28.07.2026
On July 16, during the forum “Corporate Governance in Energy: From Formal Rules to Real Responsibility,” Energy Club summarized the results of a three-month special project dedicated to modern approaches to energy company management.
One of the speakers at the event was Borys Kostiukovskyi – CIGRE expert, Scientific Director of the Bureau for Comprehensive Analysis and Forecasts, former head of the Generating Capacity Adequacy Assessment Department at NPC Ukrenergo, head of the R&D Department at Enpaselectro Science and Technology Centre LLC, senior researcher at the National Academy of Sciences of Ukraine, PhD in Technical Sciences, laureate of the State Prize of Ukraine in Science and Technology and the NAS of Ukraine Prize, and one of Ukraine’s leading specialists in energy modeling. Over more than 30 years of professional activity, he participated in developing Ukraine’s Energy Strategy, national communications on climate change, the National Greenhouse Gas Inventory, the Generating Capacity Adequacy Report, and served as an expert for international projects by UNDP, USAID, the World Bank, and the EBRD.
In his speech, Borys Kostiukovskyi proposed looking at corporate governance much more broadly – through the lens of fundamental contradictions embedded in the very architecture of the modern energy market.
Is it possible to combine market rules with state responsibilities?
According to the expert, today’s discussions about corporate governance, supervisory boards, independent directors, and management efficiency often overlook the main issue: the energy market in Ukraine was built on European market principles, while the state’s role in the economy remains paternalistic.
“Corporate governance mechanisms function effectively when a company operates in a purely market environment, where its primary objective is profit, capitalization growth, and economic efficiency. However, in Ukraine, state energy companies are assigned entirely different tasks: ensuring low tariffs for the public, guaranteeing energy security, keeping the power system stable, and supporting industrial development. This creates a systemic conflict between market rules and state policy expectations,” Borys Kostiukovskyi emphasized.
The speaker drew attention to the fact that when a company is tasked with non-commercial functions, corporate governance mechanisms inevitably begin to malfunction.
The mechanism of public service obligations (PSO) as an indicator of system distortion
As a vivid example of this contradiction, Borys Kostiukovskyi cited the Public Service Obligations (PSO) mechanism, through which state companies – Energoatom and Ukrhydroenergo – compensate for affordable electricity tariffs for domestic consumers.
“In a normal market model, social support should be provided directly through the state budget or specialized funds. Instead, the state obliges state enterprises to cover these costs at their own expense. As a result, companies lose investment capital, accumulate debt, and cannot invest in modernizing their generating capacity. In such conditions, demanding classic financial efficiency from supervisory boards or management is simply unrealistic,” the expert noted.
European experience: even mature markets face similar challenges
Borys Kostiukovskyi emphasized that this problem is not unique to Ukraine. European countries, which spent decades building liberalized energy markets, are currently forced to adjust their models.
“The energy crisis in Europe, caused by Russia’s aggression and volatile energy prices, demonstrated that pure market mechanisms cannot independently ensure energy security, grid stability, and affordable prices during crises. Today, EU countries are actively introducing capacity mechanisms, state support programs, and strategic reserves. In fact, this is a return to a broader state presence in energy sector regulation,” the speaker explained.
Capacity adequacy as a key indicator of state responsibility
The expert separately highlighted capacity adequacy assessment, which is one of the key tools for strategic energy planning.
“Market signals alone do not always incentivize investors to build new generating capacity, especially peak-load or maneuvering generation, which is required only during specific hours. That is why the state, through system operators, must create long-term incentives and mechanisms that support power system reliability where the market itself fails to deliver it. This proves that even in a competitive environment, the state is forced to intervene to guarantee energy security,” Borys Kostiukovskyi stressed.
Conclusions and key takeaways
Summing up his address, Borys Kostiukovskyi emphasized that corporate governance issues are the consequence of a much deeper contradiction between the market model of the energy sector and state responsibility for economic development, energy security, and social protection of consumers.
As long as this fundamental conflict exists, the expert is convinced, management conflicts within energy companies will also persist. Company management operates under market laws, whereas the state objectively cannot abandon its mission to support the economy, guarantee power system reliability, and ensure the availability of energy resources for consumers.
Borys Kostiukovskyi’s address was one of the most conceptual at the forum, shifting the discussion from individual managerial decisions to a broader understanding of energy sector transformation. His thesis on the need to find a balance between market mechanisms and state responsibility reaffirmed that effective corporate governance is impossible without a clear awareness of energy’s strategic role in the economy, state security, and societal well-being.
