Ukraine is facing the most severe trial in the history of its energy system. Russian attacks, capacity shortages and the need for restoration and decarbonization are creating unprecedented challenges. Yet, this also opens a unique window of opportunity.
In partnership with international donors, investors and local communities, Ukraine is gradually building a new architecture for its energy security.
At the heart of this transition are new technologies, investments in distributed generation and energy storage systems, as well as the state’s commitment to supporting the sector during this critical period.
Restoration and decentralization: projects shaping the new energy sector
In the country’s most vulnerable regions, critical restoration projects are already underway. One of them is the complete reconstruction of the Combined heat and power plant in Okhtyrka city, which was destroyed back in March 2022.
Thanks to funding from the Fund for the Elimination of the Consequences of Armed Aggression (UAH 46 million in 2024, with a total budget of over UAH 157 million), the facility has already been more than 80% restored. After the work is completed in 2025, 9,000 residents, as well as 42 social institutions – schools, hospitals and kindergartens – will benefit from a stable heat supply.
At the same time, an investment expansion into new green generation is underway. A prime example is the plans by the German company NOTUS ENERGY to build one of the largest wind power plants in the Kyiv region (60 turbines with a total capacity of 400 MW) in the Makariv community.
The company has already signed a memorandum of cooperation with the community leadership. For local residents, this will mean not only new jobs but also investments in infrastructure and energy independence.
The role of the state: programs, reforms, regulation
Despite the martial law and massive destruction, the state maintains an active role in shaping the new energy architecture.
One of the key directions has been funding the restoration of critical infrastructure. An example here is the previously mentioned reconstruction of the Combined heat and power plant in Okhtyrka city. What proved decisive for restoring this facility’s operation was the timely funding from the Fund for the Elimination of the Consequences of Armed Aggression.
Another important step has been the simplification of regulatory procedures for the implementation of new technologies. Specifically, it concerns the connection of energy storage systems, which allow the grid to be balanced during peak hours or in emergencies.
Simultaneously, the state is updating its legislation to support the development of renewable energy and involve communities in the creation of local power generation facilities. Such initiatives pave the way for greater system decentralization, which is critically important in the context of regular shelling.
Simultaneously, the reform of the market’s financial model continues. In particular, the increase in tariffs for electricity transmission and distribution has partially resolved the task of settling the state’s financial obligations to «green» energy producers. This tariff was underfunded for years. The new tariffs have at least become a safeguard against the emergence of new debts to the renewable energy segment and have created a more predictable environment for investors.
Special attention is being devoted to the harmonization of the Ukrainian energy system with European standards. This includes both technical synchronization and regulatory alignment of procedures. These steps open up for Ukraine not only new markets but also the possibility of avoiding financial losses under the Carbon Border Adjustment Mechanism (CBAM), which will require transparent accounting of the carbon footprint of goods exported to the EU.
All of this together demonstrates that the state is not merely attempting to patch gaps, but is also setting a vector for transformation towards a sustainable, integrated and flexible energy sector.
Innovation on the March: Energy Storage and SMRs
One of the latest trends has become energy storage systems, which are critically important for balancing unstable generation and operating under deficit conditions. According to the information from the National Commission for State Regulation of Energy and Public Utilities (NEURC), as of the end of 2024, technical conditions for the connection of 3 GW of Energy Storage had been issued in Ukraine (2.7 GW – to the transmission system operators grids, 0.7 GW – to distribution system operators grids).
However, in reality, only 17.4 MW of energy storage capacity had been actually connected. This indicates a colossal potential for growth that needs to be realized right now.
But progress does not stand still. The next step could be the spread of Small Modular Reactors (SMRs). For example, Poland has already begun construction of Europe’s first BWRX-300 reactor in the city of Włocławek. Sweden, Estonia, and Hungary have also announced their intentions to deploy the BWRX-300.
Ukraine also cannot ignore this technology: SMRs are an opportunity to replace old coal capacities and create safe, compact generation adapted to new challenges.
Impediments to development
However, it must be acknowledged that the energy reform cannot proceed without resolving critical issues, namely:
- Chronic underinvestment in the grids and high failure rates. Even before the war, Ukraine had the highest duration of power outages (SAIDI) among European countries.
- Rising electricity prices due to currency devaluation, increased costs of nuclear fuel, natural gas imports and the necessity of electricity imports.
- The lack of instruments for accounting for the carbon footprint of products, which creates risks for exporters in the context of the CBAM.
- Outdated electricity market regulation (including price caps), which deters investment and integration into the European market.
- An unbalanced tariff policy, which has previously led to the accumulation of debts to «green» energy producers.
A look into the future
Ukraine is not simply rebuilding what was lost. It is building a new energy system – one that is more resilient, decentralized and innovative. In this system, there will be a place for SMRs, local solar power plants, powerful wind farms and intelligent demand management.
But the ultimate goal is reliable heat and light for every household. This is the true meaning of the energy transition: not just technology, but also caring for people.
The author of the article is Andrii Kalinov, Technical Director of NVP «ENERGO-PLUS» LLC.
Source: The Page.
