The energy balance of any country consists of the ratio between energy resources that come to usage (mining, manufacturing, imports), and the amount of resources which are consumed. Providing conditions for the proper formation of the energy balance is one of the main tasks of the state. Stability of the economy, increase of welfare and minimizing damage to the environment could become here as the positive results.
When creating energy balance it is important to pay attention to factors such as the availability of fossil energy resources, "genetic" structure of the energy mix, the possibility of using renewable energy resources on some energy products for import etc. A number of both internal and external non-economic factors has negative impact to the formation of appropriate energy balance in Ukraine:
1) the dominance of monopolistic financial oligarchic groups, combined with political figures and official representatives of executive hierarchy. The energy market is financially attractive only because of the possibility of access to government budget, tariff setting and manipulating with prices, as well as abusing of dominant market position, blocking the entry of competitors to the internal market, ignoring investment commitments and the vast majority of financial transactions through offshore accounts;
2) different prices for different categories of consumers. Relic of the Soviet period, which substituted social protection of the population actually has negative multifeature consequences for energy balance, including eliminating incentives for savings, accounting and modernization of transport infrastructure, providing the basis for an opaque business of unaccounted gas resources. All these factors cause high expenses from the state budget to cover the difference between the market price and the socially regulated prices for households and district heating companies etc.
3) the prevalence of administrative control over market instruments. The government always tries to manage the energy sector in manual mode, regulating the activities of mining companies with large number of statutes and regulations that complicate planning work on projects and inhibit investments to the sector. Even though some government actions that can be accounted for by complex situation or additional threats through military aggression of Russia, it cannot be justified by general trend observed in the field for many years;
4) lack of transparency in public mining companies. State-owned enterprises in the energy sector retained many features of planned economic system of the Soviet period, which merged almost limitless possibilities for authorities of top management, usually under the auspices of various political and business communities. As a result, every company works with many factoring companies through which funds are drained out and debts are passed on to the state;
5) neglecting measures to create strategic reserves and diversify energy sources of acute importance. Despite many years of political declamation in Ukraine strategic reserves of oil and petroleum products weren’t created as well as building supplies were not provided by transparent cooperation schemes with private gas producing companies. As a result, the government's efforts to form the required number of energy at the current heating season were chaotic, ill-conceived and largely boycotted.
However, the biggest challenge or even the threat is an external factor – multicomponent and destabilizing influence of Russia, where the Kremlin has used and uses energy dependence for political concessions, control over internal and foreign policy.
The energy balance of Ukraine should be formed by the government taking into account the large impact of non-economic factors, which are triggered by the expansionist policy of Putin. This would require additional expenditures on the formation of key strategic reserves of energy, special modes of consumption and replenishment. This extremely important informational and educational campaign among the population should be provided by leadership of key political figures of the state. They are in turn required to show personal example and insist on rigorous prosecution and impartial consideration of disruption events without regard to political or business origin of culprits. The development strategy of the energy sector is considered to be the document that will be produced by specialists and thoroughly analyzed by independent experts.
Author — Andriy Chubyk, Executive Director of the Centre for Global Studies «Strategy XXI»