By Monika Bucha, LL.M. / B.Sc., Legal Affairs & Energy Law at Kelso Institute Europe
In December 2024, Russia conducted its 12th large-scale assault on Ukraine’s energy infrastructure this year, damaging transmission grids and power facilities, especially in the western border regions (BBC News, 2024) From October 2022 to April 2023, 43% of Ukraine’s main power grid was damaged (Poltavets and De Vos, 2024), leaving over a million people without electricity (Meduza, 2024). The inability to operate air conditioning in summer and heating in winter has gravely impacted the health of Ukraine’s citizens.
The decline in energy availability is stark: Before Russia’s full-scale invasion on 24 February 2022, Ukraine produced 44.1 gigawatts hours (GWh) of electricity, mainly with nuclear, thermal, and hydroelectric plants (UNHR, 2024). Winter electricity needs stood at 26 GWh. By the winter of 2023-2024, production had plummeted by over 50% to 17.8 GWh, while peak consumption dropped by almost 30% to 18.5 GWh (UNHR, 2024).
To mitigate the impact, Ukraine has received emergency from Poland, Romania and Slovakia (Polityuk, 2024). This assistance was facilitated by the synchronisation of Ukraine and Moldova’s grids with the European Network of Transmission System Operators for Electricity (ENTSO-E) (European Commission, 2024). Just two days after the initial attack on February 22, 2022, Ukrainian grid operators were able to disconnect from the Russian grid and synchronised with the European grid three weeks later (Casey, 2024). However, the commercial capacity is limited, and European electricity prices exceed those of Ukraine’s domestic market (Yulia, 2022), prompting a need to reconsider Ukraine’s energy strategy.
Ukraine heavily depends on imported oil, coal and natural gas
Before the war, Ukraine’s energy needs were met through a mix of domestic production and imports. According to the International Energy Agency (IEA), Ukraine’s total energy supply in 2022 comprised coal (21.7%), nuclear (26.5%), natural gas (25.1%) and oil (18.6%). Renewables, excluding nuclear – despite their huge potential (#Renewables4ukraine, 2024) – accounted for a minor share, with the remaining 8.1% coming from hydro, geothermal, biofuels, and waste (IEA, 2024a).
In 2022, while Ukraine was self-sufficient in nuclear energy production, it relied heavily on imported oil (83%), coal (50%) and natural gas (33%). Data by the Ukraine’s State Fiscal Service indicated that in 2018, the largest share of oil was imported from Belarus (38.7%) and Russia (37.3%) (IEA, 2021). Prior to the Russian invasion in February 2022, the IEA had already highlighted the significant risk of an oil supply shortage if Russia were to disrupt the Ukrainian oil market, prompting initial steps towards energy diversification.
Decentralised energy production to secure reliability of supply
In 2024, the IEA outlined ten actions to bolster Ukraine’s energy security for the upcoming winter. Notably, action three emphasises that large energy assets are particularly susceptible to attacks, making decentralisation a strategic advantage. Accelerating the deployment of smaller-scale gas-fired combined heat and power plants, alongside solar PV and wind systems, supplemented with batteries and other storage technologies, is crucial for enhancing the resilience of the energy supply (IEA, 2024b).
Since the onset of the war, Ukraine has experienced a significant increase in the importation of diesel generators to provide backup power, with hundreds of units arriving daily from international allies and donors (Ministry of Economy of Ukraine, 2024). However, as demand has surged, generators have become both costly and environmentally detrimental. Consequently, many municipalities are opting for solar PV panels, battery systems, and heat pumps at hospitals and other critical infrastructure sites as more sustainable, cost-effective alternatives (Adbullah, 2023).
Ukraine could become a testing ground for decentralised energy production
The Ukrainian government (2023) recently declared that building a decentralized and diversified energy system—one that is more resilient against military attacks or natural disasters and can enhance energy security while facilitating the transition to renewable energy sources (RES)—will be a key priority. This initiative resonates with the public sentiment, as over 80% of Ukrainians believe in maximizing the use of RES and that distributed energy generation could significantly strengthen the nation’s energy independence (Ecoaction, 2022). While this new system is in its early days and far from formalized, with the right support it could become a testing ground and model for Europe’s energy transition.
To also promote a just and inclusive energy transition, the Civil Society Energy for Resilient Ukraine project is facilitating the formation of renewable energy communities (Citizen Energy for Ukraine, 2024). These communities are groups of citizens who collectively own and operate renewable energy projects, thereby enhancing local energy independence, reducing costs, and aiding the decarbonisation of the energy system. However, a recent report from Razom We Stand (2024) also flags that current laws fail to define “decentralised electricity generation” and do not regulate energy storage systems or small distribution systems. Simplifying access to the grid is essential for more of these secure projects, it says (Birol, 2023).
Outlook: A Green Energy Marshall Plan for Ukraine
Ukraine’s journey towards a sustainable energy future is marked by both significant challenges and substantial opportunities. The Current Prime Minister, Denys Shmyhal, and various international bodies have voiced strong support for a just transition in Ukraine’s coal regions, underpinned by inclusivity and sustainability. Notable international assistance has been provided, including aid from the EU Civil Protection Mechanism and commitments to support structural changes in the energy sector (Borell, 2024). Additionally, initiatives such as the Ukraine Energy Support Fund are dedicated to fostering territorial energy developments (Energy Community, 2024).
While there is theoretical support for a sustainable transition, a lack of investor confidence is stalling immediate progress. Following Russia’s 2022 invasion, foreign direct investment in Ukraine plummeted from USD 6.5 billion in 2021 to just USD 570 million in 2022, as reported by the Vienna Institute for International Economic Studies. Concerns about physical risk to assets are particularly acute in the energy sector, where Russia’s targeted destruction of energy facilities further complicates the acquisition of bank financing (Januta, 2024).
To support a green and sustainable energy transition in Ukraine, it is crucial to eschew investment projects that could trap Ukraine in lock-in situations and instead promote a new, decentralised approach to energy transition. Campaigners were calling for a “Solar Marshall Plan” ahead of the Ukraine Recovery Conference in Berlin which took place in June 2024. The demand partner countries help by providing cheaper loans through financial aid; more technical know-how and skilled workers; and battery storage technologies (Limb, 2024). The time to set the direction for Ukraine’s energy future is now.
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