Ukraine’s power system continues to operate under constant pressure, facing aerial attacks, shortages of skilled personnel and critical equipment, as well as complex and high-risk logistical challenges.
However, alongside the risks associated with the war, there is another factor that is less visible but no less dangerous — the debt trap. It erodes confidence, starves investment, and turns any discussion of a rapid recovery into little more than empty rhetoric. Delaying action today means paying a higher price tomorrow.
The Scale of Indebtedness: Figures Putting Pressure on the System
Outstanding payments to renewable energy producers reached their peak in September 2024, amounting to approximately UAH 35.7 billion. Over the course of the following year, this debt was significantly reduced. However, despite this progress, outstanding liabilities related to electricity generated from renewable energy sources (RES) remain substantial. As of October 2025, the total debt owed by Ukrenergo to the State Enterprise Guaranteed Buyer amounted to UAH 16.1 billion.
At the same time, an additional UAH 2.1 billion in arrears accumulated during the period from January to October 2025 alone, indicating that it is still too early to speak of a systematic and sustainable approach to eliminating the debt burden. For example, in 2023 the payment discipline for current settlements was close to ideal, standing at approximately 99%. By 2024, however, the situation had deteriorated, with monthly payment rates falling to a range of 89–95%. Payment performance also remained unstable during the current year, ranging from 77% to 99% from month to month, ultimately resulting in the accumulation of the additional debt obligations mentioned above.
However, 2022 remains the most problematic period. Owing to the fragmentation of the power system into isolated operating zones and the disruption of metering and settlement mechanisms, payment rates fell to as low as 33–45% in certain months. It was during this period that the bulk of the cumulative underpayment for electricity generated from renewable energy sources (RES) was accumulated, ultimately exceeding UAH 15 billion.
Where the Funding Gap Emerges
The electricity transmission tariff remains the main problematic element of the system. Its current level is insufficient to cover the actual financial needs of the State Enterprise Guaranteed Buyer in making payments to renewable energy producers. The National Energy and Utilities Regulatory Commission (NEURC) has adopted a decision to increase the electricity transmission tariff by 7.2% in 2026. However, only time will tell whether this increase will be sufficient to restore payment discipline within the renewable energy sector.
This calculation should also incorporate outstanding payments from end consumers and the sale of part of the electricity generated from renewable energy sources (RES) on the balancing market at discounted rates. As a result, a persistent cash flow gap emerges, exerting sustained pressure on the energy market.
The market is still dealing with the consequences of ineffective regulatory decisions. In particular, the imbalance settlement methodology adopted in 2021 artificially suppressed payments for electricity generated under the feed-in tariff (FiT) mechanism. At the end of 2024, following lengthy legal proceedings, the formula was ruled unfair by the court. As a result, the issue of recalculating payments for electricity generated under the feed-in tariff scheme during 2021–2022 was placed on the agenda. Although this measure is justified, it also increases the overall amount payable.
Trust as Infrastructure: How It Was Lost and How It Can Be Restored
Until the autumn of 2024, approximately 90% of international assistance provided to Ukraine’s electricity sector was channelled through Ukrenergo in the form of grants and concessional loans intended for the construction of protective infrastructure, the procurement of equipment, and related purposes. Following a series of management scandals and the company’s technical default on its Eurobonds, this funding channel was all but depleted.
International support declined sharply, while stockpiles of transformers, circuit breakers, cable accessories, and other essential equipment remain inherently limited. When each large power transformer costs millions of dollars and requires months to manufacture, a funding gap can quickly turn into a shortage of critical equipment. This is precisely where the “weak link” of the autumn–winter season emerged: critical equipment and protective fortifications are needed today, not in some idealized future.
Imports: A Bridge, Not a Strategy
In November 2025, electricity imports increased by 15%, reaching approximately 415 thousand MWh, while Ukraine remained a net importer of electricity for the second consecutive month.
At present, Hungary accounts for approximately 44% of Ukraine’s total electricity imports. Imports from Slovakia have increased severalfold, while imports from Moldova have doubled. Electricity exports have been virtually suspended since 11 November.
The issue extends beyond electricity prices and the availability of external supply. Capacity constraints within Ukraine’s west-to-east transmission network limit the effective use of imported electricity. As a result, the country incurs higher costs while being unable to fully benefit from the available import volumes because of insufficient transmission capacity.
Practical Solutions That Deliver Results: Boilers, Pumps, and Cogeneration
The government has expanded the list of equipment for critical infrastructure facilities that may be procured outside the electronic public procurement system. Heat pumps, modular boiler houses, and grid connection units are among the assets covered by this measure, allowing for a faster response during peak periods and facilitating the development of reserve capacity.
A special natural gas price of UAH 19,000 per thousand cubic metres has been established for a period of one year for power producers located in frontline regions. The measure is aimed at supporting combined heat and power plants (CHPs), gas turbine units (GTUs), and gas reciprocating engine power plants, which play a critical role in balancing peak loads within the power system. The primary focus is on cogeneration, which enables the simultaneous production of heat and electricity while strengthening the decentralization of the power system. These are important and well-founded measures; however, they cannot replace the key priority – restoring the market’s financial sustainability and economic rationale.
The Cost of Delay: Imports, Risk, and System Failures
As a result, debt-related uncertainty has effectively become a risk premium, which investors invariably factor into a higher cost of capital or translate into a decision not to enter the market at all.
Without new investment, Ukraine will be unable to develop the 3.5–4 GW of flexible and distributed generation capacity that the country will require over the next four to six years. Without these additional capacities, the power system will face greater difficulties in managing peak demand, increased dependence on electricity imports, and reduced operational flexibility. The consequences would include depleted maintenance reserves, postponed modernization programmes, and an increasing incidence of equipment failures.
Therefore, it is now time to call things by their proper names.
- Debt is not merely a legacy of the past. The underlying causes of the problem have not disappeared: the tariff shortfall, payment arrears, the sale of renewable electricity on the balancing market at discounted prices, outstanding liabilities dating back to 2022, and recalculations mandated by court rulings all remain unresolved.
- Trust is an asset: it is lost quickly but rebuilt slowly. Without transparent governance and predictable market rules, it will be impossible to scale up external financing.
- Imports are a bridge, not a road. Imports may help the country get through the season, but they do not create domestic capacity.
Action Plan: From Immediate Measures to Systemic Solutions
Against this backdrop, it is already possible to formulate a step-by-step plan for restoring the financial stability of the market.
Immediate actions (within three months): closing legal gaps and bridging the cash flow gap:
- Recalculate payment obligations for electricity generated from renewable energy sources (RES) for the period 2021–2022 without applying the previously introduced reduction coefficients, thereby eliminating the grounds for future disputes.
- Adjust the electricity transmission tariff to reflect the actual funding requirements of the Guaranteed Buyer. The approach should be driven not by political considerations, but by technical calculations based on actual target expenditures.
- Launch a dedicated financing mechanism to clear the remaining arrears (through domestic government bonds or other targeted instruments) in order to eliminate uncertainty and reduce the market risk premium.
Actions for the next 6–12 months: restoring financial accounting systems and financing channels:
- Legislatively establish a clear framework for the settlement and accounting procedures related to 2022.
- Restore channels for international financial assistance through transparent corporate governance mechanisms.
- Standardize fast-track procurement procedures for critical infrastructure by defining clear equipment lists, verification requirements, and transparent post-award monitoring mechanisms.
Actions for the next 12–36 months: a new payment model and flexible generation capacity:
- Establish a sustainable payment framework for renewable energy sources (RES), ensuring regular payments, clear prioritization rules, and a well-defined allocation of responsibilities among market participants, while integrating support mechanisms for flexible generation capacity.
- Replace cross-subsidization with targeted social support mechanisms to prevent the recurrence of structural financial imbalances.
- Prioritize decentralized generation and cogeneration projects in regions experiencing energy shortages.
Expected Outcomes: Investment, Reserves, and Fewer Outages
Debt repayment is more than a financial transaction; it is a signal to the market. It demonstrates that the state recognizes its obligations and is capable of fulfilling them. Once that signal is delivered, investment decisions accelerate and the cost of capital declines.
Ukrainian companies that receive the payments they have been awaiting will be able to reinvest in modernization and expansion. International donors, in turn, will see a clear and transparent mechanism and will be more willing to provide targeted support programmes for protective infrastructure, power networks, and critical equipment. The power system will gain the resources needed for repairs and reinforcement, while consumers will benefit from fewer outages and greater predictability.
Every month of delay means lost megawatts, a higher import bill, longer equipment delivery times, and yet another contractor reassessing both risks and financing costs. Every step of the roadmap must have a clearly defined deadline and an accountable party. Only then will tariffs cease to be a political issue, debt cease to be a chronic condition, and imports cease to serve as the system’s only safeguard.
Ukraine has already demonstrated its ability to keep the power system operating under constant attack. The next challenge is to prove that we are equally capable of maintaining financial discipline. Restoring power lines is a matter of engineering; restoring trust is a matter of rules. In a debt trap, those who prevail are the ones who choose to invest in the future rather than continue paying for the mistakes of the past.
Author: Vadym Lytvynenko, Executive Director of NVP ENERGO-PLUS LLC.
Sources: The Page, Energy Club, Liga, Obozrevatel, Energy Club Facebook.
