Under Russia’s invasion, 60% of Ukraine’s power system capacity remains occupied, damaged, or destroyed, and the bombardments weaken the remaining coal, hydro and nuclear capacities. A new report by Instrat think-tank, based on the PyPSA-UA power system model, shows that Ukraine faces an unprecedented challenge, requiring the installation of 5.4 GW of new capacity within the next two years and 9.2 GW more across 2027-2030. Decisive government actions are essential to unlock the necessary investment and accelerate deployment.
New capacities needed now
Ukraine is facing a power deficit during periods of seasonal peak consumption and remains under constant threat of further attacks on its energy system. To address its immediate energy needs, Ukraine urgently requires 4.3 GW of new renewable energy sources (RES) by 2026, 1.1 GW new fast-start gas supported with 2.8 GW of repaired remaining plants as well as ensured additional 0.6 GW of cross-border capacity. PV can play a decisive role, of which the majority could be behind-the-metre. The energy produced in such systems is used primarily for the building’s own consumption and reduces its need for electricity from the grid.
Oleksii Mykhailenko, author of the report and the Head of Analytics at the Clean Energy Lab, think-tank from Kyiv which partnered with Instrat, explains the narrow path to achieve that: – This effort requires mobilising a major investment of at least EUR 4.3bn in the next 2 years. Unlocking investments and deploying such capacity in a record timeframe calls for decisive policy actions. The best way is to leverage the existing pipeline of utility-scale project developers and tap into the potential of small and medium prosumers.
PV and wind can become the backbone of Ukraine’s power system by 2030
Given the current uncertainty regarding the military and geopolitical situation, the study considers 2 scenarios: starting with an ‘immediate’ 2026 scenario, experts consider 1) the ‘Frontline’, which assumes a prolonged conflict that will lock control over territories along today’s frontline in 2030; and 2) the ‘Victory’, that envisages Ukraine regaining control over all of its territory including the Crimean peninsula by 2030. Under all of those, Ukraine faces an unprecedented challenge, requiring the installation of 10.5-14.6 GW of new capacity by 2030.
Oleksii Mykhailenko stipulates the need to boost specific capacities: The Frontline pathway requires 9.4 GW of new RES and 1.1 GW of new gas capacities, together with 3.8 GW of repaired legacy capacities by 2030. The Victory pathway requires 12.8 GW of RES and 0.9 GW of new gas in addition to 7.4 GW repaired and 3 GW unoccupied capacities. Prosumer-driven behind-the-meter solar capacities can play a decisive role, contributing up to 7.5 GW by 2030. A combination of wind and gas-fired generation is required to maintain larger continuous loads during winter seasons.
Security premium
A transition to a decentralised gas & renewable system costs more but is more resilient. Scenarios considering the repairs of damaged stations require the least investments compared to others – EUR 12.5 bn to EUR 9.3 bn over the next 5 years. This means that repairing coal power stations is cheaper, but it leaves them vulnerable to attacks.
The decentralised pathways with high levels of RES and gas-fired generation replacing legacy coal suggest higher investment costs between EUR 18.8 bn and EUR 13.6bn, depending on the scenario. When comparing the Repair and Decentralised scenarios, the 46-50% capital cost increase serves as a security premium. Mykhailenko sums up – It is simply more costly by around a half and more challenging to rebuild the generation fleet with renewables and gas at the pace that we propose than repairing the coal plants. Having said that, you can’t put a price tag on security, but if you could – this is a ballpark figure.
Policy implications
A build-out pace of this magnitude was last achieved in 2019-2020 fueled by renewable support schemes. However, today, investors face debts and have low trust in the government’s support. The Ukrainian electricity market needs more robust, more reliable policy support than ever to meet its ambitious goals.
Decisive government actions are essential to unlock the necessary investments and accelerate new capacity deployment in Ukraine. Oleksii Mykhailenko enlists the steps that Ukraine can take to meet this pressing need: – The government must take decisive action. Restoring trust in support policies is crucial, beginning with addressing debts to renewable energy investors and ensuring the long-term sustainability of payments. Auction-based procurement of renewables should be leveraged to unlock the project pipeline, particularly the 4.8 GW of wind power.
Resolving debts and lifting price caps in the balancing market is essential to attract investment in flexible generation and improve overall market economics. Active support for behind-the-meter photovoltaics is equally important, ensuring subsidised loans are sufficient for target capacities and expanding support to include grants if necessary. Poland’s experience in managing rapid solar growth could be helpful for Ukraine’s energy system strategy. In recent years, we have built more than 15 GW of much-needed PV panels, but too often, without storage and with too simple business models. Let’s capitalise on this lesson and ensure Ukraine has a healthy solar growth plan targeted at the right customers with conscious business models – says Michal Hetmanski, Instrat’s CEO.
Additionally, the government should establish industry standards and fund pilot aggregation programs to smooth the integration of behind-the-meter applications, boosting system flexibility. Finally, a strong and unambiguous message on mid-term investment priorities is needed. Overemphasis on large nuclear projects risks diverting resources from renewables, and delays in expanding generation capacity could prove costly.
The report is a result of Instrat’s expansion of energy modelling capacity beyond Poland. We modelled Ukraine’s energy market in partnership with the Kyiv-based think tank Clean Energy Lab and the open-source energy modelling consultancy Open Energy Transition.