UAFP Policy Brief: «Draft Law on the Integration of Energy Markets Positive Aspects vs Potential Loopholes»
Energy and Climate
Following the synchronisation of the Ukrainian power system with the European one in March 2022, there remains a need to integrate commercial electricity markets as well, i.e., to implement market coupling. This approach should enable the free cross-border flow of electricity, supporting efficient resource allocation and robust price formation.
The Verkhovna Rada is currently in the process of drafting the relevant document – the Draft Law «On Amendments to Certain Laws of Ukraine Concerning the Implementation of European Law on Energy Market Integration, Enhancement of Security of Supply and Competitiveness in the Energy Sector» (No. 12087-d).
Analysts at the Ukraine Facility Platform have reviewed the draft law, highlighting its positive aspects and potential «loopholes» that create risks.
The draft law provides for:
- the transition to a 15-minute imbalance settlement period,
- partial regulation of negative prices,
- harmonisation of balancing products with European standards,
- the introduction of a legal basis for citizen energy communities,
- the streamlining of capacity mechanisms.
In this format, it can support integration with the European market and strengthen investment signals provided that exceptional instruments remain genuinely exceptional, time-limited, and transparently justified.
At the same time, the draft contains several gaps requiring revision:
1.The procedure for introducing the 15-minute imbalance settlement period is reduced to a two-stage process – regulator’s assessment –> separate regulatory decision – with no fixed deadline, creating a risk of delayed implementation.
2.Provisions on price caps formally unlock the possibility of negative prices, yet this is not reflected in the articles governing price formation for balancing energy and imbalance pricing. The absence of explicit authorisation generates regulatory uncertainty.
3.The use of specific balancing products is not limited in duration and is not subject to mandatory periodic review of their relevance, which risks «freezing» exceptional measures instead of returning to standard approaches.
4.The draft law includes numerous transitional provisions which, often without time limits, effectively alter the legal framework set out in the main body of the law. This primarily concerns the regulation of public service obligations (PSOs) and the regulator’s power to impose price caps in the electricity market.
These shortcomings do not negate the positive progress made, yet they require precise editorial improvements to ensure compatibility with European practice, consistency of regulatory signals, and predictability for market participants.
If the identified distortions are not corrected and the «transitional norms» in the temporary provisions are not narrowed or repealed, the risks of constrained competition and distorted price signals will grow. This would slow investment in flexibility, storage, and network digitalisation, and ultimately delay full integration with the EU market.
To avoid a gap between the declared harmonisation and continued «manual» regulation – which would undermine partner confidence – it is crucial to ensure that all exceptions (PSOs, price caps, specific products) are narrowly defined in scope, strictly time-limited, and governed by transparent criteria for activation, deactivation, and regular review.
The full Policy Brief: «Draft Law on the Integration of Energy Markets Positive Aspects vs Potential Loopholes» is available in both English and Ukrainian:
