The reform is aimed to enhance Ukraine’s energy security in the following key areas:

• arranging secure supply of electricity and natural gas to consumers; 

• integrating energy markets into European markets; 

• improving the performance and reliability of the Ukrainian unified energy system;

• diversifying sources and routes of energy supply;  

• increasing the production of Ukrainian energy materials where economically feasible;

• developing renewable and low-carbon energy sources and alternative fuels;

• increasing energy efficiency across the production and consumption chains;

• reforming the coal industry of Ukraine.

Why change anything?

Ukraine’s energy security has become particularly important with the beginning of Russia’s hybrid aggression against our country. The Government had to take a brand new approach to energy security under the pressure of economic aggression, continuous blackmailing from Russian state-run corporations and the threat of energy (natural gas, nuclear fuel, crude oil and petroleum products) supply disruption by Russia.

Energy is one of the Ukrainian economy’s strategic sectors whose safe, stable and sustainable functioning and development is vital for the majority of aspects of social life and public welfare. Our energy sector is also important in global terms as Ukraine is a key actor in the energy security process of the whole European continent.

Integrated modernisation and reforming are needed to achieve the goals set by the Energy Strategy of Ukraine to 2035 approved by the Cabinet of Ministers in Order No. 605-р dated 18 August 2017 and the Action Plan approved by the Cabinet of Ministers in Order No. 497-р dated 06 June 2018 and implementing the Energy Sector Reform Stage (to 2020) of the Energy Strategy of Ukraine to 2035 “Security, Energy Efficiency, Competitiveness”, and by other sectoral programmes, with integration into European energy markets being among the most important goals. 

This includes upgrading and construction of overhead power lines and substations, and adopting market mechanisms since it is a highly competitive market. At the same time, low energy efficiency, worn out energy infrastructure, dependence on energy imports are the key issues that require immediate attention.

Ukrainian energy sector has high potential for attracting investment. However, for many years the industry has lacked transparent, competitive and clear market rules, and suffered from monopolies and over-regulation. All these prevented from the evolution and modernisation of the Ukrainian energy sector. The system of cross-subsidies and budgetary appropriations inhibited the rise in retail energy prices, caused huge expenditure of state funding, created unequal conditions, hindered progress, modernisation and introduction of new technologies at fuel and energy facilities.

The energy reform aims to bring national legislation in line with the EU law, norms and standards as required by the Association Agreement between Ukraine and the European Union. Once implemented the EU legislation and standards will help speed up positive transformations in the energy sector. It will also unlock the country’s significant potential in the innovative energy segments such as renewable energy. Together, all these steps will help strengthen the energy independence of our state and improve the quality of domestic consumer services.

The Government’s efforts in the energy sector reform aim to bring the energy to a new, higher level of development, harmonise it with the EU norms and standards, liberalise and form integrated natural gas and electric power markets with the transparent and competitive pricing and adequate consumer protection systems. 

These steps are also designed to optimise the energy balance and enhance economic, energy and environmental security, particularly in the context of external aggression. The main goal of these transformations is to strengthen Ukrainian energy security, meet the fuel and energy needs of the society and economy, and create a solid foundation for the country’s sustainable energy future.

What does the reform include?

• Introduction of efficient energy market rules and mechanisms, demonopolisation and promotion of competition.

• Introduction of competitive conditions to stimulate renewable energy power generation.

• Reforming the Ukrainian coal industry.

• Introduction of an integrated approach to setting energy and environmental policies.

Goals and Objectives 

The reform will be performed by achieving five key strategic goals:

Goal I — to ensure the proper functioning of energy markets

Goal II — to ensure continuous energy supply to consumers

Goal III — to reform the coal industry

Goal IV — to improve energy efficiency

Goal V — to introduce an integrated approach to setting energy and environmental policies

Entities involved in the reform implementation

The Ministry of Energy, the Ministry of Environmental Protection and Natural Resources of Ukraine, the Ministry of Communities and Territories Development of Ukraine, the Ministry of Economic Development, Trade and Agriculture, the Ministry of Finance of Ukraine, the State Service of Geology and Mineral Resources of Ukraine, the State Agency for Energy Efficiency and Energy Saving of Ukraine, the National Commission for State Regulation of Energy and Public Utilities, Naftogaz of Ukraine NJSC, National Nuclear Energy Generating Company “Energoatom”, National Energy Company “Ukrenergo”, Ukrhydroenergo PJSC, the Reforms Office of the Cabinet of Ministers of Ukraine

Key documents and useful links

The Energy Strategy of Ukraine to 2035 “Security, Energy Efficiency, Competitiveness”

The Cabinet of Ministers Activity Plan