Elementum Energy Implements a Price Stabilization Mechanism for Electricity
Elementum Energy has signed Ukraine’s first-ever pilot agreement to stabilize electricity prices between the 100 MW Dnistrovska Wind Farm, managed by the company, and an industrial enterprise. The one-year contract is based on the CfD (Contract for Difference) mechanism, which enables businesses to forecast electricity costs and protects them from price fluctuations. This mechanism has been successfully implemented in other countries and is now being tested for the first time in Ukraine’s energy market.
Under the agreement, the parties establish a "price corridor"— a range within which market price fluctuations do not trigger additional settlements between the producer and consumer. If the market price exceeds the upper limit or drops below the lower limit, the difference is compensated by the respective party. In cases where the price surpasses the upper limit, the producer compensates the consumer, and if it falls below the lower limit, the consumer compensates the producer. Settlements are based on an indicative price index specified in the agreement (e.g., the day-ahead market base index) and the agreed electricity volume. Notably, physical electricity delivery is not part of this mechanism; all operations occur in the open market.
This approach minimizes volatility risks for both parties and facilitates efficient cost planning in the energy market.
The pilot project aims to evaluate the viability of the CfD mechanism under current Ukrainian energy market regulations. Olga Rybachuk, Managing Director of Elementum Energy, noted:
“We are introducing an innovative tool in Ukraine's challenging energy market, where instability has become the norm. Our pilot project will help us assess how the CfD mechanism performs in real-world conditions and lay the foundation for its use in new large-scale projects that we are already developing.”
A key aspect of the agreement is its duration. Amid the uncertainties of war, businesses are reluctant to commit to long-term contracts of 10–20 years. However, price stabilization tools with terms of 1–3 years are attracting significant interest, as they offer cost predictability and risk reduction.
Elementum Energy is no stranger to implementing such tools in the market. This pilot agreement marks another step in the development of this mechanism, which could become a vital tool for the stable rebuilding of Ukraine’s energy infrastructure.
About Elementum Energy
Elementum Energy is a leading international investor in Ukraine’s renewable energy sector. The company manages a portfolio of solar and wind power plants with a total capacity of 636 MW and continues to develop new projects in wind energy and energy storage systems.