Debts on the Balancing Market Block Investments: Expert Explains What Needs to Change

Multi-billion debts on the balancing market continue to accumulate due to consumers who cannot be disconnected even for non-payment. As a result, electricity is consumed, but money for it is not received, and the debt spreads further across the energy market.

Liquidity Crisis and Its Impact on Energy Sector

According to Andrian Prokip, head of energy programs at the NGO "Ukrainian Institute of the Future," such a system drains money from energy companies and creates a deep liquidity crisis. It becomes harder for companies not only to make current settlements but also to attract funds for new energy storage systems and peak-load generation, which are critically needed to balance the power system.

"The presence of consumers protected from disconnections generates multi-billion debts on the balancing market. This liquidity crisis actually makes it impossible to attract investments in critically needed energy storage systems and high-maneuverability capacities," Prokip noted.

Contradictory Data

While experts from the Institute of the Future emphasize a systemic audit of protected consumer categories, other market participants point out that debts are formed unevenly. For instance, Ukrenergo's debts to balancing market participants have already reached 32 billion UAH, while industry specialists like former Naftogaz CEO Andriy Kobolev emphasize that the problem lies in the market architecture itself, and Hennadiy Riabtsev points to specific defaulters such as water utilities that fuel the overall chain of non-payments.

Ways to Solve the Debt Crisis

According to experts, the problem cannot be solved solely by raising tariffs or shifting costs to other market participants. It is necessary to repay already accumulated mutual debts and simultaneously block the mechanism for generating new debt through financial clearing with a targeted tranche.

"Solving the debt crisis on the balancing market requires the immediate implementation of financial clearing between participants and a cardinal audit of the list of protected consumers to stop generating new non-payments," the expert emphasized, proposing a comprehensive approach to healing the energy market.