Ukraine keen to join pan-European energy market

The Ukrainian government has thrown its weight behind proposals to link up the EU’s electricity market with Ukraine, Turkey, Moldova, Azerbaijan, Armenia and Georgia.

Andriy Klyuyev, the country’s vice prime minister, said Ukraine would be interested in creating an integrated pan-European electricity market with the EU, an idea put forward by Azerbaijan.

Klyuyev, who is responsible for energy, said such a plan would fit with Ukraine’s efforts to switch its energy supplies away from gas to electricity.

"We would like to go ahead [with the Azeri plan]," said Klyuyev on Monday (29 January).

"We have to overcome our reliance on gas," he said, "we must produce as much electricity as possible and then export it."

Elmar Mammadyarov, the Azeri foreign minister, recently called on EU leaders to look at integrating EU and south Caucasus energy markets through Romania, Bulgaria, Ukraine, Moldova, Turkey and Greece.

He said such a move would be a way to protect Azerbaijan against "market bullies".

The countries of the former Soviet bloc are increasingly looking for ways to reduce their dependence on Russian energy.

Following supply disruptions caused by a gas dispute between Russia and Belarus earlier this year, Russia advocated supplying oil and gas directly to the EU and cutting out transit countries, as a way of ensuring security of supply.

Both Azerbaijan and Ukraine view closer co-operation with the EU in the electricity market as a way of increasing their energy independence.

But any attempt to exclude Russia from a link up with the European grid is likely to be politically fraught.

Ukraine, Moldova and the countries of the southern Caucasus are currently linked to the IPS-UPS grid, which is dominated by Russian firm Rao Unified Energy System.

Since 2002, the EU and Russia have discussed the feasibility of synchronising the European grid with IPS-UPS.

But this is still in the planning stages and according to one European Commission expert, Azerbaijan and Ukraine may be looking for "partial solutions" to their energy security problems.

A report this week on the electricity black-outs that hit Europe last November has strengthened calls for binding security standards for grids. That is likely to make any link with IPS-UPS more difficult.

Although leaving Russia out of the link-up may make the scale of the task smaller, experts say the EU may not benefit greatly from such a move. "The political interest would be the highest consideration," said the Commission official.

None of the countries involved is a major electricity producers on the scale of France or Germany, the world’s leading exporters of electricity, although Ukraine and Turkey could be lucrative markets for EU producers.

Eurelectric, a platform that represents European electricity industry groups, said that firms would welcome the development of a pan-European market if it were based on fair market rules.

"We favour a fair two-way electricity market between east and west," said Chris Boothby, a spokesperson for the organisation.

The Ukrainian government has thrown its weight behind proposals to link up the EU’s electricity market with Ukraine, Turkey, Moldova, Azerbaijan, Armenia and Georgia.