With a power score of 1.81, Ukraine ranks number 50 among emerging markets and number 77 in the global ranking.
- Emerging markets
1.81 / 5
Net-zero goal and strategy
Ukraine’s government has remained committed to its long-term decarbonization targets despite Russia’s invasion on February 24, 2022. The European Union has also announced plans to fund the clean energy sector as part of post-war recovery efforts. However, while the country is facing war, many decarbonization policies are very challenging or even impossible to implement.
The National Economic Strategy, approved in March 2021, aims for 25% share in electricity by 2030, 65% reduction of greenhouse-gas emissions from the 1990 levels and climate neutrality in 2060.
Previously, Ukraine’s energy strategy, adopted in 2017, envisioned a 25% renewable energy share in final energy consumption by 2035. The National Renewable Energy Action Plan, approved in 2014, aimed for 11% of generation to be met by renewables by 2020. The 2020 target was met.
Nationally Determined Contributions (NDC)
Ukraine’s updated Nationally Determined Contribution (NDC) to the Paris Agreement, submitted in July 2021, targets 65% emissions reduction by 2030 compared to 1990 levels.
Ukraine has already exceeded the target set in its first NDC, despite an ongoing conflict with Russia since 2014. In its first NDC, Ukraine committed not to exceed 60% of the 1990 greenhouse-gas emissions level in 2030. As of 2019, emissions in Ukraine decreased by 62.4% since 1990, including land-use and forestry emissions (LULUCF).
Fossil fuel phase-out policy
During the COP26 climate conference in November 2021, Ukraine pledged to end coal-fired power generation by the end of 2035.
Ukraine was heavily dependent on Russian oil, gas and coal imports prior to the Russian invasion in late February 2022. While Ukraine has no plans to completely phase out gas, the country plans to significantly cut use of the fuels by improving energy efficiency as part of post-war reconstruction efforts.
Ukraine reached its 2020 target of an 11% share of renewables in power generation. A generous feed-in tariff, tax incentives for the import of renewables-related equipment and a break on corporate tax for sales of electricity from renewable sources spurred a surge in build since 2017.
Over 2011-2020, Ukraine awarded new renewable energy projects with a feed-in tariff. The rate of these tariffs was among the most lucrative offered in Europe, at around $170/MWh. Projects awarded feed-in tariffs must commission by the end of 2021 for solar projects and by the end of 2022 for wind energy projects. In July 2020, feed-in tariffs for projects commissioned before this date were retroactively cut by 2.5-15%, depending on the project technology and size. In March 2022, the Ukranian energy ministry published an order that specified the tariff levels according to technology, with wind and solar receiving lower feed-in tariffs that for example biomass.
Feed-in tariff payments have been delayed several times, with payments arriving several months later than scheduled. Renewable energy plants also have the right to curtailment compensation, but these payments have also seen delays. One explanation for this is the debt of Ukrenergo, the main utility which buys the renewable energy at guaranteed rates. These issues emerged prior to the war.
Ukraine’s Electricity Law, which came into full effect in July 2019, established a framework meant to support continued growth of renewables through a tender/auction program, but auctions have been delayed. An auction for 365 megawatts of renewables in 2021 was announced but had not taken place by early November 2022. The auction timeline has now been put on hold for an undefined amount of time as a result of the Russian invasion.
Power prices and costs
Power prices in Ukraine were regulated until the introduction of a wholesale market in 2019. New market rules have not brought full liberalization, however, as some state-owned power is price-capped to keep residential electricity tariffs low. The wholesale market is still heavily concentrated, and dominated by fossil fuel plants owned by DTEK. To avoid excessive volatility, the wholesale market is operated with price caps.
Wholesale prices rose by 50% over 2020-21, as demand rebounded after Covid. The average wholesale price of $71/MWh (UAH1928) was also some 30% above the 2019 price-level. Residential prices were capped at around $60/MWh in 2021, below the cost of wholesale power.
The new electricity law of 2019 liberalized the power market, clarified the offtaker’s role and established a framework for standardized power purchase agreements. This boosted investor confidence, which had been undermined by political instability over the past decade and territorial conflict with Russia.
The biggest single investment so far has been by Norwegian wind developer NBT, with a $210 million loan for the first phase of the Syvash wind project. Local developers, led by Ukraine’s largest non-state utility, DTEK, have played a large role in the development of the sector.
The new power market structure will require further price liberalization to incentivize independent power producers to enter the market. Generation is only partially privatized, and DTEK is by far the largest single player.
Nuclear plants supplied more than half the electricity generated in Ukraine in 2021 – a proportion that has remained fairly stable since 2015. Solar and wind accounted for around 7% of generation in 2021, and this share has more than doubled since 2019.
Both thermal and nuclear plants need investment for renewal and life extension. It is unclear how this will be funded and how retail prices will change if and when price caps are lifted. Ukraine’s situation is further complicated by a shortfall in coal supplies from the east of the country, which has been destabilized by conflict with Russia. Coal imports have partially compensated for this, while some plants are retrofitting to run on gas instead.
The Ukranian power grid was synchronized with the European power network in March 2022, after ENTSO-E (European Network of Transmission System Operators for Electricity) granted an emergency approval. Ukraine and neighboring Moldova had prepared to start operating grids in synchronization with Europe since 2017. At the time of the Russian invasion, the Ukranian grid operator had disconnected the power system from the Russian grid for what was meant to be a 72-hour trial to prove that Ukraine could retain grid stability without being linked to the larger Russian grid. To support the stability of Ukraine’s grid, the system was synchronized with the European grid. However, cross-border trading opportunities remain restricted by limitations in the physical grid connections.
Installed Capacity (in MW)
Electricity Generation (in GWh)
Which segments of the power sector are open to private participation?
Wholesale power market
Does the country have a wholesale power market?
Doing business and barriers
The war has severe implications for the stability of the Ukranian power system. For example, Russian forces took control over the 5.7-gigawatt Zaporizhzhya nuclear power plant at the start of the war, and the plant has been intermittently fully or partially disconnected from the Ukraine grid since then.
Ukraine’s renewables sector was facing challenges already over 2020-21 before the war. Regulatory and legislative reforms spurred a boom in clean energy financing in Ukraine over 2018 and 2019, with more than $5 billion invested. The European Bank for Reconstruction and Development has gone to great lengths to present Ukraine as lower risk than previously perceived. Cuts to the feed-in tariff, which is backed by a sovereign guarantee, are likely to undermine this confidence.
Power demand in Ukraine fell after the 2014 Russian annexation of Crimea. Ongoing militarization of eastern Ukraine has led to major economic volatility and a longer-term slowdown. Demand has revived somewhat since 2016, as parts of the country have stabilized and returned to growth. However, power demand after the Russian invasion in 2022 is estimated to have dropped by as much as 30% from 2021 levels.
The current generation fleet has been adequate to serve the national market, but Soviet-era nuclear assets must either be upgraded or replaced. Wind and solar resources are attractive, but the distribution and transmission system will require major investment to integrate growing renewables capacity.
There are restrictions on the use of agricultural land for renewables projects and on the production of bioethanol by foreign companies. There also are untested rules around the ownership of strategically important energy assets by foreign companies.
Probably of greater concern are risk perceptions. Before the war, political fears subsided after national elections in early 2019 took place with relative transparency and uncontested results. The retroactive cuts to feed-in tariffs, introduced in 2020, were based on a Memorandum of Understanding with local renewable energy associations but faced opposition from many power producers. The country still ranks poorly in international corruption assessments. Currency fluctuations have been a barrier to renewables deployment, though the feed-in tariff was linked to the euro to circumvent this issue. The administrative burden on foreign companies remains onerous.
Currency of PPAs
Are PPAs (eg. corporate PPAs and all other types) signed in or indexed to U.S. Dollars or Euro?
Bilateral power contracts
Can a C&I (Commercial and Industrial) customer sign a long-term contract (PPA) for clean energy?
Fossil fuel price distortions - Subsidies
Does the government influence the wholesale price of fossil fuel (used by thermal power plants) down through subsidies?
Fossil fuel price distortions - Taxes
Does the government influence the wholesale price of fossil fuel (used by thermal power plants) up through taxes or carbon prices?
New sectors coming soon
Sign up to get alerted when we launch the Transport and Buildings sectors.