On 23 April 2026, Ukraine enacted Law No. 4834-IX “On Amendments to Certain Laws of Ukraine Regarding the Implementation of European Union Law for the Integration of Energy Markets, Enhancement of Security of Supply, and Competitiveness in the Energy Sector”, which advances the market coupling of the Ukrainian electricity market with Europe and aligns domestic legislation with EU energy acquis.
The Law introduces fundamental amendments to the Electricity Market Law No. 2019-VIII dated 13 April 2017 and related legislation to transpose and enforce key EU instruments, including Directive (EU) 2019/944 and Regulation (EU) 2019/943.
Key Aspects of the Law
The Law transforms the structural and operational design of Ukraine’s electricity market in preparation for market coupling with European systems while preserving the core institutional architecture of the national energy sector.
Picture 1 below illustrates the key aspects of the Law (available at the link in Ukrainian).
Picture 1. The key aspects of the Law.
Below is a summary of the main points introduced by the Law.
- Electricity market coupling with the EU is created, laying the groundwork for Ukraine’s participation in pan-European trading platforms:
- legal mechanisms for participation in the Single Day-Ahead Coupling (SDAC) and Single Intraday Coupling (SIDC) have been introduced;
- a framework for Nominated Electricity Market Operator (NEMO) appointment and passportisation of foreign NEMOs has been established;
- participation in ENTSO-E’s coordinated balancing platforms has been enabled; and
- market operations will be conducted in Central European Time (CET).
- Long-term transmission rights (LTTRs) have been reformed, introducing financial transmission rights (both option-based and obligation-based) alongside physical transmission rights, enabling market participants to hedge cross-border price risks.
- Redispatching has been introduced as a preventive tool for network overload management, allowing the transmission system operator (TSO) to provide D-1 recommendations to market participants on adjusting schedules and trading strategies.
- Tariffs and fees calculation approaches have been updated:
- network tariffs for battery energy storage system (BESS) operators have been clarified, with a transitional preferential regime until 30 April 2037 for early projects and pumped storage facilities commissioned from 1 January 2026; and
- the transmission tariff framework has been expanded to include costs related to ENTSO-E interaction, cross-zonal capacity calculation, and participation in European balancing platforms by 1 January 2030.
- Competitive tenders for new generation capacity may now include geographic criteria, and from 1 May 2027 support mechanisms will be restricted to capacity-deficient areas identified by the TSO.
- Market access for citizens and communities has been broadened:
- energy communities have been established as a legal form, enabling citizens, local governments, and SMEs to engage collectively in energy generation, distribution, and supply from renewable sources;
- aggregators have been granted non-discriminatory access to all electricity market segments, enabling households and small-scale producers to participate effectively in trading; and
- active consumers are safeguarded with guaranteed fair remuneration, transparent connection procedures, and non-discriminatory market access for those who both consume and produce electricity.
- Smart meters deployment has been mandated with a target of 80% coverage for consumers where economically viable, subject to an economic feasibility assessment.
- New balancing instruments:
- Flexibility services have been formally introduced, enabling distribution system operators to procure services to balance supply and demand and accommodate variable renewable generation.
- Balancing capacity services have been introduced as an additional tool for the TSO in frequency regulation to be provided under standardised contracts developed by the National Energy and Utilities Regulatory Commission (NEURC).
- Strengthening international cooperation:
- The TSO’s role in European cooperation has been strengthened with explicit authorisation to engage in cross-border balancing, reserve sharing, and ENTSO-E governance structures.
- Ukraine’s participation in the Agency for the Cooperation of Energy Regulators (ACER) and regional coordination platforms has been formalised, ensuring full integration into European energy governance.
Detailed Overview
Coupling of Ukrainian Electricity Markets with the European Ones
The Law lays the essential legal groundwork for the integration of Ukraine’s key electricity market segments, including the Day-Ahead Market (DAM), Intraday Market (IDM) and balancing market, with those of the EU.
Market coupling is a mechanism for integrating electricity markets across borders whereby cross-border transmission capacity is allocated implicitly through the matching of buy and sell orders in coupled day-ahead markets. In practice, this means that electricity flows automatically from lower-price zones to higher-price zones, optimising the use of interconnectors and leading to price convergence between markets.
Electricity market coupling in Ukraine forms part of the broader integration of the Ukrainian power system into the European energy market, following its synchronisation with the continental European grid operated by the European Network of Transmission System Operators for Electricity (ENTSO-E) in March 2022. Since then, Ukraine has been working to align its market rules with EU legislation.
Picture 2 below illustrates the key aspects of the market coupling introduced by the Law.
Picture 2. The key aspects of market coupling.
Below is a summary of the main points introduced by the Law.
- the integration of DAM and IDM with EU systems through SDAC and SIDC;
- the introduction of negative prices to manage surplus production;
- the framework for NEMO appointment and passportisation of foreign NEMOs;
- balancing market integration with ENTSO-E platforms and the transition to 15-minute settlement periods;
- the shift to Central European Time for market operations;
- the prohibition of price caps in coupled markets with temporary emergency provisions; and
- the implementation timeline, including regulatory milestones over the next two years.
DAM and IDM Coupling
Regarding DAM and IDM, the Law introduces mechanisms for Ukraine’s participation in the SDAC and the SIDC, which are already operational in most EU member states.
Following expert discussion, the Law removed the two-session trading model for the DAM (made up of external and internal sessions) proposed during the first reading.
As a result, the coupled markets will be operating based on the following principles:
- DAM and IDM trading will be carried out solely within the coupled market;
- day-ahead and intraday interzonal capacity is designed to be allocated implicitly through the market process rather than through separate explicit auctions.
Trading of electricity within SDAC and SIDC is carried out in accordance with the trading rules of the relevant NEMO. Such rules must be published in advance on the NEMO’s website and must comply with applicable pan-European and regional rules, and with the national regulatory framework governing the electricity market.
The operation of SDAC and SIDC is ensured by the NEMOs on the basis of a multilateral cooperation agreement between the NEMOs and the TSO. This cooperation agreement will be prepared jointly by the TSO and the NEMOs and approved by the NEURC.
Temporary DAM Trading Sessions
To facilitate a smooth transition to the market coupling, the NEURC is authorised to introduce a temporary additional DAM trading session with the following characteristics:
- it may be implemented for a period of up to three months from the launch of market coupling and will be conducted by the market operator within Ukrainian bidding zones in accordance with DAM rules;
- it must close no later than one hour before the closure of the coupled DAM session;
- during this session, the Market Operator may apply technical price caps that can be no lower than the technical price limits.
Expected Impact: For traders and generators, Ukraine’s participation in SDAC and SIDC opens access to a larger more liquid European market, enabling cross-border arbitrage opportunities and improved price discovery. Investors benefit from greater market transparency and the potential for higher trading volumes while generators gain new export routes for their electricity. Foreign market participants can now access Ukrainian generation capacity, creating new commercial partnerships and investment opportunities.
Introduction of Negative Prices
The Law marks the first steps toward introducing negative prices in Ukraine’s DAM and IDM.
Trading at negative prices means that the buyer is paid for purchasing electricity during periods of production surplus. In practice, generators (i.e. sellers) may be required to pay a fee to electricity offtakers (i.e. buyers) to incentivise increased consumption during periods of oversupply, while the buyer acquires electricity at a minimal price. This negative pricing mechanism encourages higher electricity consumption during specific periods and may also promote the use of energy storage facilities.
Although the detailed procedure is expected to be defined in the by-laws, this development signals Ukraine’s shift from a curtailment approach toward market-based demand management mechanisms.
Expected Impact: For generators with renewable assets, negative prices create new revenue management considerations but also reduce the risk of curtailment. Battery storage operators and demand response providers stand to benefit significantly, as negative price periods create arbitrage opportunities for flexible assets. Investors evaluating storage and demand-side projects will find improved business cases since the economic value of flexibility is now explicitly recognised in market price signals.
NEMO Appointment
The Law lays the foundation for the appointment of Ukraine’s Nominated Electricity Market Operator (NEMO) and for granting access to the local market to NEMOs operating in the electricity markets of EU member states and Energy Community Contracting Parties.
A NEMO may be either:
- a legal entity holding a licence to perform the functions of a market operator or an organised commodity market operator in Ukraine; or
- a NEMO designated in an EU member state and/or a Contracting Party to the Energy Community, subject to successful certification (i.e. “passportisation”) in Ukraine.
To ensure independence and avoid conflicts of interest, a NEMO must comply with applicable unbundling and independence requirements and is generally restricted from engaging directly in electricity generation, transmission, distribution, storage, aggregation, supply to end consumers or trading activities.
The appointment of a NEMO will be carried out by the NEURC in accordance with the procedure established separately by it.
The Law requires that foreign NEMOs wishing to operate in Ukraine notify the NEURC of their intention to operate in the single DAM and IDM in Ukraine no later than two months in advance. The NEURC must then decide on approving the NEMO (i.e. “passportisation”). The Law sets out an exhaustive list of grounds for refusal, such as the following:
- if technical constraints exist that prevent the delivery of electricity traded on the coupled markets by NEMOs designated in EU Member States and/or Energy Community Contracting Parties, and such refusal is necessary to ensure the reliable operation of the Ukrainian power system;
- if the trading rules applied by the NEMO are inconsistent with Ukrainian legislation governing trading on the coupled day-ahead or intraday markets;
- if the NEMO holds a legally established monopoly in the EU member state or Energy Community Contracting Party where it is designated;
- if the NEMO fails to demonstrate that it has been duly designated by the competent authority of an EU member state or Energy Community Contracting Party.
Expected Impact: For traders and generators, the entry of multiple NEMOs increases competition among trading platforms, potentially lowering transaction costs and improving execution quality. Foreign trading firms and energy companies can now access the Ukrainian market through familiar European platforms, reducing barriers to entry. Investors benefit from enhanced market credibility and liquidity while Ukrainian market participants gain access to cross-border trading opportunities on equal terms with their European counterparts.
Balancing Market Coupling
Regarding the balancing market, the Law paves the way for Ukraine’s participation in ENTSO-E’s coordinated balancing platforms, including the International Grid Control Cooperation and the Trans-European Replacement Reserves Exchange. It harmonises domestic regulations with the European Electricity Balancing Guideline, thereby enabling real-time coordination of electricity flows and the cross-border sharing of reserves. This integration is expected to strengthen operational security, enhance the efficiency of balancing service procurement, and reduce overall system costs.
To facilitate integration of the balancing market, the Law addresses one of the most challenging aspects – the shift towards a 15-minute imbalance settlement period:
- the NEURC, within six months from the date of the Law’s entry into force, together with the TSO will assess the timeline for the implementation of a 15-minute imbalance settlement period and approve the results of such assessment; and
- within six months from the approval of the assessment results, the NEURC will adopt a decision on the date of transition to the 15-minute imbalance settlement period.
Expected Impact: For generators and traders, participation in ENTSO-E balancing platforms creates new revenue streams through the provision of balancing services to a broader market. The transition to 15-minute settlement periods will require operational adjustments but enables more granular trading and improved portfolio optimisation. Investors in flexible generation and storage assets will benefit from increased demand for fast-ramping capacity while traders can exploit shorter-term price differentials across coupled markets.
Market Operation under CET
A smaller but important change is that the market will operate in CET with seasonal clock changes. This will be relevant for scheduling, metering, balancing and contract settlement alignment with European market processes.
Expected Impact: For traders and generators, CET alignment simplifies cross-border scheduling and reduces the administrative burden of operating across multiple time zones. This enables real-time coordination with European counterparties and eliminates timing mismatches in contract settlement and metering. Market participants can now use standardised European trading hours, improving operational efficiency and reducing the risk of scheduling errors in cross-border transactions.
Price Caps
To ensure the approximation of market conditions in the coupled markets, the Law provides for the removal of administrative price caps in coupled markets, subject to limited exceptions for SDAC and SIDC trading as well as the balancing market.
At the same time, the Law allows for a similar mechanism of “technical price limitations”:
- Ukraine’s NEMO may set maximum and minimum “technical price limitations” in coordination with NEMOs operating in coupled markets; and
- Ukraine’s TSO may set maximum and minimum “technical price limitations” for balancing electricity in coordination with TSOs operating in coupled markets.
These limitations should not unreasonably impede electricity trading.
In addition, on a temporary basis until the market coupling and during the period of an emergency regime in the Integrated Power System of Ukraine, the NEURC may set price caps on the day-ahead market, intraday market and balancing market for each bidding zone.
Such price caps will be subject to the following requirements:
- price caps may be introduced for the duration of the emergency regime, but for no longer than 90 days;
- price caps must be duly justified;
- when setting price caps, the NEURC must take into account price levels on neighbouring European spot markets;
- the caps must be designed to minimise interference with market-based price formation and not restrict the ability to carry out cross-border commercial imports and exports of electricity.
Expected Impact: For traders and generators, the prohibition of price caps in coupled markets ensures that prices can fully reflect supply and demand fundamentals, enabling effective hedging strategies and accurate price forecasting. Investors benefit from improved price signals that support long-term investment decisions. During emergency periods, the temporary cap mechanism provides a safety valve against extreme volatility that protects market participants from exceptional price spikes while preserving the integrity of market-based trading under normal conditions.
Timing for Market Coupling Implementation
Importantly, the adoption of the Law represents only the first step toward market coupling with the EU energy system. Ukraine will subsequently be required to undertake substantial regulatory and technical work.
Table 1 below demonstrates the expected steps the stakeholders have to take to implement market coupling.
Expected Impact: The detailed implementation timeline provides the certainty needed to plan capital expenditure, secure financing, and develop trading capabilities ahead of market coupling. Project developers can align construction schedules with regulatory milestones, while trading firms can prepare their systems and personnel for the new market structure. The clear deadlines reduce regulatory risk and enable more accurate business planning for market entry or expansion.
Long-Term Transmission Rights
The Law broadens the definition of long-term transmission rights (LTTRs) by introducing the concept of financial transmission rights.
LTTRs will now be defined as either physical transmission rights or financial transmission rights (either option-based or obligation-based) allocated through long-term cross-zonal capacity allocation mechanisms.
The Law introduces two types of financial transmission rights:
- financial transmission rights with obligation – entitling the holder to receive (or obliging it to pay) a financial settlement based on day-ahead price differentials between two bidding zones over a specified period and direction; and
- financial transmission rights with option – entitling the holder to receive a financial settlement based on such price differentials, without a corresponding payment obligation.
The Law also provides that physical and financial transmission rights may not be allocated simultaneously for the same interconnection, ensuring that different allocation models are not applied concurrently to the same interconnection.
Expected Impact: For traders and generators, financial transmission rights provide essential hedging tools to manage cross-border price risk and lock in margins on export or import positions. Investors benefit from a more sophisticated market structure that supports portfolio optimisation and risk-adjusted returns. The availability of both option-based and obligation-based instruments gives market participants flexibility in structuring their hedging strategies according to their risk appetite and trading objectives.
Redispatching
The Law introduces the concept of “redispatching”. Redispatching is considered a tool for the preventive management of network overloads, allowing the TSO to identify potential network constraints on a D-1 basis and, where applicable, require or incentivise adjustments to market participants’ schedules on the DAM and the IDM.
The implementation of the redispatching mechanism should minimise the need for the TSO’s dispatching commands on trading day D itself and reduce the amount of electricity needed for balancing.
The Law requires redispatching:
- to be carried out on objective, transparent, and non-discriminatory terms;
- to allow for the participation of all relevant technologies, including those located in EU member states and/or Contracting Parties to the Energy Community, where technically feasible;
- selection of facilities subject to redispatching is to be conducted through market-based mechanisms and in accordance with settlement procedures established by the NEURC;
- non-market-based redispatching is permitted only in exceptional cases, which are exhaustively defined by the Law.
To implement redispatching, the NEURC will have to amend the market rules.
Expected Impact: For generators and traders, the redispatching mechanism provides advance notice of potential network constraints, enabling proactive adjustment of trading positions before the delivery day. This reduces exposure to real-time imbalance costs and improves the predictability of dispatch outcomes. Investors in generation projects benefit from a more transparent congestion management regime that aligns with EU practices, reducing regulatory risk and supporting more accurate revenue forecasting.
Tariffs and Fees Calculations
Network Fees for BESS Operators
The Law introduces significant amendments to the regulation of BESS, further clarifying how transmission, distribution, and dispatching tariffs apply, and introducing transitional incentives for early projects.
Until 1 May 2027, a simplified model for BESS operators applies:
- tariffs are calculated based on the net difference between electricity withdrawn and injected;
- only flows at the grid connection point are taken into account.
Picture 3 below illustrates the net difference approach to calculating network fees.
Picture 3. Net difference approach to calculating network fees.
After 1 May 2027, two regimes will apply:
- general; and
- transitional (for qualifying facilities).
General Regime
Under the general rules, BESS operators will be required to pay for transmission, distribution and dispatch services based on tariffs approved by the regulator.
A key principle of the new framework is that tariffs must be:
- calculated separately for electricity injected into and withdrawn from the grid;
- cost-reflective and non-discriminatory;
- designed to incentivise efficient system operation, including the use of storage for balancing and flexibility services; and
- avoidance of double charging, particularly where storage facilities consume electricity for their own needs or provide ancillary or flexibility services.
The NEURC is expressly empowered to structure tariffs based on the net energy position of storage facilities, namely the absolute difference between monthly electricity intake and output.
Transitional Regime
A preferential tariff regime applies until 30 April 2037 for certain projects, including:
- storage facilities commissioned by 30 April 2027;
- pumped storage facilities (for new-build units commissioned from 1 January 2026); and
- projects commissioned by 30 April 2028, provided they had key development rights (e.g. grid connection conditions, land rights, construction permits) in place as of 30 April 2027.
For these projects, tariffs will continue to be calculated based on the net monthly energy balance under the regulatory framework applicable as of April 2027.
Eligible operators may opt into the new tariff regime at any time from 1 May 2027.
The amendments apply only to BESS operators (i.e. market participants registered with such status) and do not apply to generators with co-located BESS. The latter should still be charged network fees based on the net difference between electricity withdrawn and injected as recently introduced by Law of Ukraine No. 4777-IX. Parliament, however, may in future unify the rules by extending the new procedure to all market participants installing BESS.
Expected Impact: For investors in battery storage projects, the new framework introduces a degree of regulatory uncertainty regarding the final tariff methodology, as the previous guaranteed “net difference” approach is replaced with a more discretionary regime. The transitional preferential regime running until 30 April 2037, however, provides a form of grandfathering protection for early-mover projects, creating a window of opportunity for storage developers to secure favourable economics.
Investors evaluating new hybrid or standalone storage projects should closely monitor the NEURC's forthcoming tariff methodology as project economics will depend heavily on the calculation approach adopted. The Law's general principles – designed to incentivise BESS projects and avoid double charging – provide grounds for optimism that the final methodology will remain investor-friendly.
Amendments to the Electricity Transmission Tariff
The Law provides that by 1 January 2030 the electricity transmission tariff will also include costs related to:
- the TSO’s interaction with the regional coordination centre and ENTSO-E;
- coordinated cross-zonal capacity calculation; and
- connection to and participation in European balancing platforms or costs incurred by the TSO in connection with its participation in market coupling, provided such costs are recognised by the NEURC as justified.
Expected Impact: This provision is significant as it establishes a transparent and predictable funding mechanism for Ukraine’s integration into the European electricity system. By expressly allowing these costs to be recovered through the transmission tariff, the Law ensures that the TSO has the financial resources necessary to participate effectively in cross-border cooperation, regional coordination and market coupling activities. This cost recovery framework is essential for enabling the technical and institutional investments required for full integration with the EU internal energy market.
Tenders for New Construction of Generation Facilities
Ukraine has introduced targeted amendments to the rules governing competitive selection of generation projects and narrowing the scope of support mechanisms. The latter procedure provides remuneration for investors constructing generation capacities with the technical parameters specified by the government. (Capacity has been set between 3 and 80 MW with a range of 80% and activation timing up to 15 minutes).
The Law clarifies that the selection criteria for competitive tenders (used to award support) may include geographical elements, allowing the designation of specific regions for the construction of power generation facilities. This enables the authorities to steer investments toward priority locations.
From 1 May 2027, such mechanisms will be used exclusively in areas identified by the TSO as capacity-deficient in its resource adequacy reports.
Expected Impact: For generators and investors, geographic targeting of competitive tenders means that project siting decisions must now factor in TSO resource adequacy assessments. Projects located in capacity-deficient areas may benefit from preferential access to support mechanisms while developments in well-supplied regions may face reduced revenue support from 1 May 2027. This creates a clearer investment signal for new generation capacity and rewards developers who align project locations with system needs.
Market Access for Citizens and Communities
Establishment of Energy Communities
The Law also paves the way for energy communities – legal entities established by citizens, local governments or small and medium-sized enterprises to engage collectively in energy generation, distribution and supply, especially from renewable energy sources. Energy communities prioritise social and environmental benefits over profit and have the potential to foster local ownership of energy resources. To achieve these objectives, energy communities are granted specific rights, as outlined in Picture 4 below of fundamental rights of energy communities.
Picture 4. Fundamental rights of energy communities.
By establishing a legal framework for energy communities, the Law opens the electricity market to cooperative locally rooted actors. The concept of energy communities is firmly embedded in EU law through the Clean Energy for All Europeans Package, specifically the Renewable Energy Directive II and the Internal Electricity Market Directive.
Across the EU, energy communities have become a proven instrument for mobilising citizens, strengthening public acceptance of renewable projects, and attracting private investment. Successful examples, such as Germany’s electricity cooperatives (Strom-Genossenschaften of which there are 1,700 communities) and Denmark’s community-owned wind farms (52% of the country’s installed wind capacity was controlled through a citizen ownership model in 2016) demonstrate how local participation accelerates the green transition while ensuring fair distribution of benefits.
Aligning with this EU practice represents a significant step toward enhanced citizen participation, sustainable growth and long-term resilience of Ukraine’s energy sector.
Expected Impact: For investors, the energy community framework opens a new market segment for renewable project development at the local level, potentially in partnership with municipalities and citizen groups. Renewable energy developers may find new offtake opportunities and community co-investment models. For larger generators and traders, energy communities represent both potential competitors in distributed generation and potential customers for aggregation and balancing services.
Legal Framework for Aggregation and Aggregators
The Law enhances the legal framework for the functioning of aggregators, which consolidate the supply or demand of multiple electricity users, in the Ukrainian energy market. This marks a crucial step toward modernising market dynamics. Specifically, the Law allows aggregators to access all segments of the electricity market on equal terms with traditional market participants. This ensures non-discriminatory participation and contributes to the overall decentralisation and democratisation of electricity trading in Ukraine, consistent with Directive (EU) 2019/944.
The aggregation mechanism plays a crucial role in maximising the value of electricity generated by prosumers and optimising grid load management. By developing market mechanisms such as aggregation, the legislation enables more actors, including households and small-scale producers, to interact with the energy market, ensuring more efficient balancing and system services.
Expected Impact: For traders and aggregation service providers, non-discriminatory market access enables the development of new business models based on pooling distributed generation, demand response, and prosumer flexibility. Investors in aggregation platforms and related technologies benefit from a clearer regulatory pathway. Generators may face increased competition from aggregated distributed resources but can also explore partnerships with aggregators to optimise their own portfolio flexibility.
Empowering Active Consumers
The legislation safeguards the rights of active consumers (i.e. individuals or legal entities that both consume and produce electricity). These electricity market participants can install distributed generation assets (e.g. rooftop solar panels) and engage in the market by selling surplus electricity or providing demand response services.
The Law guarantees active consumers fair remuneration, transparent connection procedures, and non-discriminatory access to market participation. The promotion of active consumption contributes to alleviating peak loads, promoting decentralisation and broader public engagement in the energy transition.
Expected Impact: For investors in distributed generation (particularly rooftop solar) the legal protections for active consumers reduce regulatory risk and improve project bankability. Aggregators can build customer bases among prosumers confident in their market access rights. Generators may face increased competition from distributed resources but can also explore retail supply models that serve active consumers. The guaranteed fair remuneration framework provides a foundation for prosumer-focused business models.
Implementation of Smart Meters in Ukraine
The Law introduces a legal framework for the deployment of smart meters and advanced metering systems in Ukraine. Smart meters are digital devices that record electricity consumption in real time and enable two-way communication between consumers and grid operators, replacing traditional analogue meters that require manual reading.
Under the new framework, the rollout of smart meters is subject to a prior economic feasibility assessment by the Ministry of Energy of Ukraine. Where this assessment is positive, the responsible ministry must approve a deployment schedule targeting installation for at least 80% of consumers for whom smart metering is economically viable, aligning with EU Directive (EU) 2019/944. The TSO, distribution system operators and other designated parties will be responsible for the actual deployment while the NEURC will establish technical standards and monitor implementation progress.
Smart metering is a critical enabler of Ukraine’s electricity market modernisation. It allows consumers to access real-time consumption data, participate in demand response programmes, and benefit from dynamic pricing. For the grid, smart meters improve network visibility, reduce technical and commercial losses, and facilitate the integration of renewable energy sources.
Alignment with EU smart metering standards is also a technical prerequisite for full market coupling with the European electricity market.
Expected Impact: For investors in demand response and aggregation businesses, the smart meter rollout creates the essential infrastructure for dynamic pricing products and real-time demand management services. Traders benefit from improved market data and consumption forecasting, while generators gain better visibility of demand patterns for portfolio optimisation.
The 80% coverage target provides a clear timeline for business planning, enabling market participants to develop smart-meter-enabled products and services with confidence in the underlying infrastructure rollout.
New Balancing Instruments
Integration of Flexibility Services
Another core component of the Law is the formal introduction of “flexibility” as a legal and operational instrument. According to the Law, flexibility refers to the system’s capacity to react to variability in electricity supply and demand, particularly as renewable generation increases. In practice, this means that distribution system operators are now able to procure flexibility services to manage local network constraints through an additional instrument called “flexibility services”. For convenience, we have analysed the flexibility services mechanism in Picture 5 below.
Picture 5. Main elements of the flexibility services under the Law.
The importance of this provision lies in its systemic implications. By encouraging flexibility services, the grid becomes more resilient and better suited to the integration of intermittent renewable energy sources, such as wind and solar.
Following the adoption of the Law, the NEURC must develop procedures for providing flexibility services, which will include measures to incentivise such services.
Expected Impact: For investors in battery storage, demand response and other flexible assets, the formal recognition of flexibility services creates a new revenue stream through distribution-level procurement. Generators with flexible capacity can diversify their income beyond wholesale markets. Traders and aggregators may develop new service offerings to capture the value of distributed flexibility. The NEURC’s forthcoming incentive framework will be critical in determining the commercial attractiveness of these services.
Introduction of Balancing Capacity Services
The Law introduces the concept of “balancing capacity” into Ukrainian electricity market legislation. Balancing capacity refers to the volume of reserves for frequency and active power regulation that a balancing service provider commits to maintain, within which it is obligated to submit bids to the TSO for the corresponding volume of balancing electricity in accordance with the terms specified in the contract.
Balancing capacity services will serve as an additional contractual mechanism for procuring balancing reserves for the TSO in frequency regulation. These services will be provided under a balancing capacity services agreement, the standard form of which will soon be developed by the NEURC.
Further details regarding the implementation of balancing capacity services will be available at a later stage, following the approval by the NEURC of the relevant standard contract and the adoption of the necessary by-laws.
Expected Impact: For generators with fast-ramping capacity, including gas-fired plants, hydro, and battery storage, balancing capacity services offer a new contracted revenue stream that complements energy and ancillary service revenues. Investors can factor this additional income into project valuations. Traders may develop strategies to optimise participation across multiple balancing products. The standard contract to be developed by the NEURC will determine the commercial terms and risk allocation for these services.
Strengthening International Cooperation
Role of the Ukrainian TSO in European Cooperation
The Law strengthens the role of Ukraine’s TSO in regional and European cooperation by explicitly authorising the TSO to interact with EU transmission system operators under agreements on cross-border balancing, reserve sharing and regional capacity calculation. The TSO is also required to engage in market coupling and participate in ENTSO-E governance structures.
This institutional embedding enables the TSO to influence regional decision-making processes and participate in the development of future European grid codes. It ensures legal compatibility with ENTSO-E membership rules and allows Ukraine to benefit from coordinated grid management, early warning systems, and crisis mitigation procedures in line with the Law.
Expected Impact: For generators and traders, the TSO’s enhanced role in European cooperation creates new commercial opportunities through cross-border balancing and reserve sharing arrangements. Investors benefit from Ukraine’s deeper integration into European grid governance structures, which reduces systemic risk and improves market credibility. Market participants can anticipate that future grid codes and market rules will increasingly align with European standards, providing a more predictable regulatory environment for long-term investment decisions.
Participation in European Coordination Platforms and ACER Integration
The Law formalises Ukraine’s participation in key European platforms, including ACER. The NEURC, in collaboration with the TSO, will provide data to ACER, submit regional market rule proposals and participate in joint consultations. The Law also facilitates the establishment of regional coordination centres and obliges relevant authorities to support integration efforts.
This legal framework ensures that Ukraine is not merely a technical participant but a fully integrated member of European energy governance.
Expected Impact: For investors and generators, Ukraine’s full integration into ACER and regional coordination platforms provides assurance of regulatory alignment with EU standards, reducing cross-border transaction risk and improving market access. Traders benefit from harmonised regional market rules that facilitate cross-border operations. The formalisation of Ukraine’s participation in European energy governance enhances market credibility and supports the development of long-term commercial relationships with European counterparties.
Conclusion
The adoption of the Law represents a crucial step toward the modernisation of Ukraine’s electricity sector. By incorporating key EU legal principles and best practices, the Law creates a foundation for a transparent, competitive and more stable electricity market. In the broader context of Ukraine’s EU integration strategy, the Law strengthens market mechanisms, enhances investor confidence, and facilitates reciprocal participation between Ukrainian and European electricity market participants in the internal energy market. Overall, the Law is a forward-looking reform that will generate significant long-term benefits for Ukraine’s economy, consumers and energy security.
For more information on Ukrainian electricity market regulation and upcoming opportunities for investors, contact your CMS client partner or reach out to the experts: Vitaliy Radchenko, Maryna Ilchuk.
