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Is electricity more expensive in Ukraine than in Europe? High electricity prices are undermining the position of Ukrainian metallurgy on the international market. New contracts were supposed to lock in prices for extended periods. How did the first auctions for long-term contracts go, why did traders become the predominant buyers, and how can industry secure access to electricity for long periods at an acceptable price — in an article by RBC-Ukraine. Key points: The price of electricity for Ukrainian industry is quite high and often exceeds levels in EU countries; High electricity prices add to a number of challenges, namely—shelling, blockade of sea exports, rising rail tariffs, and the carbon border tax; Ukrainian metallurgy is losing competitive positions compared both to EU producers and external suppliers from China and Turkey; Long-term contracts can reduce the risk of electricity price volatility and are needed by both generators and industrial consumers; Mostly traders won the first auctions for long contracts, which indicates the auction model needs to be revised; Industry must be able to buy electricity months in advance at an acceptable price—this requires removing traders, increasing lot sizes, applying a discount to the starting price, and fixing the amount of the guarantee deposit. Expensive electricity for industry Since the start of massive attacks on the power system (autumn 2022), the price of electricity for industrial consumers has risen significantly, especially for the energy-intensive metallurgical sector. Quite often, prices in Ukraine exceed the cost of electricity in European countries. The state analytical company Ukpromzovnishekspertyza provided last year’s statistics. In January–September 2025 the average day-ahead market (DAM, the benchmark market price) electricity price in Ukraine was 106 euros per megawatt-hour; for the same period it was 61 euros in France, 94 euros in the Czech Republic, and 80 euros per megawatt-hour in Germany, comments Sergei Povazhnyuk, deputy director for development at Ukpromzovnishekspertyza, to RBC-Ukraine. A similar situation existed in the bilateral contracts segment (contracts for weeks–months ahead). Over 9 months last year the average price for such contracts in Ukraine was about 106 euros/megawatt-hour, which significantly exceeded the energy cost in the equivalent market segment in France (65 euros) and Germany (77 euros), the interlocutor adds. In May this year the weighted average DAM price in Ukraine was 101 euros/megawatt-hour. This value was higher than prices in countries such as Slovakia, Germany, France, and Spain, according to data from the GMK Center analytical center cited by the Ukrainian Union of Industrialists and Entrepreneurs. Although in July–August the average base-load DAM price in neighboring European countries exceeded the Ukrainian market indicator (due to abnormally high temperatures and low water levels in the Danube), the cost of energy in Ukraine remains quite high for end consumers, especially metallurgical plants. Photo: Metallurgy is an industry whose operations require large amounts of energy (ArcelorMittal Kryvyi Rih) Electricity procurement costs make up a significant share of the cost structure for metallurgical products. For example, in the price structure of iron ore concentrate the energy component is 50–60%; for iron ore pellets it is 30–35%; and for steel produced in electric arc furnaces this indicator is 10–15%, says Andriy Hlushchenko, analyst at GMK Center and Candidate of Economic Sciences. In recent years the share of electricity in the cost structure of another important metallurgical output—ferroalloys—has grown significantly. These are alloys of iron and other chemical elements added to achieve required metal properties. The energy share for producing ferroalloys rose from 22–27% in 2021 to 35–40% today, comments Serhiy Kudriavtsev, executive director of the Ukrainian Association of Ferroalloy and Other Electrometallurgical Producers. Fierce competitive environment By spending more on electricity per ton of steel produced, Ukrainian metallurgy is at a disadvantage compared to competitors—European producers and other suppliers to the EU market such as China and Turkey. The Chinese government has fully exempted electricity supplied to nonferrous metallurgy enterprises from taxes and has partially reduced the tax burden on electricity for the steel industry. As a result, in some Chinese provinces the price for enterprises can fall to 30 euros per megawatt-hour, comments Sergei Povazhnyuk. For comparison: in the first 10 days of August the average base-load DAM price in Ukraine exceeded 140 euros per megawatt-hour, according to data from the state company Market Operator. Photo: The Chinese government maintains low electricity prices for its metallurgy. Workers at a metallurgical plant in Zhangye, China, check the quality of ferroalloys (Getty Images) In addition, until 2024 China actively bought primary raw materials for metallurgy—slabs (large iron plates) from Russia at a substantial discount, reaching 20% of their market value, a representative of Ukpromzovnishekspertyza says. Turkey remains an active buyer of slabs, blooms, and long products from Russia. Local producers buy Russian slabs at 100 dollars per ton cheaper than the market price, roll them into finished products, and sell them on the EU market. Europe is trying to combat this, but unfortunately there is no mechanism to verify which steel was used to make a particular rolled product, Povazhnyuk admits. As a result, Ukraine’s competitors for deliveries of metal to Europe can access cheaper electricity and raw materials. Support programs for metallurgy in the EU Metal producers in the European Union receive aid from both the European Commission and national governments. One such program is compensation for indirect carbon costs provided to enterprises with high energy consumption and significant CO2 emissions. In 2024 the EU allocated 3,2 billion euros for such compensation payments, RBC-Ukraine’s Andriy Hlushchenko comments. In June 2025 European countries launched another support program for energy-intensive industries—the Clean Industrial Deal—which provides funding to such enterprises to reduce their energy consumption by 2030. Essentially, it subsidizes part of companies’ energy costs, explains Hlushchenko, and he gives an example—Germany approved a budget of 3,8 billion euros for such subsidies for 2026–2028. Photo: The EU steel industry receives significant support from governments and the European Commission. Thyssenkrupp plant in Germany (Getty Images) National support programs for the metallurgical sector also operate in Europe. For example, Italy has run the Energy Release 2.0 program since 2024, which provides a fixed electricity price for energy-intensive industries at 65 euros per megawatt-hour. The difference between the actual and fixed price is covered by state funds, comments a GMK Center analyst. Developed EU countries understand the importance of sectors like metallurgy and do not leave industrialists alone with a significant rise in global energy prices, which occurred against the background of the blockade of the Strait of Hormuz. This is not accidental—it is the result of a considered industrial policy, says People’s Deputy and Deputy Chair of the Parliamentary Committee on Economic Development Dmytro Kysylevskyi in a comment to RBC-Ukraine. The metallurgical enterprises themselves will not be able to compete with rivals who receive such strong government support, the parliamentarian believes. High electricity costs add to a whole range of challenges faced by Ukrainian metallurgy. These include the blockade of ports on the Black Sea (the main export channel), higher rail transport costs, constant hostile shelling, and the introduction of a carbon border tax on the EU border from 1 January this year. Under such conditions any increase in energy costs reduces the competitiveness of Ukrainian products in European markets, says Anatoliy Kinakh, president of the Ukrainian Union of Industrialists and Entrepreneurs, in a comment to RBC-Ukraine. To solve the problem of high electricity costs, metallurgists are already building their own generation. However, in the coming years it will be able to cover only up to 5% of their own electricity consumption, says Hlushchenko. A metallurgical complex of this size requires hundreds of megawatts of capacity; furthermore, building power plants is a non-core business for a metallurgical company. You can’t count on metallurgy building generation that fully meets its needs, adds the GMK Center analyst. Launch of long contracts One mechanism used in Europe to support large electricity consumers is developing a market for long-term contracts. Such contracts are concluded between generating companies and large energy-intensive enterprises. Long contracts allow both parties to obtain a set price for energy over an extended period. In 2025 the European Commission and the European Investment Bank launched a pilot program providing bank guarantees totaling 500 million euros to stimulate the business practice of concluding such contracts. These financial instruments enable confirmation of a consumer’s creditworthiness. On the Ukrainian electricity market, the development of long-term contracts is a pressing issue. So far the main indicator remains the next-day price (DAM segment), and the duration of bilateral contracts—such as those recently concluded by state generation—did not exceed a decade-day. Photo: Auctions are supposed to enable large generators to conclude direct contracts with significant industrial consumers. South Ukraine Nuclear Power Plant (Getty Images) Relying on the day-ahead market can contain risks because it is very volatile. One month the price is high, another month it is low. It is important that our energy sector move into the segment of long-term relations so that we have indicative prices for one year, two years ahead, explains People’s Deputy and Chair of the Parliamentary Committee on Energy and Housing and Utilities Andriy Herus to RBC-Ukraine. In mid-June the Cabinet of Ministers allowed auctions to be held under which contracts for a quarter, half-year, and a year are to be concluded. The obligation to sell electricity for the corresponding periods was placed on state companies Energoatom (operator of nuclear power plants) and Ukrhydroenergo (large hydro and pumped storage plants). By concluding long-term contracts, electricity producers can insure themselves against price drops that usually occur in May–June, while consumers are protected against price increases typical of January–February. In Europe, industry buys about 70% of all electricity on the long-contracts segment, Herus adds. The first auctions took place in the second half of July. Due to delays in preparation, delivery periods were shortened by one month, so the traded volumes were for delivery in August–September (2 months), August–December (5 months), and August 2026 – June 2027 (11 months). Legislation allowed Energoatom and Ukrhydroenergo to sell up to 4% of production volume (2% for quarterly, 1% for half-year, and 0,5% for annual auctions). The entire volume was sold in the first two auctions, and in the third (delivery over 11 months) about half was sold. Predominantly buyers were traders—companies that purchase electricity to resell it. Among winners were mostly traders rather than end consumers. During the auctions prices rose to levels that did not match the expectations and business models of large industrial enterprises such as ArcelorMittal Kryvyi Rih, the company told RBC-Ukraine. Even when selling a contract 11 months ahead (the longest period) the price did not fall to the level buyers expected. This is strange because the longer the delivery period, the lower the resource price should be, since the seller gains the opportunity to reduce risks over a long period, explain representatives of the metallurgical company. According to the auction rules, traders must sell 50% of the electricity they acquire to end consumers, but there is currently no effective mechanism to monitor compliance with this requirement. This is another circumstance that raises questions. Photo: Large volumes of electricity under direct contracts should primarily be directed to end consumers, in particular energy-intensive industry (ArcelorMittal Kryvyi Rih) Auction participants were also concerned about uncertainty regarding the exact size of financial security required from generating companies. Today the law provides that the seller itself determines the security amount within a range up to 12% (of the starting price) for quarterly auctions and 2% for annual ones. Such variability creates unpredictable financial conditions for bidders, ArcelorMittal Kryvyi Rih believes. The first auctions showed a situation of high starting prices and small lots (2–5 MW). Such conditions do not allow large consumers to conclude long-term contracts and hedge price risks for long periods. Prices formed with predominant trader participation reflect not the balance of supply and demand but speculative expectations of DAM price dynamics. As mentioned, the market should gradually move away from this price linkage to the volatile day-ahead market. Small volumes sold by state generation create an artificial deficit that pushes prices up. They reach levels that cannot be embedded in the business model of a highly competitive industrial environment. If auctions continue with high starting prices, small lot sizes, and unpredictable guarantee deposit rates, large industry will remain outside the long bilateral contracts segment, market interlocutors emphasized. Proposals on auction conditions Typically traders buy electricity under long-term contracts to resell it on the DAM. For this they orient to future DAM price dynamics rather than to the supply-demand balance among end consumers. Thus, trader participation does not allow formation of a price that would be an objective indicator for the end consumer. To improve the auction model, traders should be excluded from participants. It is also necessary to increase lot size, for example to 20 megawatts. Such a volume would better match the consumption profile of large industrial enterprises and allow them to make more effective use of long-term contracts, RBC-Ukraine was told by ArcelorMittal Kryvyi Rih. Results of July’s auctions showed the algorithm for determining the starting price needs revision. A reasonable approach would be to use the indicator of the weighted average DAM price over the previous corresponding period, but with a discount of 30%. During auctions prices unjustifiably rise due to limited supply, so it is necessary to at least double the amount offered for sale by state generating companies. Photo: Large generation must increase the offer of electricity for sale under bilateral contracts. Khmelnytskyi NPP, part of the National Nuclear Energy Generating Company Energoatom (Getty Images) An excessive barrier to successful auctions is the requirement for at least 5 participants. It should be canceled, because the current rules do not prohibit buyers from submitting bids below the starting price. To increase predictability of buyers’ costs, the guarantee deposit rate that the seller must apply should be fixed, several electricity buyers surveyed by RBC-Ukraine say. When further revising auction conditions, it is important to analyze how they allow industrial enterprises to obtain energy at a price that enables them to remain competitive. If, due to auction design and parameters, electricity for the end consumer becomes more expensive than the company can economically bear, then we lose the very purpose of this mechanism, says Anatoliy Kinakh, adding that any intermediaries only increase the price for the end consumer. The results of the first auctions must be evaluated not only in terms of ensuring liquidity in electricity trading but also considering the economic result they create for industry, believes the president of the Ukrainian Union of Industrialists and Entrepreneurs. Access to long-term contracts for industrial consumers must be one of the key criteria when forming auction rules, Kinakh emphasized. The emergence of the ability to purchase electricity at a set price months in advance is an important step to support energy-intensive industries. However, the results of concluding the first such contracts indicate that auction conditions need to be refined. They should encourage the conclusion of bilateral contracts between large generation and industry. The ability to secure energy at an acceptable price will improve the situation of critically important industries that, in wartime conditions, remain the foundation of Ukraine’s economic development. Questions and Answers (FAQ) – What is the price of electricity for industry? – For business in Ukraine in general and for large industrial enterprises in particular, the cost of electricity is quite significant. It often exceeds prices in EU countries. This problem is most critical for energy-intensive sectors such as metallurgy. – What advantages do Ukraine’s competitors have in the European metal products market? – The main competing suppliers to the EU market are China and Turkey. In China metallurgical enterprises can buy cheap electricity that is partially or fully tax-exempt. In addition, during the full-scale invasion China purchased raw materials from Russia at a discount. Turkey continues to use that supply channel. – What support does metallurgy receive in the EU amid global energy price increases? – At the level of the European Commission and national governments there are programs that compensate energy-intensive enterprises for their costs. Billions of euros are allocated annually for these measures. The EU also applies tariffs and quotas that limit shipments from third countries to the internal market. – Can Ukrainian metallurgy build generation that fully satisfies its needs? – No. Although metallurgical complexes are already building their own generating units, they will not be able to fully cover their energy needs with them. According to GMK Center analysts, in the coming years own generation will cover about 5% of metallurgy’s energy consumption. – Why was it important to launch auctions allowing contracts for long-term electricity supply? – Long contracts reduce the risks of price fluctuations. Buyers insure against price increases in deficit periods, and sellers against price declines in surplus months. On developed European energy markets most purchase portfolios are comprised of long-term contracts. – How did the first auctions for long contracts end? – Traders—who buy volumes of electricity for subsequent resale—mostly won. During the auctions the price exceeded a level that matched the business models of large industrial consumers. – How should the auction model be changed going forward? – To ensure industry access to long-term contracts, traders should be excluded from auction participants, lot sizes increased to 20 megawatts, a discount applied when determining the starting price, the state generation offer doubled, and the guarantee deposit amount fixed.
Document: PDF proof of the original version of the news item "Дорога електроенергія для металургії. Як забезпечити прямі контракти між промисловістю та генерацією". It records the publication content at the moment of the first scan, the preservation date and the source: RBC-Ukraine.
