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Energy independence of Ukraine: achievements and prospects

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  • V. Lir

Abstract

The article provides a retrospective analysis of market transformations in Ukraine's energy sector in terms of efficiency of creating competitive commodity markets. The author identifies the basic factors causing structural changes of this country's energy balance during 1991-2016, among which the following ones would be emphasized: separation of the state's energy system from the centrally-planned single energy system; the uneven decline and increase in the output in individual sectors causing an uneven demand for energy resources; inconsistency of the reforms on individual energy markets and the consequent imbalances in the logistic pattern of the national energy supply (energy, financial and information flows). The analysis the structural and price disruptions in Ukraine's energy balance shows that, at present, the market mechanism does not ensure the optimum allocation of resources. This situation is the result of the different approaches to the formation of competitive structure of the energy markets and market pricing mechanism. The initial boost in the market reforms towards liberalization was eventually changed to the concentration of national assets that in the end retained the state-monopoly structure, even on the potentially competitive, by their nature, energy markets. Market deviations already at the stage of formation distort the objectives and effectiveness of their operation, which devalues the effect of the transfer of ownership. The privatization of energy assets has failed to create preconditions for the formation of a competitive structure of the market of natural energy monopolies and led to the consolidation of the market power of the energy monopolies. The author considers the structural changes in the energy balance and the dynamics of prices for fuel and energy resources (FER) and makes a comparative analysis of Ukraine with European countries by major energy efficiency indicators, showing the differences between Ukraine's structural and technological characteristics with the corresponding average rates. There is a dynamics of the basic indicators of this country's fuel and energy complex in the context of the use of the available resource potential. The author gives an assessment of the achieved level of energy security and sustainability of energy situation compared to other countries. By the results of the international ranking of energy sustainability, Ukraine occupies one of the lowest positions among the industrial countries. A factor analysis of energy efficiency policy urges for enhancing the improvement of the institutional mechanisms of the modernization of energy systems based on European experience. Energy efficiency is one of the key elements in the competitiveness of Ukrainian goods and services and an important factor of economic growth in Ukraine. The article deals with the key issues in Ukraine's European integration in the energy sector, in particular as to the requirements of the Second and Third EU Energy Packages. The verification of the process of Ukraine's European integration in the energy sector shows that our country shares and accepts the European principles, objectives and criteria for sustainable energy development, but does not apply European methods of task solution, in particular as regards the transparency of the policy measures, consensus of all stakeholders, mechanisms of planning and forecasting (modern decision support systems and risk management, energy foresight, and technology platforms), responsibility for delays in plan fulfilment and poor management, weak coordination between state authorities (duplication), social activation of the energy policy (public involvement) and others. The article outlines the prospects of achieving the maximum possible energy independence of Ukraine. Current challenges for this country's energy policy are derived both from the specific features in the transformation of the energy sector and branch structure of the economy, and from the global geopolitical and economic trends on the world energy market, which over the last decade have changed significantly. Ukraine's response the same as that of most industrialized countries consists in reviewing the national energy strategy, whose main provisions are currently under discussion among experts.

Suggested Citation

  • V. Lir, 2016. "Energy independence of Ukraine: achievements and prospects," Economy and Forecasting, Valeriy Heyets, issue 2, pages 107-128.
  • Handle: RePEc:eip:journl:y:2016:i:2:p:107-128
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