Here’s a question: What did the first electricity auctions under long-term contracts reveal?
24 July 13:34
ANALYSIS FROM 
In July, the first exchange auctions for the sale of electricity under the new long-term contract mechanism took place. The results of the auctions not only identified the winners who purchased electricity from Energoatom and Ukrhydroenergo, but also revealed some issues. "Komersant Ukrainian" investigated what conclusions should be drawn from these auctions.
The new mechanism for selling electricity on the Ukrainian market has undergone a pilot test. At the Ukrainian Energy Exchange auctions on July 13–14 and 20–21, Energoatom and Ukrhydroenergo sold, respectively, 405,667 and 56,481 MWh of electricity, respectively, under long-term contracts with delivery periods of August–September and August–December 2026. Buyers were able to lock in the price of electricity for several months and add predictability to their operations—something that was generally lacking before. Daria Orlova, an electricity market analyst at ExPro, explains:
“Prior to these auctions, trading in Ukraine was typically for 7 days, a decade, or half a month. They had even stopped trading on a monthly basis. In other words, the long-term market consisted of such short-term periods. Under such conditions, it is difficult for suppliers, consumers, and the power generation sector as a whole to plan their operations. That is why the idea arose to trade for longer-term periods,” the expert notes.
Long-term auctions have lived up to expectations—but not for everyone. This is partly because demand for electricity under long-term contracts exceeds supply.
The launch took place
The level of demand at the auctions was quite high, and the number of active buyers likely did not disappoint the organizers either. Fifty-three companies participated in the auctions on July 13–14, and 21 winners were selected based on the auction results. Twenty-eight participants took part in the auctions on July 20–21, and 15 of them purchased electricity. The vast majority of the winners are trading companies, not end consumers—that is, the very enterprises for which these long-term auctions were originally conceived. Olga Buslavets, the former head of the Ministry of Energy, draws attention to this fact.
“It is the industrial sector that has been most eager for this market segment to open, since the ability to purchase electricity directly from producers under long-term contracts allows them to lock in prices in advance, forecast production costs, mitigate the impact of price fluctuations, and enhance the competitiveness of Ukrainian products. The fact that industrial enterprises did not win the first auctions may indicate that the price level established during the bidding did not meet their economic expectations,” Olga Buslavets wrote on Facebook.
Official reports on the auction results mention only three companies among the winners that can be classified as end users: Ukrzaliznytsia, Naftogaz, and MHP. However, other industrial enterprises also participated in the auctions. One of them is ArcelorMittal Kryvyi Rih. Oleg Krykavskyi, the company’s director of government relations, explains:
“We participated, but we never made a purchase, and we never won a single bid. The deciding factor was price. If you look at the lots won by other participants, the price there was higher than what was acceptable to us. Plus, if you look at who won, the vast majority were traders. Therefore, we’ve concluded that changes to the relevant government resolution will be necessary. “It is clear that a larger supply is needed to make the price more competitive,” the official noted.
Based on the auction results, the weighted average selling price of electricity offered by Energoatom ranged from 5,012.53 UAH/MWh to 6,255.64 UAH/MWh, depending on the supply period. Ukrhydroenergo sold its electricity at prices ranging from 4,700 UAH/MWh to 6,336.07 UAH/MWh. Due to competition among buyers, the auction price generally rose, exceeding both the starting level and the current market price. At the same time, it remained attractive to buyers. Daria Orlova, an electricity market analyst at ExPro, explains.
“When it comes to the ‘day-ahead’ market and auction prices, prices in the ‘day-ahead’ market are, of course, lower right now. But that’s the current situation. For example, at auctions for contracts covering August through December, the price for electricity—from both Ukrhydroenergo and Energoatom—settled at around 6,300 UAH/MWh. This is indeed significantly higher than current trading prices on the “day-ahead” market. “But we must take into account that this period also covers winter, when, I believe, the price on the ‘day-ahead’ market will be substantially higher than it is in these auctions,” the expert notes.
It is precisely the price determined by the results of long-term auctions that could serve as a benchmark for market participants. Daria Orlova continues.
“This price can already be used as a reference in contracts with end consumers. The market can use this price as a reference when purchasing electricity for the following month. For example, the European market has a futures market, and they understand where prices will be heading in a given month. We don’t have anything like that here, and unfortunately, it isn’t even on the horizon yet. So I think this tool will help add a bit of predictability. “I think the exchange could also develop its own index based on these trades, and market participants could peg their prices to it and use it as a benchmark,” the expert believes.
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What’s Next
The number of participants in the new long-term auctions and the level of competition in them suggest that the initiative’s launch has been successful. However, the composition of the winners and the volume of resources offered for sale indicate that changes are needed. Oleg Krykavsky, Director of Government Relations at ArcelorMittal Kryvyi Rih, also emphasizes this.
“The main conclusion: the mechanism is working, for which the government deserves credit, since this mechanism took a very long time to develop. So, first: the auctions took place. Second: they are of interest to participants. Third: they require some adjustments. Clearly, a larger supply is needed to make the price more competitive, because the price can only be influenced by market forces—by increasing supply. In other words, larger volumes of electricity should be offered at the auctions. This can be achieved in two ways: either by increasing supply from existing participants or by bringing in new participants. But ultimately, it is up to the government to decide,” the official emphasized.
Daria Orlova, an electricity market analyst at ExPro, believes that there is both a need and the potential to increase the volume of supply.
“Thanks to these auctions, the market has received a signal that it is necessary to continue holding such auctions and to increase the volumes offered at them. Because there is greater potential. Perhaps this will happen closer to winter, when it becomes clear what our situation is regarding the balance, power outages, and cyberattacks. And this practice will continue. In other words, larger volumes need to be put up for these long-term auctions. At the very least, Energoatom could trade more using these more predictable instruments,” the expert believes.
The first series of long-term auctions is scheduled to continue on July 27, 2026. At that time, the auction winners will be able to enter into contracts covering electricity supply from August 2026 through June 2027. Concluding 11-month contracts should provide producers and buyers with even greater predictability and add some transparency and stability to the market as a whole.
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