THE FUNCTIONING MECHANISMS OF THE LONG-TERM ELECTRICITY MARKET IN UKRAINE

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THE FUNCTIONING MECHANISMS OF THE LONG-TERM ELECTRICITY MARKET IN UKRAINE

Journal Title: Науковий погляд: економіка та управління - Year 2018, Vol 2, Issue 60

Abstract

Today, Ukraine’s electricity market liberalisation is seen in the context of transition from a single buyer model to a free competitive market model with four time segments: long-term as a over-the-counter market, a spot market for the day ahead and a intraday markets, and a balancing market. Only the over-the-counter market is recognized as the unorganized market segment, where buyers and sellers of electricity will interact with each other directly, concluding relevant contracts, the content of which is known only to the contra parties, and the transmission system operator will receive only data on the contracted electricity volumes. Consequently, the wholesale electricity market design has significant methodological mistake, which was arose over the confusion of temporal boundaries and forms of electricity trading. So, if the day ahead, intraday and balancing markets are market segments separated by the time-frame borders, then the over-the-counter market reflects the form of electricity trading. Consequently, the high concentration in Ukraine’s power generation, Ukraine’s relative isolation from European electricity markets, and the introduction of a over-the-counter market as a single form of long-term electricity trading can lead to negative consequences, which will be expressed in accelerated growth and price manipulation of electricity for the end-consumer. At the same time, there are several forms of long-term electricity trading in the world and in particular in the EU: the over-the-counter market, the organized over-the-counter market and the exchange trading. At the same time, the most liquid national long-term electricity markets are to the last form with the dominant tendency to reduce the share of unorganized over-thecounter trading. Based on these drivers, the article proposes to create a long-term exchange electricity market, which provides for trading in financial electricity derivatives with the possibility to convert them into forward contracts with physical electricity delivery on an exchange basis. That's why the purchase and sale of electricity must present a multistep process of exchange of financial and physical electricity. The organization of a longterm exchange electricity market in Ukraine will allow market participants to hedge the long-term and shortterm risks of electricity trading from 2 years to 2 days before physical delivery, helping to increase the liquidity of electricity trading.

Authors and Affiliations

Т. І. Salashenko

Keywords

EP ID EP450020
DOI 10.32836/2521-666X/2018-2-60-7
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