Spot electricity market during the war: resilience and price stability

On 23 February 2022, 165,666.8 MWh were purchased on Ukraine's spot electricity market - the day-ahead market.

This is the usual average daily volume of electricity trading in this market segment, which suggests that Ukrainian business did not believe that Russia would attack peaceful Ukraine for no reason until 4 am on that terrible Thursday.

"The "market operator", which is responsible for organizing the purchase and sale of electricity on the day-ahead and intraday markets, has been on the so-called "war rails" since the first day of the war.

The IT Department mobilized efforts to counter cyber threats and DoS attacks. Employees of the trading department were put on round-the-clock duty to respond promptly to problems.

Those employees who are not involved in the direct production process voluntarily joined the Armed Forces of Ukraine and the volunteer movement.

The first three days were unstable for the DDRs and GDRs. There was price volatility and a significant decrease in trading volume.

The peak occurred on February 27 - the price index of base-load electricity on DAM in the IPS of Ukraine decreased to 988.76 UAH/MWh, the daily trading volume fell to a record low of 22 thousand MWh.

By coincidence, on February 24, the power system of Ukraine began to operate in an isolated mode from the power system of the occupiers.

NEURC had to react immediately. It was decided to raise the minimum price caps on the DAM and leave the current price caps on the IDM.

This allowed to stabilize the situation on the spot market and support electricity producers in wartime.

The baseload electricity price index on the DAM in the IPS of Ukraine throughout March, except for one day, remained at 2223.82 UAH/MWh.

During the first eight days of March, trading volumes on the day-ahead market were at a relatively high level - the average daily value was 49 thousand MWh.

However, from March 9, trading volumes began to fall and in the period from March 9 to 16 inclusive, the daily average did not exceed 28 thousand MWh.

Since March 17, trading volumes began to gradually increase - an average of 38.2 thousand MWh of electricity was auctioned daily until the end of the month. This, in our opinion, testified to the intensification of business activity.

As a result, the volume of kilowatts traded on the Market Operator's platform in March amounted to 1,243,846.8 MWh.

The business appreciated the advantage of the DAM - to come to sell and receive 100% payment on the same day.

In March, a total of UAH 3.4 billion was transferred to electricity sellers. For buyers, the benefit is different - the opportunity to buy electricity at a transparent price.

The spot electricity market has become many times more surplus than before the war. Therefore, taking into account the synchronization of Ukraine's power system with the ENTSO-E continental European grid, which took place on March 16 and certainly became a historic event for the Ukrainian energy sector, we started working to accelerate market coupling with the EU countries.

Technically, Market Operator has been ready for this for a long time. Our trading platform is close to the mechanism used by the Slovak market operator - OKTE.

The annual trading volume on the DAM and IDM is 50 TWh worth 2.6 billion euros. We work according to European standards, which is confirmed by the international quality certificate ISO 9001:2015. Every day, including weekends, we make 100% payment. And this is our competitive advantage. Therefore, after the official decision to introduce market coupling, we are ready to organize the work as quickly as possible.

Also, some issues need to be resolved at the legislative level. For foreign companies, for example, VAT registration is an obstacle. In Europe, the transfer of all VAT is shifted to the level of the electricity supplier, in our country it is charged by each market participant separately. Our proposal is to harmonize tax legislation with the European one in terms of electricity trade as soon as possible, to resolve the issue of negative prices and price caps.

"Market Operator has received many requests from European companies about their readiness to come and trade electricity in Ukraine. Therefore, we are communicating with the European Commission and the Secretariat of the Energy Community to do our homework together and relatively quickly.

So, while our Armed Forces of Ukraine are bravely defending the right of Ukrainians to freedom and territorial integrity, we have been working 24/7 since the first day of the war to ensure that electricity is available to all critical infrastructure facilities in Ukraine. We are working to bring closer the trade integration of the electricity markets of Ukraine and the EU countries. Nothing weakens the enemy as the unity of the world and faith in the victory over evil.

Glory to Ukraine!