Ukraine cross-border electricity trade: From short-term security of supply imperatives to flow based market coupling

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Ukraine’s electricity market is at a crossroads – resilient under war conditions but still burdened by inefficiencies, debts, and regulatory barriers. While Ukraine’s power system has shown extraordinary technical endurance since 2022, its path toward integration with the EU’s internal electricity market remains obstructed by outdated rules, underused 
interconnections, and inconsistent market signals. Accelerated progress on market coupling is both an economic and strategic necessity for Ukraine’s energy security, resilience, and EU accession. 

Ukraine is now physically synchronised with the continental European grid (ENTSO-E) and technically capable of significant cross-border exchange – up to 2.1 GW for imports and 900 MW for exports as of October 2025. Yet only about half of that capacity is commercially available, and inefficient trading leads to massive welfare losses: over EUR 500 million annually. Flows frequently move against the price direction, showing that explicit auctions of interconnector capacity no longer deliver efficient outcomes. Full market coupling with the EU would automatically align flows with price signals and unlock these lost benefits. 

Ukraine’s integration into the Single Day-Ahead and Intraday Market Coupling (SDAC/SIDC) is delayed by missing legislation. The Electricity Integration Package (EIP) has yet to be transposed. Without it, Ukraine cannot designate a Nominated Electricity Market Operator (NEMO) or join the preparation and submission of the updated Market Coupling Operator Integration Plan (MCO IP) – both prerequisites for formal integration. The adoption of draft law 12087-d is therefore urgent, but its proposed “two-auction” model with local price caps risks fragmenting the market and contradicting the EU electricity market target model. 

The EU Carbon Border Adjustment Mechanism (CBAM), entering force for electricity in 2026, could unintentionally undermine market integration. Unless Ukraine secures a CBAM exemption under Article 2.7 (or a force-majeure derogation under Article 30.7) and introduces a domestic Emissions Trading System (ETS) with an equivalent price to the EU ETS 
by 2030, CBAM will make Ukrainian electricity exports uncompetitive and prevent electricity market coupling. A temporary force-majeure derogation until 2028, conditional on ETS and market coupling progress, is essential to avoid this policy clash. 

To achieve market coupling by early 2028, coordinated action is required, including: 

1. Adopting and implementing the Electricity Integration Package 
2. Accelerating interconnector expansion and usage
3. Resolving structural inefficiencies (incl. debts, price caps, PSO reform) 
4. Ensuring EU flexibility and opportunities for early accession 
5. Negotiating a CBAM force-majeure derogation tied to ETS and market coupling 

With decisive political action, Ukraine could join the EU’s coupled electricity market by 2028, gaining higher security of supply, lower costs, greater transparency, and an indispensable anchor for its European future.