Igor Mazepa: The main risk of the launch of a new electricity market in Ukraine is a false start

Concorde Capital CEO Igor Mazepa comments possible risks of the launch of a new electricity market in Ukraine

The launch of a new electricity market in Ukraine is planned for July 1, 2019. What are the potential risks?

The discussion on how the infrastructure of the electricity market of Ukraine is unprepared for the introduction of the new electricity market and the need to postpone the date is becoming more active in expert community. Recently, the need to introduce the new electricity market has been addressed by numerous experts, market participants and Ukraine’s international partners who supported the new model.

Ukrainian politicians who are lobbying the new electricity market are doing everything possible for the market to be launched on time on July 1. However, in my view, such an early start can become a false start.

Here are thoughts:

• Introducing the new electricity market without a fully prepared infrastructure and normative base could lead to imbalances which were mentioned by the opponents of the market’s scheduled launch, including such reputable international institutions as the EU, EBRD and World Bank.
• Reputation risks. In case if new electricity is ineffective it will give it a bad reputation. Supported with a communication campaign by the market’s opponents, this reform will begin to frighten the Ukrainians, even more so than the current situation with the opening of the land market. Any perceived dangers will prompt Prime Minister of Ukraine to cancel / postpone the new electricity market’s launch, urgently and indefinitely.
• And in such case there is a risk that a new electricity market will never be launched:
  • It’s quite clear that the idea of a new electricity market is not popular within Volodymyr Zelensky’s team. It’s very probable that his team’s influence widening to the next Parliament will lead to the new market being either entirely canceled or its rules being significantly rewritten for the benefit of the niche’s advocates of the new market (such as DTEK private energy company).
  • We should consider also a strong support of the new electricity market’s advocates (the EU and Ukraine’s other Western partners) who are insisting on its launch. It’s hard for the market’s opponents to argue against the EU or the World Bank. But if the new electricity market is defeated, Ukraine’s foreign partners will be left with very few arguments to demand its launch in the nearest future.