JOINING OF UKRAINE TO THE ENERGY COMMUNITY: CONSEQUENCES AND FACILITIES

Шкіль Н. О., Шевченко Р. О.

Дніпропетровський національний університет імені Олеся Гончара

JOINING OF UKRAINE TO THE ENERGY COMMUNITY: CONSEQUENCES AND FACILITIES

The Energy Community was established in 2006 in order to structure the European electroenergetics and create a common European energy market.

The Energy Community is about investments, economic development, security of energy supply and social stability; but – more than this – the Energy Community is also about solidarity, mutual trust and peace. The very existence of the Energy Community, only ten years after the end of the Balkan conflict, is a success in itself, as it stands as the first common institutional project undertaken by the non-European Union countries of South East Europe [1].

Ukraine’s membership in the Energy Community became an important and, at the same time, the most challenging element of the organization development, due to the lack of significant reforms in the country’s energy sector in the years since it gained independence from the former Soviet Union. As a result of rent-seeking exploitation, it became one of the main sources of oligarchic fortunes, but at the same time remained seriously lacking in investment. Ukrainian economy is highly energy-intensive. Ukrainian gas and electricity sectors, both of which are the main subjects of the Energy Community Treaty are based on an outdated Soviet-era infrastructure. Due to lack of significant reforms on the eve of Ukraine joining the Energy Community, there were very few free market mechanisms. Thus it is hard to imagine Ukrainian economic and political modernization without the prior introduction of transparency and free market principles of its energy sector.

At the same time for the EU perspectives, the Ukrainian natural gas sector is an especially important factor for its own energy security. The country is one of the biggest consumers of natural gas in Europe and an important gas transit player – most of Russia’s natural gas exports to the EU are transported through the Ukrainian gas transportation system (GTS).

Ukraine is also one of the biggest producers of electricity in Europe. Ukraine’s electricity system is partially integrated with the European Network of Transmission System Operators for Electricity (ENTSO-E) through the so-called Burshtyn Island, an isolated network of power station and substations in Burshtyn, western Ukraine.

Nevertheless Ukraine accession of the Energy Community in 2011 created the potential for the country's complex market reforms in the energy sector towards its integration into European energy space. Unfortunately, Ukraine does not use these features properly and taken measures often meet European market principles only in form, not in substance.

Becoming a full member of the Energy Community, Ukraine pledged to implement a number of European directives and regulations in the field of gas and electricity, environment, renewable energy source issues.

Ukraine has taken some steps towards establishing an independent regulator of the energy sector. Until November 2011, the gas and electricity sectors were both regulated by the National Electricity Regulatory Commission of Ukraine. In November 2011, the President of Ukraine signed a decree creating the National Commission on Energy Regulation of Ukraine (NERC). However, there is still no any relevant law regulating the functioning of this institution [2].

On the one hand the European Energy Community should take into account the way, which Ukraine implements European energy legislation. Therefore Ukraine is not a country with a developed and well functioning energy industry. It should also be noted that the energy policy of Ukraine has a great impact from Gazprom (Russia).

On the other hand these factors do not exempt Ukraine from the fulfillment of the conditions, requirements posed by Energy Community.

As it harms not only the image of Ukraine, but also slows the development and restructuring of the energy sector as well as the economy as a whole.

Structural reforms that ensure economic and financial viability of the Ukrainian energy sector will allow Ukraine to attract necessary investment in the energy sector and develop their powerful internal energy. The example of new foreign investors can be Shell company, with which Ukraine signed an agreement in January 2013. The company intends to work to develop renewable sources of energy, namely shale gas.

Implementation of new technologies to the extraction of shale gas should reduce its dependence on gas imports, primarily from Russia. All this makes it possible to avoid effectively disruptions in the supply of energy resources in the Ukrainian market.

Reforming the gas sector, in accordance with the rules of the Energy Community will provide Ukraine access to a large EU gas market, and hence the ability to export to the EU's own gas production.

Dixi Group has made a survey on participation of Ukraine in Energy Community entitled "One Year in the Energy Community: Are We Doing Well?"

According to Dixi Group analysts in oder to change this situation for the better, the following reforms should be made:

· Free access to information relating to the implementation of the commitments undertaken by Ukraine to the Energy Community.

· Define their position in relation to the Third Energy Package.

· Designate a single coordinator responsible for the implementation of obligations in the energy sector.

· Adopt new documents necessary for further reforms and update existing ones the next few months.

The list of references:

1. Official website of the Energy Community [Web resource]. – Access mode: http://www.energy-community.org

2. Igor Lyubachenko Ukraine’s First Year in the Energy Community: Restart Needed [Web resource]. – Access mode: http://www.pism.pl/files/?id_plik=10131

3. Украина в Энергетическом Сообществе: два года в ожидании. Портал про энергосбережение [Web resource]. – Access mode: http://elektrovesti.net/ 22680_ukraina-v-energeticheskom-soobshchestve-dva-goda-v-ozhidanii