 29,4% 30,3% 31,1% 31,9% 32,7% 33,5% 34,4%
100,0% 100,0% 100,0% 100,0% 100,0% 100,0% 100,0% 100,0% 100,0%
%
Consumption
structure

Industry
Transport sector
Construction
Public utility
consumers
consumers
Households
Total
Structure of installed capacities in the UES of Ukraine (at the end of 2017)
2024E 2025E 2026E 2027E 2028E 2029E 2030E
40,1% 39,6% 39,1% 38,5% 37,8% 37,0% 36,1%
3,1% 3,1% 3,1% 3,1% 3,1% 3,1% 3,0%
5,4% 5,3% 5,3% 5,2% 5,1% 5,1% 5,0%
0,7% 0,7% 0,7% 0,7% 0,7% 0,7% 0,7%
11,8% 11,7% 11,4% 11,2% 11,0% 10,7% 10,5%
3,7% 3,5% 3,3% 3,2% 3,2% 3,1% 3,0%
35,2% 36,1% 37,1% 38,1% 39,2% 40,4% 41,8%
100,0% 100,0% 100,0% 100,0% 100,0% 100,0% 100,0%
%
PLANS FOR GENERATION DEVELOPMENT
As of the beginning of 2017, 51.8 GW of generating capacities were installed in the UES of Ukraine, which
mainly focus on:
four nuclear power plants (15 power units, of which 13 – with a capacity of 1000 MW and 2 – with a capacity
of 415 and 420 MW);
cascades of 8 HPPs on rivers Dnipro and Dniester with a total number of hydroelectric units (HU) 103 units
and three HPSPP (11 HU with a capacity from 33 MW to 324 MW);
14 TPPs (97 power units including 6 units with a capacity of 150 MW, 42 – 200 MW, 42 – 300 MW, 7 units –
800 MW and 4 turbine generators)* ;
three large CHPPs with power units of 100 (120) MW and 250 (300) MW.
Source: NEURC
* At the end of 2017 – 12 TPPs (87 power units including 6 units with a capacity of 150 MW, 32 – 200 MW, 38 – 300
MW, 7 units – 800 MW and 4 turbine generators) due to disconnection of TPPs in the temporarily uncontrolled territories
of Donbas from the United Energy System of Ukraine.
2.2.
Consumption
structure
NPP
GC TPP
CHPP
HPP
HPSPP
RES

uifuture.org
Installed capacity utilization factor
Forecast of existing capacity decommissioning, MW
Source: NEURC, UIF calculations
Source:Ukrenergo
The installed capacities of NPP are mostly utilized, which cover the base load. To regulate peak imbalances,
the capacities of TPPs are used, which are flexible and more cost efficient than CHPP.
According to NEURC, the design service life of the equipment in the majority thermal power plants has
already been exhausted. For example, of 83 power units of the thermal power plants (total installed capacity
is 24,185 MW), 72 power units (18,046 MW or 74.6%) are operated over the economic lifetime, 5 units (1,339 MW
or 5.5%) are operated over the threshold lifetime and 6 power units (4,800 MW or 19.8%) are operated over the
design lifetime.
Due to the high degree of equipment wear in 2018-2029, it is planned to decommission the outdated TPPs
and CHPPs with a total installed capacity of 4,810 MW. And in 2029, operation of power unit No. 1 of the Rivne
NPP with a capacity of 440 MW is expected to terminate, which will result in an extended design lifetime.
Generation type 2015 2016 2017
NPP
GC TPP
CHPP
HPP
HPSPP
SPP
WEP
Biofuel TPP
72,3% 66,8% 70,6%
23,0% 23,2% 20,9%
32,0% 25,2% 23,7%
12,7% 18,6% 21,7%
15,2% 12,4% 12,0%
14,8% 9,9% 9,8%
38,6% 24,1% 33,2%
32,2% 33,7% 33,8%
0
500
1000
1500
2017
2018E
2019E
2020E
2021E
2022E
2023E
2024E
2025E
2026E
2027E
2028E
2029E
2030E
NPP GC TPP CHPP HPP HPSPP SPP WEP Biofuel TPP

Forecast of commissioning of new capacities is calculated based on the plans of development of generat-
ing companies and the target scenario of NEC Ukrenergo. This forecast is relevant in both cases, since the
need for new power units does not depend on the reform. However, the degree of actual implementation of
the plans will be different.
The forecast “without reform” specifies commissioning of new capacities by private generating companies,
while state power plants (NPP, HPP, and HPSPP) will not expectedly be able to finance the construction of new
blocks due to lack of investment resources.
Forecast of the installed capacities is made on the basis of the balance equation: Installed capacities at
the end of the year = Installed capacities at the beginning of the year + Commissioned capacities –
Decommissioned capacities.
GC TPP CHPP SPP WEP Biofuel TPP
NPP CHPP HPP SPP WEP Biofuel TPPHPSPPGC TPP
Forecast of construction of new capacities, MW
Forecast of installed capacities, MW
Source:Ukrenergo,Energoatom,
Ukrhydroenergo,UIFcalculations

uifuture.org
Forecast of construction of new capacities, MW
In case of the reform, the forecast for decommissioning of existing capacities remains unchanged: 4,810
MW – TPP and CHPP, 440 MW – NPP.
Forecast of the volumes of commissioning of new capacities is made based on the plans of development
of generating companies of the private and public sector and the target scenario of NEC Ukrenergo. Should
the reform be implemented, these plans can be expectedly implemented in full.
Increase of the capacities of HPP is taken into account due to modernization of existing power plants
(Kaniv, Kremenchuk, Dnipro, Dniprodzerzhynsk HPP) by a total of 132 MW, as well as new construction on
Kakhovka HPP-2 (250 MW) Verhnodnistrovska HPP (390 MW) and small HPPs (160 MW).
Forecast of existing capacity decommissioning, MW
0
500
1000
1500
2017
2018E
2019E
2020E
2021E
2022E
2023E
2024E
2025E
2026E
2027E
2028E
2029E
2030E
0
500
1000
1500
2000
2500
2017
2018E
2019E
2020E
2021E
2022E
2023E
2024E
2025E
2026E
2027E
2028E
2029E
2030E

Increase of the capacities of HPSPP is taken due to completion of the Dniester HPSPP (1,296 MW) and
Tashlyk HPSPP (604 MW), as well as construction of Kaniv HPSPP (1,000 MW). Herewith, partial delay in
commissioning of new capacities on HPSPP is admitted.
Commissioning of the completed 3rd and 4th units of Khmelnytskyi NPP is planned for 2025 and 2028
respectively. For TPP, a 330 MW capacity increase is planned for 2020 and 2022.
The capacities of SPP and WEP are installed in accordance with the target scenario of the NEC Ukrenergo
strategy.
Growth of the installed capacities is expected mainly due to HPP, HPSPP and RES.
Forecast of installed capacities, MW
0
10 000
20 000
30 000
40 000
50 000
60 000
2017
2018E
2019E
2020E
2021E
2022E
2023E
2024E
2025E
2026E
2027E
2028E
2029E
2030E
Source:MetropoliyaGroupofCompanies
Commissioning of new capacities in full in 2019-2030 requires USD 22.2 billion of investment in
construction.
Estimate of investments required for construction of new capacities
Generation type
million USD/
1 MW
MW million USD
NPP
GC TPP
CHPP
HPP
HPSPP
SPP
WEP
Biofuel TPP
Total
– 2 000 2 690*
1,5 660 990
1,6 1 251 2 002
1,8 970 1 746
1,4 2 900 4 060
1,0 1 560 1 482
1,6 1 860 2 883
2,3 2 803 6 307
– 14 004 22 160
* - cost of completion of construction, 2017, considering expenses already incurred

uifuture.org
Evaluation of implementation of investment programs of generating companies
Source:NEURCSource:NEURCSource:NEURC
– NAEK Energoatom
– Ukrhydroenergo
– CHPP
Plan Actual
Investment needs
(plan), million EUR
Level of financing
of investment needs

In the current energy model of “mandatory pool” or “single buyer”, the investment needs of the generating
companies are not fully financed except for certain years. Subsequently, underfunding of development
programs will result in an increase in wear and tear, interruptions in power supply, increase in the accident
rate of equipment of the power units, increase in repair time and lack of capacities.
Need for investments in construction, million USD
NPP
GC TPP
CHPP
HPP
HPSPP
SPP
WEP
Biofuel TPP
Total
2018E
7
248
0
133
277
285
580
736
2 265
2019E
27
396
0
154
494
114
274
833
2 292
2020E
148
149
0
233
742
105
265
846
2 486
2021E
195
198
0
261
850
238
322
554
2 617
2022E
335
0
0
277
717
238
388
675
2 629
2023E
335
0
0
250
584
95
295
878
2 437
2024E
537
0
0
206
290
71
136
671
1 911
2025E
402
0
0
84
106
71
115
261
1 039
NPP
GC TPP
CHPP
HPP
HPSPP
SPP
WEP
Biofuel TPP
Total
2026E
402
0
0
45
0
67
118
113
744
2027E
302
0
0
45
0
67
109
158
679
2028E
0
0
0
36
0
67
109
225
436
2029E
0
0
0
23
0
67
109
225
423
2030E
0
0
0
0
0
0
65
135
200
Total
2 690
990
0
1 746
4 060
1 482
2 883
6 307
20 158
Source: Metropoliya Group of Companies

uifuture.org
Source: UIF calculations
Source:Ukrenergo
Need for investments in maintaining existing capacities, million USD
Technical condition of the overhead power lines
NPP
CHPP
HPP
Total
2018E
161
22
49
232
2019E
154
21
47
222
2020E
152
20
46
219
2021E
152
20
46
219
2022E
149
20
46
215
2023E
149
20
46
215
2024E
149
20
46
215
2025E
149
20
46
215
NPP
CHPP
HPP
Total
2026E
149
20
46
215
2027E
149
20
46
215
2028E
149
20
46
215
2029E
149
20
46
215
2030E
149
20
46
215
Total
1 961
264
601
2 827
PLANS FOR DEVELOPMENT OF POWER GRIDS
Main equipment installed in the transmission system, which operates continuously and determines the
reliability and efficiency of operation, is made mainly in the 50s-70s of the last century. According to the main
technical characteristics (weight and dimensions, reliability and efficiency indicators, etc.), it yields to modern
equipment and needs more and more repairs. Thus, 17.3% of substation equipment and 56% of power
transmission lines have been in operation for more than 40 years.
2.3.1. Plans
Voltage Total, km
incl. those operated, years
less than 25 25-30 30-40 More than 40
800 кВ 98,5 – – – 98,5
750 кВ 4 120,5 218,1 411,6 2 382,7 1 108,2
500 кВ 374,8 38,1 – 159,6 177,1
400 кВ 339,0 – – – 339,0
330 кВ 13 423,7 1 276,4 798,3 2 202,9 9 146,1
220 кВ 3 976,0 178,6 56,4 338,2 3 402,7
110 кВ 549,7 52,7 26,9 34,1 436,0
35 кВ 114,0 21,3 12,5 17,4 62,8
Total 22 996,2 1 785,2 1 305,7 5 134,9 14 770,4
2.3.

Such a condition greatly affects the increase of electric power losses in the transmission system and
limits the possibility of preventing technological disturbances – damage to electrical equipment or its perfor-
mance disturbance, which results in disturbance of the normal operation of power plants of the electricity
generating facilities and the UES of Ukraine as a whole.
A particular problem is reliability of electricity supply, which is measured for electricity distribution compa-
nies by the following indicators:
for distribution power transmission grids – average duration index of long power interruptions in the
system (SAIDI);
for main power transmission grids – calculated volume of energy not supplied (ENS).
Growth of both indicators in the dynamics indicates a deterioration in of the grids condition and increase
in the frequency of shutdowns of electricity supply of the consumers.
Reliability of electricity transmission and distribution
SAIDI of the European countries, minutes
Source:NEURC
Source:NEURC
– through the fault of the companies – due to scheduled shutdowns
ENS,millionkWh
SAIDI,min.
Ukraine
Romania
Poland
Croatia
Latvia
Estonia
Czech Republic
Lithuania
Finland
Germany
Ukraine
Finland
Germany
Latvia
Croatia
Romania
Lithuania
Czech Republic
Poland
Estonia

uifuture.org
Development of distribution grids
Compared to the EU countries, the SAIDI indicators in Ukraine are much higher. This is due to existence of
system monitoring and regulation of the electricity supply reliability in the EU, high level of deterioration of
power grids in Ukraine, and a significantly higher share of cable networks in the EU, which reduces the
frequency of shutdowns of electricity supply.
Enhancing the reliability of power supply requires development of distribution and transmission grids in
accordance with the plans developed.
Power
grid type
Purpose of activities
150 kV
overhead line
110 kV
overhead line
110 kV
overhead line
110 kV
overhead line
150 kV
Substation
150 kV
110 kV
Substation
Novyi Buh - Yelanets
Usatove - Tsentrolit
From 330 kV Substation
“Drohobych”
(110 kV Substation
“Drohobych-21”, 110 kV Substation
“Dobrivliany-T”, 110 kV Substation
“Boryslav-1”, 110 kV Substation
DDZ circle A and B),
Boryslav-Sambir
Boryslav - Turka - Tukhlia
330 kV Substation
Melitopolska and
Molochanska through 150
kV Substation Robitnicha,
Berdianska and
Chernihivka
ZaTPP - GNS - ZRK -
Fedorivka - Molochanska
Zakhidna in the area of
330 kV Substation
Khmelnytska
Construction
Construction
Construction
Construction
Construction
Construction
Construction
Enhancing the reliability of power supply to two power
units of Mykolaiv region, as well as Mykolaiv-Kherson
power node grid. Provision of reliable power supply to
the consumers of 150 kV Substation “Raionna” under the
conditions of shutdown of 330/150 kV autotransformer
of South-Ukraine NPP.
Enhancing the reliability of power supply of Odessa and
increase in transmission capacities of intersection of
the UES of Ukraine - Odessa, Moldova.
Tying of the completed 330 kV Substation Drohobych to
the 110 kV electricity grids of the region.
Reliable electricity supply to the consumers of oil
pumping stations, electrified sections of the Lviv railway,
as well as strengthening of connections between
substations of the transmission system 220 kV Boryslav,
Stryi and Volovets.
Strengthening of connections between the specified
lines in order to ensure reliable electricity supply to the
consumers of 330 kV Substation Melitopolska, as well as
to increase the potential power output of RES.
Provision of power supply of Zaporizhzhia TPP in the
repair modes of shutdown of 150 kV overhead line ZaTPP
- Luch - V. Bilozerka - Frehat - Tavriysk - Molochanska.
Transmission to a new 110 kV substation of the
consumers on a 10 kV voltage type from 330 kV
Substation Khmelnytska.
Connection/facility
Type
of activities
Source:Transmissionsystemdevelopmentplanfor2019-2028(Ukrenergo)

Power
grid type
35 kV
Substation
110 kV
Substation
110 kV
overhead line
110 kV
330 kV
substation
and 110 kV
substation
110 kV
Substation
110 kV power
transmission
line
110 kV
Substation
Lisovi Hrynivtsi
(Khmelnytskyi)
Dniprovska in the area
of 330 kV Substation
Cherkaska
Koziatyn 330 - Koziatyn
traction
Bar - Cherniatyn -
Zhmerynka
Kakhovka HPP - Mykilske
- Kherson CHPP
between 330 kV
Substation Vinnytska
and 110 kV Substation
Tulchyn
Mykhailivka
Vinnytska 750 - Skhidna
Zakhidna in the area of
330 kV Substation
Khmelnytska
Bila Tserkva - Ros -
Fastiv, Bila Tserkva -
Myronivka
Modernization
Construction
Construction
Replacement of
wire in transit
Modernization
Restoration of
communication
channel
Installation of
line protection
Construction
Construction
Modernization
Conversion from voltage 35 kV to 110 kV. This will enable
to divide of the TPA line - Zapadyntsi, which will enhance
the reliability of connection between 330 kV Substation
Khmelnytska and 330 kV Shepetivka Substation.
substation.
Enhancing the reliability of power supply of traction
substations, consumers connected to dual-circuit transit
of 110 kV Koziatyn-traction - Fastiv, and strengthening of
connections between 330 kV Substation Koziatyn and
Novokyivska.
Provision of load redundancy of 330 kV Substation
Vinnytska and Bar in the 110 kV transit network.
Increase in transmission capacities.
Enabling parallel operation of 110 kV grid between 330 kV
Substation Vinnytska and Ladyzhynska TPP in order to
enhance the reliability of the power output of Unit 1 of
Ladyzhynska TPP and reliability of the consumers' supply
in the Vinnytsia region.
Enhancing the reliability of the power output of Unit 1 of
Ladyzhynska TPP and reliability of consumers’ supply in
the Vinnytsia region.
Load redundancy of 330 kV Substation Vinnytska,
enhancing the reliability of power supply of Vinnytsia and
enabling the industry development in Vinnytsia.
consumers of PJSC “Khmelnytskoblenergo” , which
currently receive power supply on a 10 kV voltage type
from 330 kV Substation Khmelnytska.
Provision of reliable power supply to the consumers in
the southern part of the Kyiv region.
Connection/facility
Type
of activities
Development of distribution grids

uifuture.org
Power
grid type
150 kV OSG of
Zaporizhzhia
TPP, 330 kV
Substation
Molochanska
150 kV
Substation
150 kV
Substation
150 kV
Substation
150 kV
150 kV overhead
line
330 kV
Substation
150 kV
Substation
150 kV
150 kV
Substation
150 kV
110 kV
Substation
ZaTPP - GNS - ZRK -
Fedorivka -
Molochanska
М-1
Aluminiieva
F-1
ZaTPP - Molochanska
Molochanska -
Chernihivka
Partyzany - N. Troitsk -
Dudchyne - Kakhovska
330
Quartzite
Vuzlova
Substation DZU
Nikopolska
Suputnyk - Grushivska -
Ferosplavna 330
Dniprovska in the area
of 330 kV Substation
Cherkaska
Modernization of
150 kV OSG of
Substation ZRK
and GNS
Modernization of
150 kV OSG
Modernization
Modernization
Modernization
Modernization
Modernization
Modernization
Circuit breakers
replacement
Modernization
Modernization
Construction
Resolution of the reliability problem of the tying scheme
of 150 kV OSG of Zaporizhzhia TPP to a 150 kV grid of the
adjacent energy area.
Enhancing the reliability of transit of power output of
Dniprovska HPP-2.
Ensuring the full power output of Dniprovska HPP-2.
Ensuring the redundancy of power output of Dniprovska
HPP-1.
Enhancing the reliability of transit, increase in
transmission capacities.
Increase in transmission capacities of the transit 150 kV
Molochanska - Chernihivka - Andriivka - Berdiansk -
Melitopol.
Increase in transmission capacities.
Implementation of the design connection diagram of
330 kV Substation Quartzite to 150 kV grid.
Ensuring the reliability of transit connections in the
repair modes.
Enhancing the reliability of normal and repair schemes
in the adjacent energy area.
Enhancing the reliability of transit of 150 kV Nikopolska
330 - Ferosplavna 330 in the repair modes.
Ensuring the reliability of transit.
substation.
Connection/facility
Type
of activities
Construction of the
second transit 150
kV Quartzite -
Tymkove,
replacement of the
wire on the sections
of the operating 150
kV overhead line

Project
Estimated cost,
thousand UAH (excl. VAT)
Construction of 750 kV overhead line Zapor-
izhzhia NPP - Kakhovka with 750 kV Substa-
tion Kakhovska
Modernization of 750 kV Substation Kyivska
with installation of a second 750 kV
autotransformer and construction of 330 kV
overhead lines in the Kyiv region
Construction of 330/110/35 kV Substation
Zakhidna with 330 kV overhead line
Second Electricity Transmission Project
(ETP-2)
Construction of 500/220 kV Substation
Kreminska with approach of 500 kV
overhead line Donbaska-Donska and tying to
220 kV grid
Modernization of 400/220/110 kV Substation
Mukacheve
Construction of 330 kV overhead line Zakhid-
noukrainska-Bogorodchany with moderniza-
tion of 330 kV Substation Bogorodchany and
750 kV Substation Zakhidnoukrainska
Modernization of an outdoor electric substa-
tion switchgear of 330 kV with installation of
AT-3 on 330/110/10 kV Substation Novokyivs-
ka
Installation of the third 330/110/35 kV
autotransformer on 330 kV Substation
Chernivetska
Ensuring the normative conditions for power
output of Zaporizhzhia NPP (6,000 MW).
It will enable to enhance the reliability and
quality of the power supply of the energy-de-
ficient consumers, namely the Central and
Northern regions of the UES of Ukraine, due to
transit of the generating capacities from
Rivne and Khmelnytskyi NPP, which in turn
enable to reduce the coal and gas consump-
tion.
Enhancing the reliability of consumers' supply
in Kyiv.
Improvement of safety, reliability and efficien-
cy of electricity transmission, as well as
improvement of the situation with compensa-
tion of reactive power in the grids.
Provision of reliable electricity supply to the
consumers in the northern part of the
Luhansk region.
Provision of internal system connections in
the UES of Ukraine and system interconnec-
tion (export of electricity to the European
countries).
Enhancing the reliability of the grid and
power supply to the consumers of the
adjacent power node grid.
Provision of connection to the main power
grids of 110/10 kV Substation Chabany of PJSC
“Kyivoblenergo”.
Resolution of existing critical operational
problems, ensuring reliable electricity supply
to the consumers of Chernivtsi power node
grid, creating grounds for infrastructure
development in the Chernivtsi region
increasing the volume of the scheduled
electricity export.
7 981 547
1 956 401
1 066 148
n/a
n/a
199 442
254 744
n/a
279 889
Rationale
Development of main power transmission grids

uifuture.org
Project
Estimated cost,
Installation of the second 330/110/35 kV
autotransformer on 750/330/110 kV Substa-
tion Vinnytska
Expansion of 330 kV Substation Kremenchuk
with installation of 4AT
Modernization of 330 kV Substation Brovars-
ka with installation of АТ-3
Modernization of 220/35/10 kV Substation
Berezan
Construction of the transit of 330 kV
overhead line Pobuzhzhia-Talne-Poliana with
330 kV Substation Talne
Construction of 330 kV overhead line Lutsk
North-Ternopil with modernization of 330 kV
Substation Lutsk North and 330 kV Substa-
tion Ternopilska
Construction of 330 kV overhead line Terno-
pilska - Chernivetska with modernization of
330 kV Substation Chernivetska
Modernization of outdoor switchgears 750
kV, 330 kV, 110 kV, 35 kV at 750 kV Substation
Dniprovska, 750 kV Substation Zaporizka, 330
kV Substation Kharkivska, 330 kV Substation
Zaliutine (Dnipropetrovsk, Zaporizhzhia,
Kharkiv regions)
Construction of approaches of 330 kV
Substation Kryvorizka TPP - Trykhaty to 330
kV Substation Mykolaivska with replacement
of two autotransformers and modernization
of 330 kV switchgear of 330 kV Substation
Mykolaivska
Construction of 330 kV overhead Line
Novoodeska - Artsyz with replacement of
2AT at 330 kV Substation Artsyz from 125
MVA to 200 MVA
Resolution of the problem of reliable power
supply for industrial and household consum-
ers in Vinnytsia.
Due to operating measures, it will be possible
to avoid power failures of the consumers in
the event of emergency shutdown of both
systems of 330 kV Substation Kremenchuk.
Redundancy of full load capacity of busbar of
330 kV Substation Brovarska. Ensuring
growing electricity needs of Brovary district of
the Kyiv region.
Ensuring operation of solar power plants.
Enhancing the reliability of the existing
electricity supply and the possibility of joining
of prospective consumers to the grids of the
Cherkasy power node grid.
Provision of the repair and emergency modes
with a decrease in operation of the ARS OL
RNPP and unloading of the station in the
post-emergency modes.
Operating grid 330-750 kV does not provide for
transmission of surplus capacity from the
west to other regions of Ukraine in the repair
and maintenance and emergency schemes.
Provision of repair of 750/330 kV autotrans-
former on Zaporizhzhia NPP, 750 kV Substation
Dniprovska and Zaporizka under the condi-
tions of the lowered generation of TPP.
Enhancing the reliability of electricity supply
to the consumers in the Kherson and Mykolaiv
regions.
Provision of the necessary level of reliability of
power supply and maintenance of acceptable
voltage profile in the southwestern part of the
Odessa region.
n/a
n/a
885 532
277 146
2 135 500
1 985 185
1 868 400
5 101 709
101 205
2 537 910
Rationale

Project
Estimated cost,
Construction of 330 kV Substation Slobo-
zhanska with approaches of 330 kV overhead
line
Construction of 330 kV cable line Zakhidna -
Nyvky with modernization of Substation
Nyvky
Modernization of 750 kV Substation
Dniprovska with installation of AT-3
Construction of 330 kV overhead line
Dniester HPSPP – 750 kV Vinnytska with
modernization of 330 kV switchgear of
Dniester HPSPP and 330 kV switchgear of 750
kV Substation Vinnytska
Construction of the second 330 kV overhead
line Dniprovska 750 - VDGMK with moderniza-
tion of 330 kV Substation VDGMK
Construction of 330 kV bay at 330 kV Substa-
tion Melitopolska for connection of 330 kV
overhead line of Zaporizhzhia WEP
Construction of 330 kV Substation Vorskla
with approaches of 330 kV overhead line
Poltava - Pivnichnoukrainska
Construction of 750 kV Substation Prymorska
with approaches of 750-330 kV overhead line
Construction of 750 kV overhead line
Prymorska -Kakhovska
Modernization of 220 kV Substation Tsentrolit
with conversion to nominal voltage 330 kV
Modernization of 330 kV Substation Adzhalyk
with replacement of autotransformers
New construction of 330 kV Substation
Akvilon with approaches of 330 kV power
lines in the Kherson region
Construction of approaches of 750 kV
overhead line Zakhidnoukrainska-Vinnytska
to Dniester HPSPP
Construction of double circuit 330 kV
overhead line Khmelnytskyi NPP - Lisova -
Kyiv
Enhancing the reliability of electricity supply
to the consumers in Kharkiv and the Kharkiv
region. Reduction in electric power losses.
Provision of reliable electricity supply in the
central districts of Kyiv.
Coverage of growing consumption in the area
of the Dnipro energy system.
Ensuring the operation of Dniester HPSPP in
the normal scheme.
Enhancing the reliability of the power supply
to the industrial enterprises in the north of
the Dnipropetrovsk region.
Provision of connection of the wind power
plant of EuroCape Ukraine I, LLC.
Provision of reliable electricity supply of
Poltava and adjacent areas.
Resolution of the supply problem of the
Odessa region.
Provision of mutual redundancy between 750
kV Substation Prymorska and Kakhovska.
Coverage of the growing load of Odessa in the
absence of own energy sources.
Coverage of growing consumer load.
Provision of connection of two wind power
plants of Windcraft Kalanchak LLC to the grid.
For power acceptance/output of Dniester
HPSPP when commissioning of 5, 6 and 7
hydroelectric units.
Ensuring power output of the KhNPP when
commissioning of units No. 3 and 4.
2 813 178
4 173 333
n/a
420 000
653 940
n/a
n/a
10 120 500
4 281 750
1 712 700
279 066
949 770
n/a
n/a
Rationale
Development of main power transmission grids

uifuture.org
Project
Estimated cost,
Construction of 330 kV overhead Line
Novovolynsk-Yavoriv with modernization of
330 kV Substation Novovolynsk and 330 kV
Substation Yavoriv
Completion of construction of 330/110 kV
Substation Drohobych with 330 kV overhead
Line Zakhidnoukrainska - Drohobych
Construction of 400 kV Substation Uzhhorod
with approaches of 400 kV overhead line
Mukacheve-Kapushany
Connection of 750 kV Substation Kyivska to
the 330 kV grid (with re-commissioning of
330 kV Substation ChNPP - Mozyr to Substa-
tion Kyivska, 330 kV Substation ChNPP-Slavu-
tych to Substation Kyivska)
Construction of 330 kV Substation Skhidna
with approaches of 330 kV overhead line of
Kyiv TPP-5 -Brovarska
Construction of 330 kV Substation
Novohrad-Volynska with approaches of 330
kV overhead line Khmelnytskyi NPP - Lisova
Construction of 330 kV overhead line Kaniv
HPP - Poliana, 330 kV overhead line Kaniv
HPSPP - Bila Tserkva and Kaniv HPSPP - Talne
Construction of 330 kV Substation Prydni-
provska TPP - Livoberezhna with 330 kV
Substation Livoberezhna
Construction of 330 kV Substation Vuzlova
with approaches of 330 kV Substation
Prydniprovska TPP - Pershotravneva
Extension of 500 kV Substation Kreminska
with construction of 330 kV grids
Construction of 330 kV overhead line Kurakh-
ivska TPP - Bilytska
Prevention of overloading of one 750/330 kV
autotransformer at 750 kV substation
Zakhidnoukrainska at shutdown of the
second one, provision of power output of
RES, as well as reliable electricity supply to
the consumers of this power node grid and
the Lviv power node grid.
Enhancing the reliability of the electricity
supply of the Boryslav power node grid by
transmission of a part of the load from
“Burshtynska TPP island” to power from the
UES of Ukraine.
Provision of reliable electricity supply to the
consumers in the Zakarpattia region.
Enabling decommissioning of outdoor
switchgear 750 kV and 330 kV of Chernobyl
NPP.
Provision of reliable power supply to the
existing and prospective consumers of the
Boryspil and Brovary district of the Kyiv
region and the left bank part of Kyiv.
Provision of electricity supply to the
Novohrad-Volynsky power node grid.
Provision of the power output of Kaniv HPSPP.
Provision of electricity supply to the consum-
ers of the left-bank part of Dnipro.
Coverage of growing load of the southern
districts of Dnipro.
Removal of restrictions on consumption of
electricity in the Kupyansk power node grid.
Unloading of Kurakhivska TPP in the event of
an emergency shutdown of 330 kV overhead
line Kurakhivska TPP - Zaporizka 750.
830 000
622 800
1 245 600
3 114 000
1 401 300
n/a
1 557 000
1 868 400
n/a
n/a
n/a
Rationale

* - Energy Strategy of Ukraine by 2035
need for investments annually need for investments annually
In Ukraine, investments per 1 km of grids from distribution companies are about EUR 130, which is more
than 10 times less than the average for the EU countries (EUR 1,600). The similar indicator for transmission
grids of NEC Ukrenergo is EUR 3,500, with the European standard EUR 17,000 (4.5 times less).
Compared to the European companies, Ukrainian companies have a significant need for investment
resources.
Investment needs of distribution companies Investment needs of Ukrenergo
× 12 times more
€1,357 bln
€1 600* /1км
× 4,5 times more
€ 0,440 bln
€17 000* /1км
According to the Energy Strategy, investments of EUR 350 per 1 km of distribution grids can reduce losses
by 1%. Accordingly, investments of EUR 1,600 will reduce losses by 4.0-4.5%.

uifuture.org
Source: Energy Strategy of Ukraine by 2035
Reduction of distribution losses in forecasting is taken into account by annual adjustment of share of
these losses in gross consumption to the coefficient, which determines the theoretical reduction of losses
based on the level of investments per 1 km of grids (this level varies within the range of EUR 430-540 in the
model). This approach enabled to exclude the influence of the factor of increase in losses due to increased
electricity consumption.
With the increase of investments, losses in the transmission grids are expected to decrease, while the
level of in-process electricity consumption by power plants is unchanged.
In the forecasts of losses in the grids, the following assumptions are made:
Without reform – maintenance of losses at the level of 2017, since the amount of investment resource
does not allow to improve the quality of the grids.
As a result of reform – reducing the volume of losses in proportion to the amount of investments.
Forecast of gross consumption was obtained by adding losses to the net consumption arising from
generation and transmission of electricity, as well as the volume of exports and imports.
Forecast of electricity generation to cover a certain volume of gross consumption is made in the following
order:
1. Based on the installed capacity and volumes of electricity generation in 2017, the number of hours of
operation at full load for each generation type was calculated.
2. In the forecast period, for all types of generation, except for TPPs, the number of hours of operation at
full load at the level of 2017 is taken.
Investments in the distribution grids result in reduction of losses by 1%, EUR per 1 km
GROSS CONSUMPTION AND GENERATION BALANCE2.4.
350
Germany Poland Latvia

3. Based on the number of hours of operation at full load and installed capacity, annual volumes of
electricity generation by the generation types are calculated.
4. The volumes of electricity generation at the TPP are determined as a residual.
It is expected that without the reform, condition of the grids will be maintained at the current level, so
losses in the forecast period (as a percentage of gross consumption) will be unchanged (at the average level
for 2015-2017).
Load of generating capacities in 2017
Forecast of the share of losses in gross consumption
Generation
type
Number of hours of operation,
thousand per year
Installed capacity
utilization factor (ICUF), %
NPP
CHPP
HPP
HPSPP
SPP
WEP
Biofuel TPP
6,2 70,6%
2,1 23,7%
1,9 21,7%
1,1 12,0%
0,9 9,8%
2,9 33,2%
3,0 33,8%
Share of own needs and expenses in the oblenergo networks
Share of expenses in the transmission networks
Share of expenses for in-house needs of power plants

uifuture.org
Taking into account the forecast losses, electricity consumption (including exports) will grow by an
average of 1.7% per year. To cover the growing demand of load of the installed capacities of the TPP will
increase from 20.9% in 2017 to 37.6% in 2030.
According to the forecast generation balance, without the reform, nuclear generation covers 43-55% of the
total electricity demand. Share of thermal generation (GC TPP) is gradually increasing from 37% in 2017 to 43%
in 2030, which will have a greater impact on the environment.
Utilization of the TPP capacities to ensure the gross consumption and export
Electricity generation balance, million kWh
Gross consumption, million kWh
Export, million kWh
ICUF GC TPP

Source:NEURC,UIFcalculationsSource:WorldBank
The reform scenario takes into account the gradual reduction of transmission and distribution losses
associated with an increase in the investment volume in the grids.
Total electricity losses for transmission and distribution will decrease from 11.2% in 2018 to 9.3% in 2030.
The specified trend indicates approaching of the level of losses in Ukraine to the average European level.
Should the reform be implemented, gross electricity consumption will increase by 2.3% per year. TPP
loading will increase from 20.9% in 2017 to 36.5% in 2030.
Forecast of the share of losses in gross electricity consumption
Level of losses for electricity transmission and distribution (in % to generation)
Share of own needs and expenses in the oblenergo networks
Ukraine EU
Share of expenses in the transmission networks
Share of expenses for in-house needs of power plants

uifuture.org
Utilization of the TPP capacities to ensure the gross consumption and export
Electricity generation balance, million kWh
Gross consumption, million kWh
Export, million kWh
ICUF GC TPP

* – export forecast is provided in section 2.8.
Forecast of gross electricity consumption (without reform)
million kWh 20162015 2017 2018E 2019E 2020E 2021E 2022E 2023E
Net electricity
consumption
Own needs and
expenses in the
oblenergo networks
Expenses in the
transmission networks
Expenses for own
needs by power plants
Gross consumption
EXPORT*
Share of own needs
and expenses in the
oblenergo networks in
gross consumption
Share of expenses in
the transmission
networks in gross
consumption
Share of expenses for
own needs by power
plants in gross
consumption
118 725
12 612
4 369
14 780
150 486
9 303
8,4%
2,9%
9,8%
118 257
12 885
3 755
14 450
149 346
5 471
8,6%
2,5%
9,7%
118 927
12 932
3 855
14 012
149 726
5 688
8,6%
2,6%
9,4%
120 334
12 993
4 049
14 620
151 997
6 000
8,5%
2,7%
,6%
121 815
13 153
4 099
14 800
153 867
4 500
8,5%
2,7%
9,6%
123 395
13 324
4 153
14 992
155 863
1 500
8,5%
2,7%
9,6%
125 143
13 512
4 211
15 204
158 070
1 500
8,5%
2,7%
9,6%
127 152
13 729
4 279
15 448
160 608
1 500
8,5%
2,7%
9,6%
129 232
13 954
4 349
15 701
163 236
1 500
8,5%
2,7%
9,6%

uifuture.org
million kWh 2025E2024E 2026E 2027E 2028E 2029E 2030E
Net electricity
consumption
Own needs and
expenses in the
oblenergo networks
Expenses in the
Expenses for own
Gross consumption
EXPORT*
Share of own needs
and expenses in the
gross consumption
the transmission
networks in gross
consumption
own needs by power
plants in gross
consumption
131 400
14 188
4 422
15 964
165 974
4 500
8,5%
2,7%
9,6%
133 744
14 441
4 501
16 249
168 935
4 500
8,5%
2,7%
9,6%
136 272
14 714
4 586
16 556
172 128
4 500
8,5%
2,7%
9,6%
139 027
15 012
4 679
16 891
175 608
5 500
8,5%
2,7%
9,6%
142 101
15 343
4 782
17 264
179 491
5 500
8,5%
2,7%
9,6%
145 539
15 715
4 898
17 682
183 833
5 500
8,5%
2,7%
9,6%
149 459
16 138
5 030
18 158
188 785
5 500
8,5%
2,7%
9,6%

* – export forecast is provided in section 2.8.
Forecast of gross electricity consumption (with reform)
million kWh 20162015 2017 2018E 2019E 2020E 2021E 2022E 2023E
Net electricity
consumption
Own needs and
expenses in the
oblenergo networks
Expenses in the
Expenses for own
Gross consumption
EXPORT*
Share of own needs
and expenses in the
gross consumption
the transmission
networks in gross
consumption
own needs by power
plants in gross
consumption
118 725
12 612
4 369
14 780
150 486
9 303
8,4%
2,9%
9,8%
118 257
12 885
3 755
14 450
149 346
5 471
8,6%
2,5%
9,7%
118 927
12 932
3 855
14 012
149 726
5 688
8,6%
2,6%
9,4%
120 334
12 993
4 049
14 620
151 997
6 000
8,5%
2,7%
9,6%
121 815
12 912
3 924
14 755
153 405
4 500
8,4%
2,6%
9,6%
123 395
12 861
3 968
14 923
155 148
4 500
8,3%
2,6%
9,6%
125 143
12 816
3 925
15 099
156 982
4 500
8,2%
2,5%
9,6%
127 152
12 815
3 982
15 319
159 267
4 500
8,0%
2,5%
9,6%
129 232
12 808
3 875
15 528
161 444
13 490
7,9%
2,4%
9,6%

uifuture.org
million kWh 2025E2024E 2026E 2027E 2028E 2029E 2030E
Net electricity
consumption
Own needs and
expenses in the
oblenergo networks
Expenses in the
Expenses for own
Gross consumption
EXPORT*
Share of own needs
and expenses in the
gross consumption
the transmission
networks in gross
consumption
own needs by power
plants in gross
consumption
131 400
12 826
3 934
15 767
163 928
13 490
7,8%
2,4%
9,6%
133 744
12 846
3 828
16 008
166 425
13 490
7,7%
2,3%
9,6%
136 272
12 898
3 895
16 289
169 355
13 490
7,6%
2,3%
9,6%
139 027
12 971
3 969
16 598
172 566
13 490
7,5%
2,3%
9,6%
142 101
13 056
3 871
16 924
175 952
25 040
7,4%
2,2%
9,6%
145 539
13 188
3 960
17 313
180 000
25 040
7,3%
2,2%
9,6%
149 459
13 344
3 873
17 738
184 414
25 040
7,2%
2,1%
9,6%

Forecast balance of generation (without reform), million kWh
Type 20162015 2017 2018E 2019E 2020E 2021E 2022E 2023E
NPP
GC TPP
CHPP
HPP
HPSPP
SPP
WEP
Biofuel TPP
Total
87 628
49 386
12 252
5 235
1 574
465
979
148
157 665
80 950
49 902
13 107
7 664
1 634
462
923
175
154 817
85 576
44 960
12 414
8 982
1 585
653
956
287
155 414
85 576
45 854
12 456
8 982
1 585
825
1 830
888
157 997
85 576
44 775
12 362
8 982
1 585
911
2 369
1 805
158 367
85 576
42 431
11 758
8 982
1 585
1 015
2 850
3 167
157 363
85 576
43 121
11 916
8 982
1 585
1 110
3 374
3 906
159 570
85 576
43 272
12 649
8 982
1 585
1 325
4 102
4 617
162 108
85 576
43 823
12 629
8 982
1 585
1 540
4 830
5 771
164 736
Forecast balance of generation (with reform), million kWh
Type 20162015 2017 2018E 2019E 2020E 2021E 2022E 2023E
NPP
GC TPP
CHPP
HPP
HPSPP
SPP
WEP
Biofuel TPP
Total
87 628
49 386
12 252
5 235
1 574
465
979
148
157 665
80 950
49 902
13 107
7 664
1 634
462
923
175
154 817
85 576
44 960
12 414
8 982
1 585
653
956
287
155 414
85 576
45 854
12 456
8 982
1 585
825
1 830
888
157 997
85 576
44 266
12 362
9 030
1 585
911
2 369
1 805
157 905
85 576
44 443
11 758
9 096
1 744
1 015
2 850
3 167
159 648
85 576
44 317
11 916
9 277
2 006
1 110
3 374
3 906
161 482
85 576
43 216
12 649
9 515
2 767
1 325
4 102
4 617
163 767
85 576
51 422
12 629
9 796
3 370
1 540
4 830
5 771
174 934

Type 2025E2024E 2026E 2027E 2028E 2029E 2030E
NPP
GC TPP
CHPP
HPP
HPSPP
SPP
WEP
Biofuel TPP
Total
85 576
48 060
12 597
8 982
1 585
1 626
5 121
6 925
170 474
85 576
50 252
12 624
8 982
1 585
1 691
5 325
7 398
173 435
85 576
53 146
12 479
8 982
1 585
1 755
5 558
7 546
176 628
85 576
56 214
12 479
8 982
1 585
1 816
5 762
7 694
181 108
85 576
59 515
12 500
8 982
1 585
1 876
5 966
7 990
184 991
82 855
66 206
12 313
8 982
1 585
1 936
6 170
8 286
189 333
82 855
70 577
12 333
8 982
1 585
1 997
6 374
8 582
194 285
Type 2025E2024E 2026E 2027E 2028E 2029E 2030E
NPP
GC TPP
CHPP
HPP
HPSPP
SPP
WEP
Biofuel TPP
Total
85 576
51 364
12 597
10 077
4 132
1 626
5 121
6 925
177 418
91 762
46 167
12 624
10 476
4 472
1 691
5 325
7 398
179 915
91 762
48 476
12 479
10 638
4 630
1 755
5 558
7 546
182 845
91 762
51 227
12 479
10 686
4 630
1 816
5 762
7 694
186 056
97 947
59 349
12 500
10 733
4 630
1 876
5 966
7 990
200 992
95 226
65 698
12 313
10 781
4 630
1 936
6 170
8 286
205 040
95 226
69 483
12 333
10 828
4 630
1 997
6 374
8 582
209 454
uifuture.org

To assess the sufficiency of generating capacities, the volume of the capacity shortage/surplus was
determined to cover the base and peak load.
The capacities with the priority load include capacities of NPP, HPP and HPSPP, RES, calculated in
accordance with the installed capacity utilization factor in 2017. Forecast of the priority load is based on the
growth rate of the gross electricity consumption and average load in 2017-2018.
Availability of a shortage/surplus of the peak capacity was assessed based on the assumption that the
peak load would be covered by the TPP. The peak capacities are calculated by subtracting reserves and
capacities that cannot be utilized in the peak from the installed capacities of the TPP.
It is assumed that without the reform, new capacities of NPP, HPP and HPSPP will not be commissioned
due to lack of sufficient funding.
The calculations made show shortage of the priority capacities of NPP, HPP and HPSPP, RES after 2029.
Available maneuvering capacities will be able to cover both base and peak loads but hereafter, this shortage
is expected to increase and, as a consequence, the lack of generating capacities to cover it.
SUFFICIENCY ASSESSMENT OF GENERATING CAPACITIES
Surplus (-shortage) of base capacity, MW Source:Ukrenergo,UIFcalculations
2.5.
Base load, MWBase capacities, MW

uifuture.org
Source:Ukrenergo,UIFcalculationsSource:Ukrenergo,UIFcalculations
Surplus (-shortage) of peak capacity, MW
Surplus (-shortage) of base capacity, MW
It is expected that the reform will allow generating companies to finance commissioning of new capacities
specified in development plans in full.
The obtained results indicate that there is no shortage of basic capacities in the forecast period due to
construction of new capacities of NPP and HPP.
Base load, MWBase capacities, MW
Capacities of TPP that can be utilized in the peak
Required maneuvering capacities, MW

Maneuvering capacities of TPP will be able to cover the peak loads in full.
In the “single buyer” market model, the wholesale market prices (WMP) are defined as follows:
NPP, HPP and CHPP: the tariff is set by NEURC;
TPP: the price at which Energorynok SE purchases electricity is calculated for each settlement period
(time) in accordance with the wholesale market rules and is mainly formed at the level of the highest
price bid of the power unit involved in the operation. Energorynok SE defines a list of power units that
will operate in the energy system;
RES: the tariff is set at the legislative level (Law of Ukraine on Alternative Energy Sources);
Subsidy certificates: the wholesale market price includes the amounts of compensation for losses from
the electricity supply to the public at a reduced (regulated) tariff imposed by NEURC;
Other payments: excise tax, payments by NEC Ukrenergo, Energorynok SE.
Surplus (-shortage) of peak capacity, MW
FORECAST OF THE WHOLESALE PRICES2.6. Source:Ukrenergo,UIFcalculations
Capacities of TPP that can be utilized in the peak
Required maneuvering capacities, MW

uifuture.org
Mechanism of WMP formation
In the structure of WMP in 2018, the component of tariffs of the electricity producers is about 75%. Another
large component is subsidy certificates, about 20% of WMP.
Mechanism of WMP forecast:
1. Establishing the forecast balance of electricity of the UES of Ukraine.
2. Tariff of NPP, HPP, and CHPP is determined by annual adjustment to the manufacturer price index.
3. Tariff of TPP is determined by adjustment for the forecast of the coal price and the UAH/USD rate.
4. Tariff of RES is fixed at the level of EUR 0.15 per kWh till 2029. After 2029, it is assumed that the tariff of
RES will be equal to the average producer tariff.
5. To determine the average tariff per 1 kWh, the producer tariffs are weighed against their share in the
generation balance.
6. The amount of the subsidy certificates is defined as the share of the subsidies in the weighted average
retail tariff to household consumers (see section 2.10), which is divided into the total consumption and
exports.
7. The amount of the excise tax, payments of Ukrenergo and Energorynok are forecast based on their total
share in WMP – about 6%.
Source: NEURC
Source:NEURC
Planned structure of WMP
by 2018, %
Cost of electricity purchased from
producers (NPP, HPP, CHPP, RES)
Cost of electricity purchased from
producers operating on the price
bids (TPP)
Payments to compensate for the losses
from electricity supply at regulated tariff
(SUBSIDIES)
Excise tax
(2018 – 3.2%)
Payment of NEC Ukrenergo
(dispatching costs)
Payment for services
of Energorynok, SE
WMP
TPP
NPP
HPP
CHPP
RES
Ukrenergo
Excise tax
Subsidies
Energorynok

Source:UIFcalculations
The average growth rate of WMP in 2019-2029 will be 7.0% per year. In 2030, WMP is expected to decrease
by 16.8% due to expiration of the so-called “green tariffs” for the RES electricity producers.
Along with the cost of electricity, the amount of the subsidies will increase, which share in WMP will
increase to 36% by 2030.
WMP forecast, UAH/kWh
WMP forecast, kop./kWh
2019Е2018Е 2020Е 2021Е 2022Е 2023Е 2024Е
Producer tariffs:
NPP
HPP
TPP
CHPP
RES
Shares in generation volumes:
NPP
HPP
TPP
CHPP
RES
Cost of electricity, UAH/kWh
Subsidy certificates, UAH/kWh
Excise tax, Energorynok SE, NEC Ukrenergo
WMP, UAH/kWh excluding VAT
WMP, EUR/MWh
54,5
54,7
180,0
215,0
530,8
54,2%
6,7%
29,0%
7,9%
2,2%
1,14
0,25
0,07
1,56
45,8
59,1
59,3
174,4
233,0
579,2
54,0%
6,7%
28,3%
7,8%
3,2%
1,22
0,28
0,07
1,57
43,3
63,8
64,0
171,0
251,7
609,0
54,4%
6,7%
27,0%
7,5%
4,5%
1,31
0,32
0,08
1,71
44,8
68,6
68,9
166,4
270,6
614,0
53,6%
6,6%
27,0%
7,5%
5,3%
1,39
0,35
0,08
1,82
47,4
73,4
73,7
172,3
289,4
654,1
52,8%
6,5%
26,7%
7,8%
6,2%
1,53
0,39
0,09
2,01
49,2
78,0
78,3
176,7
307,6
681,5
51,9%
6,4%
26,6%
7,7%
7,4%
1,66
0,44
0,10
2,20
51,7
81,9
82,2
179,0
323,0
701,4
50,2%
6,2%
28,2%
7,4%
8,0%
1,77
0,47
0,11
2,34
53,5
Excise tax,
Energorynok SE,
NEC Ukrenergo
Subsidy
certificates
Cost
of electricity

uifuture.org
Structure of the wholesale electricity market as a result of the reform:
on the emerging market/on the stable market
2026Е2025Е 2027Е 2028Е 2029Е 2030Е
Producer tariffs:
NPP
HPP
TPP
CHPP
RES
Shares in generation volumes:
NPP
HPP
TPP
CHPP
RES
Cost of electricity, UAH/kWh
Subsidy certificates, UAH/kWh
Excise tax, Energorynok SE, NEC Ukrenergo
WMP, UAH/kWh excluding VAT
WMP, EUR/MWh
86,0
86,3
184,2
339,1
722,0
49,3%
6,1%
29,0%
7,3%
8,3%
1,86
0,51
0,11
2,48
55,0
90,3
90,6
193,8
356,1
743,1
48,4%
6,0%
30,1%
7,1%
8,4%
1,95
0,56
0,12
2,63
56,6
94,8
95,1
203,9
373,9
764,8
47,5%
5,9%
31,2%
6,9%
8,5%
2,05
0,61
0,12
2,78
58,2
99,5
99,9
214,4
392,6
787,2
46,5%
5,7%
32,3%
6,8%
8,6%
2,16
0,67
0,13
2,96
60,1
104,5
104,9
225,6
412,2
810,4
44,0%
5,6%
35,2%
6,5%
8,7%
2,29
0,74
0,14
3,17
62,5
109,7
110,1
237,3
432,8
183,4
42,9%
5,5%
36,5%
6,4%
8,8%
1,83
0,67
0,14
2,64
50,6
Law of Ukraine on the Electricity Market provides for removal of the Regulator from the pricing process
on the electricity market. That is, the price is formed by the market. Pricing principles will depend on the
market segment.
Bilateral contract
market
Day ahead
market
Intraday market
Balancing market
Ancillary services market
Exchange segment
Market share
up to 10%/40-60%
Market share
up to 90%/35-55%
Market share
up to 3%/5-7%

On the bilateral contract market, direct contracts between consumers (suppliers) and electricity
producers are concluded including long-term price fixing. Bilateral contracts should cover the main volumes
of industrial needs for electricity. An important factor affecting the share of this market segment is the
possibility of hedging the risks of price change and volumes for the long-term. But a significant degree of
unpredictability caused by high macroeconomic risks, high volatility, will be included in the price. We believe
that at the first stage of the market, the price may be linked to the prices in the exchange segment, which
reduces the possibility of hedging but fixes the volume of supplies. Therefore, until achievement of the
macroeconomic stability, the share of this segment will not be high, and the prices will correspond to those
that have emerged in the exchange segment.
The day ahead market and the internal market are regulated (exchanging). These segments shall cover
the short-term needs of the consumers (suppliers) and provide for the market access for those who have not
concluded bilateral contracts. The price of electricity on these markets is determined by the principle of
margin pricing based on the balance of aggregate demand and supply.
On the balancing market participants who have imbalances, buy/sell such imbalances. Price will be
calculated by the transmission system operator (NEC Ukrenergo) in accordance with the approved rules.
Prices on the balancing market will be higher than in other segments. Therefore, participants have incentives
to reduce imbalances and accordingly to limit the share of this market segment.
On the ancillary services market there is no sale and purchase of electricity. There is a purchase of
services to be provided to the transmission system operator including capacity reservation for use on the
balancing market.
Since the share of the exchange segments can take up to 90% at the beginning of formation of new
markets, and the prices on the bilateral contract market will be tied to the exchange prices at the first stage,
the exchange segment will form the price on the market by the principle of margin pricing. But over time, the
share of the bilateral contract market will increase and can reach 40-60% of the market, which will affect
pricing.
Mechanism of marginal pricing on the electricity market
RES
+CHPP
(must
run)
HPP
NPP
TPP
CHPP
Capacity that can be utilized, MW, cumulatively
Price
Capacity requested
by the consumers at a
time
Market (marginal) price

Electricity market reforms in Ukraine. Challenges and opportunities

Electricity market reforms in Ukraine. Challenges and opportunities

Empfohlen

Empfohlen

Weitere ähnliche Inhalte

Was ist angesagt?

Was ist angesagt? (20)

Ähnlich wie Electricity market reforms in Ukraine. Challenges and opportunities

Ähnlich wie Electricity market reforms in Ukraine. Challenges and opportunities (20)

Mehr von UIFuture

Mehr von UIFuture (20)

Kürzlich hochgeladen

Kürzlich hochgeladen (20)

Electricity market reforms in Ukraine. Challenges and opportunities