The destruction of electricity generation capacity is forcing Ukraine to accelerate its energy transition, making it one of the most important areas of foreign business involvement in the country's reconstruction process.
Since the beginning of 2024, Ukraine has been struggling with severe power outages, because of massive Russian air strikes that destroyed about half of the country's energy capacity. The energy crisis has serious consequences for Ukraine's economy, negatively affecting industry and the daily lives of the population. Supply interruptions do not affect critical infrastructure enterprises.
Russia seeks to disrupt the Ukrainian economy by reducing industrial capabilities, including Ukraine's fast-growing defense sector. By depriving Ukrainians of regular access to electricity, Russia is also trying to demoralize the civilian population and weaken the country's resilience.
Russia's attempts to destroy the Ukrainian power grid in the first year of the war, between October 2022 and March 2023, did not bring the intended results. The current campaign, however, has proven to be much more effective. Russia has learned from previous actions and exploited the growing gaps in Ukraine's air defenses caused by delays in the delivery of Western military aid.
It is estimated that in the past five months, Russia has managed to damage or destroy 80% of Ukraine's non-nuclear power plants, including all coal-fired power plants. Missile strikes also damaged many transformer stations. According to the Financial Times, the Ukrainian energy system is in a critical situation, and its generation capacity has halved in recent months. Ukraine's Ministry of Energy has confirmed the instability of generation capacity, but at the same time categorically denies suggestions that a system collapse should be expected in winter. The national electricity transmission system operator Ukrenergo forecasts that the most difficult situation in the Ukrainian energy system will fall in mid-summer 2024 and will improve in the following weeks.
To balance the system, Ukraine periodically imports energy from the EU countries – Poland, Romania and Slovakia. Efforts are also being made to rebuild and strengthen its energy infrastructure. Ukraine has started talks with the European Bank for Reconstruction and Development (EBRD) and the European Investment Bank (EIB) with a view to quickly obtaining funds using the EU's Ukraine Facility program to rebuild its energy sector. During the international Conference on the Reconstruction of Ukraine in Berlin, the first of the agreements on the transfer of one billion euros by the EBRD to Ukraine for energy needs was signed.
In many cases, however, it will be impossible to restore the production capacity of damaged power plants that were built in the 1960s and 1970s. An increasingly urgent challenge, as emphasized by representatives of the Ukrainian government, is therefore decentralization and support for investments in smaller, dispersed energy sources. We are talking about small gas-fired power plants, solar and wind farms, as well as biogas plants processing biomass and waste. The needs will also apply to energy storage systems scattered throughout Ukraine.
On the eve of the war, the Ukrainian Ministry of Energy presented the "National Action Plan for the Development of Renewable Energy until 2030", which includes a plan to increase the share of energy from renewable sources to 27% of the country's total energy consumption. In view of the huge losses in terms of the current energy generation potential, it should be expected that this area will become one of the priorities for the reconstruction of Ukraine, and the process will be faster than planned.
This opens up opportunities for Western companies operating in the field of energy, including renewable energy sources.
These opportunities can also be used by Polish businesses offering goods and services in the energy sector – wind turbines, photovoltaic panels, energy management and storage systems, as well as biogas installations.
In addition to the renewable energy sector, Polish business can also participate in projects to repair damaged energy infrastructure in Ukraine, providing necessary components such as transformers, generators, steam turbines, as well as offering services for the reconstruction of Ukraine's energy system.
