Ukraine is introducing long-term electricity contracts for businesses
Ukrainian businesses will be able to lock in electricity prices in advance for a quarter, half a year, or a year, which will help reduce their dependence on sharp market fluctuations. The government has decided to launch a mechanism for long-term contracts in the electricity market, Yulia Svyrydenko reported:
Non-residential consumers will be able to purchase electricity under fixed terms for an extended period through transparent, competitive auctions. The first auctions are expected to take place in the near future. For the pilot launch, 4% of the generation capacity of state-owned power producers—Energoatom and Ukrhydroenergo—will be made available: 2% through quarterly contracts, 1% through semi-annual contracts, and another 1% through annual contracts.
What will this change in practice?
Today, electricity consumers depend on the short-term day-ahead market, where prices can fluctuate significantly. In winter, prices rise due to high demand, while they fall in the spring and summer months. The new mechanism makes it possible to lock in prices and supply volumes in advance, as well as to plan expenses, investments, and production. For electricity producers, this also means predictable revenues, clear operating conditions, and protection against price drops during months of surplus.
Such long-term contracts are standard practice in EU countries. They help attract financing for new energy projects, as banks are more willing to provide loans when there is a guaranteed buyer and a clear price for the future.
Nothing changes for residential consumers. The decision applies to the commercial segment of the electricity market.
It will make the market more predictable and help energy companies attract investment and build new capacity, the prime minister explains on Facebook.
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