Electricity Market Coupling Between Ukraine and the European Union
On 7 April 2026, the Parliament adopted Law No. 4834-IX aimed at integrating the electricity markets of Ukraine, EU Member States, and the Energy Community Contracting Parties. The key changes introduce electricity trading on coupled spot markets with foreign countries, ensure cross-zonal transmission capacity, and enable cross-border balancing.
On 7 April, the Parliament adopted the Law of Ukraine "On Amendments to Certain Laws of Ukraine Regarding Implementation of European Law Provisions on Energy Market Integration, Enhancement of Security of Supply, and Competitiveness in the Energy Sector” No. 4834-IX (the "Law”), based on the Draft Law No. 12087-d dated 27 June 2025, which was signed by the President on 20 April 2026. The Law introduces a number of key changes to be implemented gradually, alongside the development of infrastructure required for the integrated operation of Ukrainian and foreign electricity markets.
New market participants, rules and services
The Law provides for the regulation of new participants and functions in the electricity market:
- nominated electricity market operator (the "NEMO”) — an entity that professionally organises wholesale electricity transactions and ensures single coupling of the day-ahead market (the "DAM”) and the intraday market (the "IDM”). In particular, NEMO receives bids from market participants, verifies trading results within the coupled DAM and IDM, notifies market participants and the transmission system operator (the "TSO”) of trading outcomes, and publishes trading-related information, including prices and traded volumes;
! key point: a NEMO may also be a non-resident entity certified by the Regulator in accordance with Ukrainian legislation;
- central counterparty — an entity that becomes a party to contracts (as seller or buyer) with trading participants within the single market coupling, and organises the transfer of net electricity export and import volumes to another central counterparty or a trading agent;
! key points: (i) NEMO shall be an entity capable of performing central counterparty functions for clearing and settlement of electricity trading transactions resulting from a single market coupling; (ii) NEMO may delegate performance of the central counterparty’s functions to a third party regulated under the Law of Ukraine "On Capital Markets and Organised Commodity Markets”;
- trading agent — an entity whose task is to facilitate the transfer of netted volumes of electricity exports and imports between central counterparties within a single coupling of DAM and IDM. Trading agent organises the execution of participants’ bids following their approval by the NEMO;
! key points: (i) trading agent may be a foreign legal entity; (ii) trading agent may perform central counterparty functions in relation to electricity exchange between different central counterparties, if it is provided by its agreement with a central counterparty;
- сitizen energy community — a voluntary, non-profit association of individuals, small and micro-enterprises, and local authorities, established to serve the public interests of its members and local communities. Its primary purpose is non-profit, and it may engage in aggregation, generation, supply, distribution, storage of energy, electricity consumption, as well as provide electric vehicle charging services to its members.
Regulatory framework: in addition to the national rules, the Law requires market participants to comply with pan-European and regional rules in accordance with international obligations of Ukraine. The list of mandatory supranational rules shall be approved by the Regulator. Furthermore, the Regulator ensures implementation of binding decisions of ACER (the European Union Agency for the Cooperation of Energy Regulators), in particular with regard to technical and regulatory matters affecting cross-border trade, as well as issues of energy system security of interstate relevance.
The Law introduces new opportunities for market operations:
- trading under negative pricing procedures – a mechanism whereby the purchaser acquires electricity at the lowest price while simultaneously providing the seller with a paid service to stimulate consumption in conditions of market oversupply;
! key point: as of 1 May 2027, the Law abolishes the Regulator’s authority to set price caps on the market. The Regulator’s powers to impose price caps on the DAM, IDM, and balancing market could temporarily apply in the period from 1 May 2027 until the launch of single market coupling only during a state of emergency in the Integrated Power System of Ukraine, for a period of up to 90 days, taking into account prices on adjacent European markets, and such measures must not restrict electricity imports/exports. Separate regulation is introduced for technical price limits that may be applied in balancing operations and by NEMO if harmonised with other NEMOs;
- flexibility services – services provided to the distribution system operator (the "DSO”), including by energy storage operators, aimed at adapting the energy system to changes in consumption and generation and, accordingly, ensuring reliable and efficient electricity distribution. The procedure for the provision of flexibility services shall be approved by the Regulator;
- dynamic pricing supply – a supplier and a consumer equipped with a smart electricity meter may conclude a contract with a dynamic price reflecting price fluctuations on the DAM and IDM. Suppliers serving more than 200,000 consumers are required to publicly offer (i.e., maintain a public commercial offer for) the possibility of entering into such contracts;
- capacity mechanism — a temporary mechanism (up to 10 years) that provides remuneration for resource availability to ensure adequacy of supply, separate from ancillary services and congestion management. Rules governing capacity mechanisms shall be approved by the Regulator and will cover types of mechanisms (including strategic reserves), operating conditions, remuneration principles, and maximum CO₂ emission requirements for participating units;
- the Law abolishes the Regulator’s authority to set a minimum mandatory monthly volume of electricity sales on the DAM as of the date of commencement of single DAM coupling.
The Regulator’s decision to launch single market coupling will be preceded by a report on readiness for the operation of coupled DAM and IDM markets, which shall include, inter alia, information on the readiness of market infrastructure and the system for organising financial settlements within the electricity market of Ukraine and with foreign counterparties.
Within six months of the Law’s entry into force, the Regulator and TSO shall assess the timeline for transitioning to a 15-minute imbalance settlement period, and adopt a decision on the transition date within the following six months.
Preventing and overcoming crises in the electricity sector
The Law implements European regulatory approaches to the assessment of risks to the security of electricity supply, the development of potential crisis scenarios in the power sector, and preparedness for action in the event of a threat of crisis or its occurrence.
Key responsibilities are assigned to the Ministry of Energy (the "Ministry”), which is required to cooperate with the other market participants, foreign authorities, and regional institutions in order to identify effective instruments and measures for preventing or overcoming crises.
Crisis Preparedness Plan, to be developed and approved by the Ministry, will be binding on all market participants and will include measures for crisis prevention, preparedness, and mitigation at the national, bilateral, and regional levels.
Dispatch Management and Re-Dispatch
Regulation of dispatch (operational and technological) management by the TSO is amended:
- as of 1 January 2030, the dispatch (operational and technological) management agreement will be removed from the list of contracts in the electricity market;
- re-dispatch of generation, energy storage, and demand response is regulated and shall be carried out primarily on a market-based approach, while the application of non-market mechanisms is permitted only as an exception (in the absence of competition or for the elimination of system congestion). Transmission and distribution system operators are required to minimise the volumes of re-dispatch, particularly with respect to renewable energy sources and high-efficiency cogeneration, ensure network flexibility, and report to the Regulator on the application and effectiveness of re-dispatch measures. Non-market-based re-dispatch shall be duly justified and carried out in compliance with network security priorities, and entails performance of settlements and payment of compensation in accordance with procedures established by the Regulator.
Amendments in the Regulation of Energy Storage Facilities
Starting from 1 May 2027, the approach to determining charges for transmission, distribution, and dispatch services for energy storage operators will change. Previously, the law explicitly established that such charges were calculated as the difference between the volumes of electricity withdrawn from and injected into the grid (a "net approach”), ensuring a clear and predictable pricing model.
The updated scheme moves away from this fixed rule and introduces a methodology-based approach, under which:
- tariffs will be calculated separately and may involve separate charges for electricity withdrawn from the grid and electricity injected into the grid (a "gross approach”);
- at the same time, it declares the avoidance of double charging in cases where electricity is consumed for the operator’s own needs or during the provision of flexibility or ancillary services;
- it requires the creation of incentives for the operation of energy storage facilities and the need to reflect their system value.
At the same time, the possibility of applying the previous model (charging based on net volumes) is not excluded, but it will no longer be mandatory and will depend on the decision of the Regulator within the approved methodology.
Until 30 April 2037, the Law allows application of the "old” scheme (i.e., charging based on the difference between monthly volumes of electricity withdrawn and injected by an energy storage facility), according to the terms defined by the transmission and distribution systems code, and retail electricity market rules as in force on 30 April 2027, to the following categories of entities:
- operators of energy storage facilities commissioned before 30 April 2027;
- operators of energy storage facilities at pumped storage power plants, with respect to units/stages commissioned after new construction between 1 January 2026 and 30 April 2027;
- entities that commission energy storage facilities before 30 April 2028, provided that as of 30 April 2027 they would have: valid technical conditions for connection of ESF to the grid, title to the land plot or other facility for ESF installation, and the required construction permits.
Amendments to the Regulation of Electricity Supply and Aggregation
- market access for foreign electricity suppliers is introduced; however, the conditions for such access require further clarification, as the Law refers to Part 5 of Article 8 of the Law of Ukraine "On the Electricity Market”, which is currently absent;
- application of fees for contract termination or modification has been legalised, except for household and small non-household consumers (although it seems that Part 1 of Article 59 of the Law of Ukraine "On the Electricity Market” still requires corresponding amendments);
- regulation of comparison tools for the electricity suppliers’ offers has been established. The Regulator will publish references to comparison tools that have been granted a trust mark;
- previous exemption under which an aggregator was not responsible for imbalances of consumer installations (where such consumers purchase electricity from a supplier) has been removed;
- free participation in aggregated groups and the ability to switch between them have been regulated. Exit from a group must occur within the shortest possible time, but no later than 21 calendar days. Contracts may include exit fees; however, such fees must be proportionate and limited to the actual costs or damages incurred by the aggregator, which shall be duly substantiated. Penalty charges do not apply to household and small non-household consumers;
- the concept of "energy poverty” has been introduced, along with measures to mitigate it.
Allocation of Cross-Zonal Capacity
The Law introduces a distinction between physical and financial transmission rights and establishes their respective regulatory frameworks:
- physical transmission right – the acquired right to use cross-zonal capacity of the electricity network in a specific direction and for a defined period of time;
- financial transmission right with obligation – a right under which its holder either receives or, conversely, is obliged to pay a financial difference depending on the results of day-ahead cross-zonal capacity allocation between two bidding zones in a specified direction and for a defined period;
- financial transmission right with option – a right that entitles its holder to receive a financial benefit based on the results of day-ahead cross-zonal capacity allocation, without any obligation to make payments.
Until the launch of single market coupling in Ukraine, only physical transmission rights will be allocated.
The Law also removes the concept of mid-term capacity allocation. Allocation for periods exceeding one day is now classified as long-term allocation.
Amendments in the Regulation of the Balancing Market and Ancillary Services Market
The Law updates the balancing market model taking into account Ukraine’s integration into the European energy space. In particular, it explicitly provides for the possibility of cross-border balancing through European platforms.
A more detailed structure of balancing products is introduced, distinguishing between standard products (in line with EU rules, including those used for cross-border balancing); and specific products (as an exception, introduced by decision of the Regulator). Specific products may only be applied where operational security cannot be ensured through standard instruments. They are limited in scope (i.e., not applicable to cross-border balancing), and the TSO is required to justify their use.
The Law introduces a prequalification procedure for balancing service providers, further detailing requirements for such providers and their facilities. It also ensures broader market access for aggregators, energy storage facilities, and consumers.
The pricing rules on the balancing market have been clarified and must align with pan-European principles, including the possibility of negative prices. The Law also distinguishes between the procurement of balancing energy and balancing capacity.
In addition, the Law updates the ancillary services market model, taking into account the possibility of exchange and sharing of capacity reserves with TSOs from EU Member States and Energy Community Contracting Parties.
The Law distinguishes between: (i) ancillary services related to frequency and active power control (balancing capacity); and (ii) non- frequency ancillary services.
Furthermore, the Law introduces the participation of distribution system operators in the procurement of non-frequency ancillary services (in particular, flexibility services).
The list of contracts for the ancillary services market has been clarified, including: (i) contracts for the provision of non-frequency ancillary services; and (ii) contracts for the provision of balancing capacity services, which are concluded on the basis of standard agreements approved by the Regulator. The exchange and/or sharing of frequency reserves is performed on the basis of relevant agreements with foreign TSOs, subject to the Regulator’s approval.
The Law also separately regulates the procurement timelines, specifying that balancing capacity services are generally procured for periods of up to one day, with possible deviations subject to approval by Regulator under defined conditions.
At the same time, the competitive procurement principle for ancillary services remains in place. However, the mechanism for deviation from market-based conditions has been refined: it may be applied by the Regulator upon request of the TSO in cases of insufficient competition or shortages of required bids.
Additional pricing requirements are established, including a prohibition on fixing the price of balancing energy within balancing capacity contracts.
Other Amendments
The definition of "distributed generation” has been updated. It no longer includes the previous 20 MW capacity cap and is now defined as any power plant connected to the electricity distribution system.
The Law also regulates the right of DSOs to own, possess, develop, manage, or operate electric vehicle charging stations, as well as the conditions to be met for exercising such rights. The key point is that DSOs may exercise this right when the charging infrastructure is used for their own needs, or when no third party can provide electric vehicle charging services in a timely manner and at a reasonable cost.
As of 1 May 2027, competitive procedures for the construction of generation capacity, energy storage facilities, and the implementation of demand-side management measures shall apply to deficit areas identified by the TSO, for the purpose of meeting demand and ensuring capacity reserves. As of 1 May 2028, provision of the Law of Ukraine "On the Electricity Market” governing these competitive procedures shall cease to have effect; however, obligations arising prior to that date shall remain valid until fully performed.
In addition to market participants, the Law extends liability provisions to commercial metering service providers and recognises the following as breaches in the electricity market:
- violations related to the submission of data and documents, including late or incomplete submission of mandatory data, as well as submission of false or distorted information or documents to the commercial metering administrator;
- violations of requirements regarding metering data and decisions of the commercial metering administrator, including breaches of data handling rules, failure to ensure proper data storage, and non-compliance with the requirements and decisions of the commercial metering administrator (including those resulting from inspections and dispute resolution).
Such violations are subject to fines ranging from UAH 17,000 to UAH 170,000 (approximately EUR 330 to EUR 3,300).
The Law reduces the installed capacity threshold for facilities eligible for a reduced (time-phased until 2030) share of imbalance cost compensation within the balancing group of the guaranteed buyer: from 1 MW to 400 kW, and for facilities commissioned after 1 January 2026 – to 200 kW.
From the date of termination of martial law, detailed requirements shall be introduced for the imposition of public service obligations in the electricity market, taking into account the need to ensure equal access for electricity undertakings from Energy Community Contracting Parties to consumers.
Within nine months from the termination of martial law, the Regulator must analyse and submit proposals for the revision or abolition of public service obligations in the electricity market.
Conclusions
The Law implements European electricity market requirements as part of Ukraine’s integration with EU and Energy Community markets. The changes are wide-ranging, affecting market participants, functions, mechanisms, services, price caps, mandatory sales quotas, and public service obligations. Implementation will be gradual, taking into account the ongoing martial law in Ukraine, and will require development of significant secondary legislation.