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

Multibillion-dollar debts in the balancing market continue to accumulate because of consumers who cannot be disconnected even for nonpayment.

Debts pose a threat to investments in the energy sector. Electricity is consumed, but money for it does not flow in, and the debt then spreads across the entire energy market. According to the expert, this system drains money from energy companies and creates a liquidity crisis. As a result, companies find it harder not only to meet current payments but also to attract funds for new energy storage and maneuverable generation capacities needed to balance the power system. "The existence of protected-from-disconnection consumers generates multibillion-dollar debts in the balancing market. This liquidity crisis effectively makes it impossible to attract investments in critically needed energy storage systems and high-mobility capacities," said Prokipp. How to change the situation in the balancing market. In the view of the head of energy programs of the NGO "Ukrainian Institute for the Future," the problem cannot be solved by raising tariffs or shifting costs to other market participants alone. It is necessary to extinguish already accumulated mutual debts and at the same time close the mechanism that creates new debt. "Solving the debt crisis in the balancing market requires immediate financial clearing among participants and a drastic audit of the list of protected consumers to stop the generation of new defaults," the expert emphasized. Read also: The debt of "Ukrenergo" to balancing market participants reached 32 billion UAH, according to the expert. He proposed extinguishing the "cycled" debts through clearing with a targeted tranche, and also revising the list of consumers who cannot be disconnected. This should allow not only to remove old debts but also to prevent the emergence of new ones. Previously, former chairman of the board of Naftogaz of Ukraine, founder of ENEA, Andriy Koboliev, called the debts in the balancing market one of the key problems for the development of energy storage systems.

And energy expert Hennadiy Ryabtsev explained that debts of individual consumers, including water utilities, directly fuel outstanding debts in the balancing market.