Ukraine in the Energy Community: 'Meeting its obligations'

In his speech at the Ukrainian Energy Forum in Kiev, Dirk Buschle, Deputy Director & Legal Counsel, Energy Community Secretariat, began with a quote from the previous day's meeting in Brussels.

"The leaders welcome Ukraine's progress in meeting their obligations under the Energy Community Treaty and recognize that further efforts are required to implement all of the issues."

Mr. Buschle offered a summary of a progress report for 2012 which noted the achievements of Ukraine's membership in the Energy Community. He showed a map indicating that Ukraine was a member of Trans-European Intra-Community Energy Market, a member of the Energy Community and would take the presidency of that organization in 2014, which should Ukraine's significant and important role.

The Energy Community, he explained, was an international treaty aimed at increasing competitiveness through reform.

"It's appropriate to summarize this competitiveness we'd like to achieve by three catch words that are key achievements: Transparency, efficiency, reliability, which are all very general, but we would like to see them because they are key to attracting investment."

He said it was difficult to make causal links about such achievements which have appeared, but contended that the PSA made by Shell and a contract made by RWE had some relation in Ukraine's efforts at transposing and implementing the reform system.

According to Mr. Buschle, another aspect of the treaty was improving the security of supply aspect for Ukraine via diversification of import sources; and reducing pollution.

He explained, "The Energy Community is modeled on European legislation, of the EU, and is also modeled on its institutional design. So my organization and the Ukrainian authorities have a kind of symbiotic interaction in the bulk of implementation and reform work which happens here on the ground, in Kiev and beyond, and the assistance that the Secretariat can provide."

In terms of implementation, he said one must look at different sectors as the treaty was not only about natural gas, but one of the key achievements for membership was adoption of the Gas Market Law of 2010.

"We consider it a solid basis for all the reforms that have to happen, but it will have to be revisited sometime in the future, especially as we go forward into transposition with the 3rd Energy Package."

Secondary legislation was where really achievements were occurring, he said.

He reported, "We are in intense discussions with regulatory authorities in charge, like the regulatory authority, and I can only say that there are issues we must continue working on which involve unbundling in practice, third-party access - some of they key elements of European legislation, which have to be implemented in real terms - a big challenge."

One exciting development, according to Mr. Buschle, was a pending draft of Ukraine's electricity law, which was pending in Parliament and had the backing of the Energy Community. "This will make for the leapfrogging of Ukraine. We'll see that for the first time markets will actually open and Ukraine can take advantage of its key characteristics compared to others - it is possible to have a functioning market here in Ukraine, not having to integrate many tiny markets as we have to do in southeast Europe."

He also mentioned the Energy Community's 11% renewables directive by which Ukraine took on this binding target by 2020; it had also adopted the oil directive by 2023, making sure that Ukraine has 90 days of consumption in case of emergency. Competition and state aid, he said were also working areas for the organization. "In energy efficiency Ukraine has adopted an action plan, which is very good and which we support for adoption," he added. "Legislation has not yet been adopted in the area of environment: there are two directives which relate to the pollution coming from the energy sector that constitute big challenges: sulfur in fuels and large combustion plants."

Citizens lives, he noted, could be prolonged through such measures. "The results go way beyond the goal of attracting investment."

Buschle reported that the Secretariat did monitoring and provided assistance to the authorities in Ukraine. "We have been and will be involved in drafting legslation - the gas and electricity laws are examples, we provide advice to domestic authorities upon request; we also do country missions and have spent lots of time in Ukraine.

"It started out as explaining the obligations under the treaty, but now is turning more and more to working together and discussing specific issues," he explained, adding that there were nearly 80 meetings, workshops and studies per year with issues relevant for Ukraine, dealing with issues like a competition network or a study assessing the possibilities for rehabilitating power plants to meet combustion requirements.

Enforcement, he noted, was a requirement.

"Any legal obligation needs to have a system which assures that obligations are being followed up. It is an essential feature of EU integration. And it allows us to identify and discuss problems, issues in a very focused way, not just having a superficial view, but going very deep. And then, to enter into a structured dialogue with authorities in Ukraine to overcome and solve the problem or dispute.

"We have made good progress with our other contracting parties and we hope and are confident we can do this in Ukraine," said Mr. Buschle.

He reported that capacity allocation rules on interconnectors were on the radar screen, for one.

"Besides this legal approach, let's look at how we promote energy investment. The law alone will not help to overcome this problem, that's why we're trying to prioritize investments, streamlining and channelling the funds available to those projects which we consider most important - an Energy Community task force deals with that," he said. "It ranks project by priority in terms of electricity infrastructure, generation, gas infrastructure, oil infrastructure."

Ukraine, he said, had submitted projects in all of those areas.

The goal of the Energy Community was the full integration of Ukraine into the pan European energy market: "This will mean full access to the EU energy market for Ukraine and its companies as buyers and sellers; it also makes for the deepest form of energy relations that exist.

"Ukraine, indeed, has laid the foundations for these achievements, a very good and solid foundation, and is starting to reap the benefits. The government is constantly driving this process forward. We've taken notice of a Government plan for priority measures on EU integration which was adopted and covers many aspects of our work," he said.

Dr. Buschle concluded, "We must tackle all the big challenges together, like the Renewables Directive, 3rd Energy Package, these are things that no country can do alone and which also will need the assistance of the Secretariat. It depends on good communication and we have that. Together we can achieve a lot."