Ukrainian Parliament Approves Law to Integrate Energy Market with Europe: Creation of 'Energy Schengen'

The Verkhovna Rada of Ukraine has taken a significant step towards energy market integration by approving Bill No. 12087-d in its second reading and overall. This legislative move aims to unify the electricity markets of Ukraine and Europe, a development that has been described by Andriy Gerus, the head of the parliamentary energy committee, as the creation of an 'Energy Schengen' for Ukraine. This initiative is expected to facilitate the removal of barriers that have historically separated the Ukrainian energy market from its European counterpart.

In discussing the key features of the new law, Gerus emphasized, 'The main innovation of this document is the establishment of an 'Energy Schengen' for Ukraine. We are erasing the borders between our energy market and the European space. This means that market participants will be able to trade freely on a single platform, where prices and access to cross-border networks are determined simultaneously.' This legislative change is designed to streamline the procedures for traders who previously faced a two-tier bureaucratic process: first obtaining the right to cross the border and then searching for a buyer or seller.

Gerus also highlighted the importance of legalizing negative prices, a common practice within the European Union. 'This reflects the real technical logic of modern generation,' he added. He drew a parallel between this new law and the reforms of 2017, which established a modern market model in Ukraine, now set to integrate into the European system.

Under the newly adopted law, Ukraine will be able to export electricity without hindrance in times of surplus and import electricity in times of deficit. 'In Europe, there are negative prices for electricity. We have never had that. Therefore, we want this law to allow cheap electricity from Europe to enter Ukraine,' Gerus noted, indicating a significant shift in energy trading dynamics.

Andriy Zupanin, the deputy head of the committee and a co-author of the bill, assured that the new law would not affect electricity prices for the public. Its goal is to gradually implement uniform rules across markets. 'This law will provide us with EUR 500 million under the Ukraine Facility,' Zupanin emphasized, highlighting the financial implications of the legislation.

He also pointed out that after the law's passage, it will take at least 12 to 18 months for its implementation. Possible dates for market integration have been suggested as January 1, 2028, or January 1, 2029, as several subordinate regulations still need to be adopted. Zupanin added that the law abolishes price caps in the electricity market, which is expected to positively impact the competitiveness of the Ukrainian energy market.

Thus, the adoption of this law marks a crucial step towards integrating Ukraine into the European energy space, opening up new opportunities for the development of the country's energy sector. This legislative change is poised to enhance Ukraine's energy independence and align its market practices with those of the European Union, fostering a more competitive and efficient energy environment.