The shape of the Ukrainian power industry 

The total installed capacity of Ukrainian generation sources is approximately 55 GW[1]. Most of this capacity comes from coal- and gas-fired power plants. These, together with cogeneration, are distributed relatively evenly across the country, however, they are concentrated in the south and east of the country. Nuclear power plants, with a total capacity of almost 14 GW, are located in the west and south of the country. Currently, only the Zaporizhzhia NPP is on the front line. Hydroelectric power plants, on the other hand, are mainly located on the Dnieper and, to a lesser extent, on the Dniester. The deployment of RES is the least favourable. Due to the wind and solar conditions, the most advantageous location for their development is in the partially occupied south and east of the country and along the Carpathian Mountains. 

Nuclear power plants generate more than half of the electricity produced in Ukraine. These are followed in the Ukrainian generation mix by coal and gas-fired power plants and CHP. Renewable energy in 2020 accounted for about 7% of the electricity generated, of which two-thirds was produced by solar power plants[2]. The share of renewable energy has been growing dynamically in recent years and as recently as 2018 it accounted for less than 2% of the mix. The least amount of electricity, around 5%, was produced by hydroelectric and pumped storage hydropower plants, which play a balancing role in the electricity system. To a limited extent, coal-fired power plants are also used for this purpose. 

District heating plants are the most important from the perspective of providing heat energy in Ukraine, accounting for more than half of the supply. However, CHP plays a significant role, especially in large cities, accounting for around 30% of heating nationwide[3].  

Wartime oversupply 

The war has significantly changed the operating conditions of Ukraine’s energy system. In August, around 90% of Ukraine’s wind power plants were located in Russian-occupied areas or were damaged. A similar fate was suffered by about 30% of solar power plants and CHP plants[4]. The 6 GW Zaporizhzhia NPP is also occupied. Russia has destroyed most of the lines connecting it to the area controlled by Kyiv and plans to use it for Russian needs, re-synchronising it with the Russian system[5]. In addition, the Kakhovka Hydroelectric Station is occupied. 

At the same time, Ukrainian demand has collapsed. Power demand has fallen by as much as a third, from around 15 GW in September 2021 to only about 10 GW a year later[6]. As a result, Ukraine has reduced renewable energy output by approximately 30%[7]. The inflexible Ukrainian system cannot absorb all the energy produced by RES. Among the other problems of Ukraine’s wartime electricity sector, we can highlight the following: constant repairs to damaged infrastructure (more than 600,000 Ukrainians are cut off from electricity, despite regular maintenance[8]), the sector’s growing debt[9], and the need to protect consumers from rising costs. The government decided to interfere in the market, setting payment limits on renewables[10]. 

Moderate optimism regarding electricity supply  

The Ukrainian electricity sector is relatively well prepared for winter. It is estimated that peak power demand in Ukraine could reach a maximum of 20 GW, which, in theory, does not pose a challenge, even considering the damage and occupation of generating units following the invasion.  

The stock of coal for system power generation is also satisfactory. It stands at around 2 million tonnes, which is significantly higher than the previous year’s figure. The Ukrainian authorities plan to increase stocks by an additional 0.5 million tonnes by 15 October. In addition, Ukrainian gas storage facilities hold around 13 bcm of natural gas and plan to reach a safe level of 14.5 bcm by 15 October.  

Given the dim prospects for a rapid demand recovery and the energy sector’s substantial financing needs, it became natural from Ukraine’s perspective to seek a foreign market. Although this was already being pursued before the outbreak of war, only the Russian invasion and the related energy crisis in Europe opened a new chapter in EU-Ukrainian cooperation.  

Deeper market integration  

On 16 March 2022, emergency synchronisation of the Ukrainian system with the Continental Europe Synchronous Area took place. It facilitated the increase of exports from the whole of Ukraine instead of just isolated areas or power plant units, as before (from the isolated “Burshtyn Island”, energy was exported to Slovakia, Hungary, and Romania. To Poland, exports were made from the separated two units of the Dobrotvir coal-fired power plant).  

In August, operators from Poland and Ukraine started upgrading the 1 GW Rzeszów–Khmelnytsky line, which will increase energy transmission capacity between the two countries to 1.2 GW[11]. The work is expected to be completed in December 2022. The project to rebuild an analogous Ukrainian-Romanian link is also on the agenda (Pivdennoukrainska NPP–Issacea)[12].  These two investments should increase the capacity of Ukraine’s connections with the EU from the current 860 MW to more than 2.8 GW.  

What’s more, the existing connections have shown high profitability from a Ukrainian and EU perspective. The first two months of electricity exports to the EU generated almost EUR 55 million in revenue for Ukrainian operator Ukrenergo.  

In turn, from an EU perspective, the price of Ukrainian electricity, which is up to 75% lower than in neighbouring EU countries, is particularly important at a time of a major energy crisis. Ukrainian electricity can also help to meet the needs of the EU at a time of increased power demand during the winter season. The commissioning of the Rzeszów–Khmelnytsky line later in December will enable the systems to support each other at the most critical time. 

Expanding energy exports from Ukraine will enhance renewable production in Ukraine while reducing CO2 emissions. Ukrainian RES companies have been particularly affected by the war. Not only have they lost a large amount of generation capacity, but the reduction in green tariff payments has also eroded their budgets. As a result, the sector was on the brink of bankruptcy[13]. 

Heating challenges 

For most of the period since the start of the Russian full-scale invasion, residential heating was not a significant issue for Ukraine because of the summer season. However, supplying Ukrainians with heat energy during the upcoming winter season will be a huge challenge. 

Given the decrease in demand for heat energy due to the ongoing war (the number of refugees has already reached 4 million, or about 10% of the country’s population[14], the accumulated stock of raw materials will most likely allow Ukrainian CHP and heating plants to meet the demand of Ukrainians. However, a more significant risk is the likely damage to transmission and generation infrastructure by Russian shelling.  

While the primary source of heat for Ukraine is small local district heating plants, which are a difficult target due to their dispersion, about one-third of heat energy is produced in large thermal power plants, which have already been the target of Russian attacks that have destroyed four plants and damaged six[15].  

Some settlements are particularly dependent on large CHP plants and there is a risk that up to several hundred thousand Ukrainians could be deprived of heating from the targeting of several CHP plants simultaneously. The Ukrainian authorities are already trying to prepare citizens for such a scenario by recommending, among other things, stockpiling wood and using burzhuiki (iron stoves with an exhaust pipe)[16]. 

Conclusions 

Ukraine is relatively well prepared for the heating season regarding accumulated coal and gas stocks. Reduced electricity and heat demand will likely mean that it will not need emergency coal and gas supplies. 

Surplus capacity in the Ukrainian electricity sector is also likely to remain during the winter season. As a result, Ukraine will be able to increase its electricity exports to Poland, mainly using the new Rzeszów–Khmelnytsky connection. This will be beneficial from the perspective of ensuring the stability of the Polish electricity system, especially during the winter season. Electricity exports to the EU will allow Ukraine to increase its RES utilisation.  

Ukraine’s most significant risk during the winter is the high probability of Russian attacks, which may target power plants and CHP plants. These could decrease Ukraine’s electricity export potential and deprive up to several hundred thousand Ukrainians of heating. This poses the risk of a humanitarian catastrophe in Ukraine and an increase in the number of refugees in EU countries, mainly Poland.