Ukraine: key energy sector developments 2024

November 5, 2024

Missile and drone attacks in the spring of 2024 led to extensive damage or destruction of up to 9 GW of coal-fired and large hydropower plants, which served as Ukraine's primary balancing facilities. Despite maximizing electricity imports through interconnectors (totaling around 1.7 GW, with expansion plans underway), these attacks led to consumer curtailments during peak hours throughout the spring and summer. Experts estimated a gap in power balance of approximately 2-4 GW, positioning renewables as Ukraine's second-largest electricity source, surpassed only by nuclear.

Measures Ukraine has taken in 2024 to bridge the energy gap

To address the urgent generation shortage, particularly of balancing facilities, the Ukrainian government implemented several pivotal measures:

1. Accelerated "Winterization" and Infrastructure Rehabilitation

The government launched a "winterization" program, prioritizing rapid repair of damaged infrastructure, acquisition or leasing of gas-fired plants, and enabling loans for companies to develop gas and renewable power plants for self-supply. In addition to mobilizing financial and technical assistance from international donors, Ukraine undertook extensive efforts to rebuild and fortify its energy system.

National Renewable Energy Action Plan 2030

The Ukrainian government approved an ambitious National Renewable Energy Action Plan for 2030, outlining a substantial increase in renewable capacity (excluding currently occupied territories):

• Solar: Expansion from 7,327 MW to 12,200 MW (including 7,200 MW from large producers and 5,000 MW from prosumers).
• Onshore wind: Increase from 512 MW to 6,214 MW.
• Offshore wind: Development of 100 MW from a previous baseline of 0 MW.
• Bioenergy (biomass and biogas): Growth from 319 MW to 876 MW.
• Geothermal: Introduction of up to 40 MW, a previously untapped resource.

This ambitious scaling of renewables necessitates the addition of balancing facilities, such as high-maneuverability generation (likely gas peakers) up to 906 MW and energy storage up to 656 MW.

The plan also envisions renewable gas production growth:

• Biomethane: Up to 21.8 billion cubic meters annually.
• Green Hydrogen: Up to 44,957 thousand tons annually.

3. Launch of pilot auctions for renewable projects

In 2024, Ukraine held its first-ever pilot auctions for renewable energy, covering:

• Solar: 11 MW on the left bank of the Dnipro River (October 2024).
• Wind: 88 MW distributed across Ukraine (November 2024).
• Other Renewable Sources: 11 MW planned for auction in November 2024.

4. Biomethane export legislation

New legislation facilitating the export of biomethane via gas pipelines came into effect in September 2024, unlocking the potential for Ukraine to become a biomethane exporter.

5. Capacity payments mechanism for new gas peakers

To address peak generation needs, the Ukrainian government launched a contest for high-maneuverable gas peakers (ranging from 5 to 80 MW), aiming to secure 700 MW. Winners are eligible for capacity payments up to €854,977.50 per MW.

6. Grid support and auctioning for ancillary services

Ukrenergo, the national power transmission company, ran two auctions to distribute 99 MW of Frequency Containment Reserve (FCR) services and up to 1 GW of Frequency Restoration Reserve (FRR) services, with an additional 700 MW FRR auction scheduled for December.

7. Oil and gas licensing expansion

Ukraine's government has been actively auctioning oil and gas exploration licenses via digital platforms. A recent license was acquired for a record UAH 1 billion (over EUR 20 million), signaling investor interest despite current conditions.

8. Partnerships for oil and gas development

State-owned Ukrnafta is seeking partners for production-sharing agreements (PSA) or joint operating agreements (JOA) to advance its oil and gas fields, marking a critical step toward bolstering domestic energy production.

9. Regulatory improvements in energy sector legislation

Recent reforms have streamlined processes for land allocation, permitting, grid connection, and environmental impact assessment, with additional improvements in the pipeline.

A transformative year for Ukraine's energy landscape

In the context of the ongoing conflict, the energy sector has become Ukraine's second-most critical sector, after defense. The government, together with donors and businesses, is pushing to deploy distributed generation, with a strategic focus on renewables and gas peakers. The transmission system operator is enhancing the grid's connectivity and expanding its capacity for new generation. A pilot smart grid project is currently underway in Ternopil, funded by international donors, with plans to scale up smart grid infrastructure nationwide.

Through substantial governmental, financial, and technological support, Ukraine is not only weathering the immediate challenges but is also building a cleaner, more robust energy future which will also provide opportunities for international participation in the sector. For further information and insights visit the Ukraine transformation and rebuild hub.