Batteries in the energy sector: how storage devices are changing the rules of the game

Batteries are the most well-known trend in technical equipment

Today, batteries (cells or systems of chemical energy storage), their prices, production volumes and operating time are the subject of a very large information field.  Industrial business and economists are taking note of this trend, and global geopolitics is starting to revolve around the raw materials for their production. Investments in battery factories are being approved at the highest state levels.

The question is why this interest? The answer is that now every second industrial product has a microchip, and the vast majority of them need a battery. The number of facilities where batteries are used on the planet is estimated at billions.  

The energy sector is one of the industries where the development of chemical storage technologies is leading to global structural changes. This is due to the fact that at each stage of electricity production, transportation, and consumption, energy storage systems begin to play a special role, and without them, development and even just stable operation are no longer possible.

The role of batteries in modern energy

Until recently, the reliable operation of power systems was ensured almost exclusively by large power plants and power lines. But with the advent of Battery Energy Storage Systems (BESS), the rules of the game are changing. Industrial batteries are increasingly taking on important functions, increasing the reliability and flexibility of energy supply to consumers.

2.1. Role in generation

The high demand for batteries in generation is primarily due to the very rapid development of solar power plants, which are classified as non-guaranteed power plants. The capabilities of SPPs are entirely dependent on meteorological conditions and there are fluctuations in power output over short periods (seconds to minutes caused by variable cloud cover) and longer hourly (caused by alternating light and dark periods of the day) and seasonal (caused by different sun heights and day length) intervals. In winter, SPP electricity production is about 5 times less than in the peak summer months.

At the same time, the electricity market and the power grid require stable controlled operation of the power plant in commercial and technological schedules. Thus, the instability of SPPs should be compensated by an additional buffer. At the first stages of SPP development, when their share was 5-7%, the grid itself acted as a compensator, absorbing these fluctuations without noticeable consequences. However, the development of SPPs is accompanied by the simultaneous displacement and closure of traditional coal-fired power plants, which absorbed disturbances from SPPs with their maneuvering properties. Thus, the storage system is now becoming a mandatory attribute of a new SPP, otherwise, with a share of more than 25%, SPPs become a significant source of interference for the power system and are often shut down or limited in some way in operation.  The combination of SPP and BESS in a single process of sustainable electricity generation creates a so-called hybrid, when a joint control system in real time evaluates the capabilities and resources of each of these elements and solves the problem of power supply to the grid while ensuring both stability and maximum production efficiency. But the role of the SPP-battery hybrid is becoming very important and will be discussed in more detail below. 

2.2. Role in power grids

Physically, a large number of battery storage facilities are connected directly to distribution or high-voltage networks, but only a small share of them are used for electricity transportation. European and our national legislation stipulates that the grid operator can install its own battery storage systems only to ensure the operation of the grid. This can be compensation for transportation losses or compensation for excessive reactive energy, or simply maintaining voltage in certain network nodes. These problems are particularly acute for remote lines or underutilized lines, when the cost of transporting electricity to a particular area becomes comparable to the amount of electricity transported. Installing batteries at certain points improves grid conditions and reduces losses. 

There is a separate issue of providing ancillary services in the Ukrainian power system, which is also the responsibility of the transmission system operator. The operator purchases these services from the owners of storage systems, who, following the commands of dispatchers, accept or deliver power to maintain the balance in the Ukrainian power system as a whole. The intervals for receiving and delivering power range from 15 minutes to several hours, but high speed is required to change the power, literally tens of MW in a few seconds. 

The physical essence of these ancillary services is to maintain the current frequency (50 Hz in Ukraine) without deviations. A sudden small imbalance between electricity production and consumption can cause frequency fluctuations that, after a certain limit, threaten accidents and require blackouts. BESS react to such fluctuations almost instantly – in a matter of seconds, they can release or absorb energy, restoring the balance. Unlike traditional turbines, which take minutes, the batteries quickly equalize the frequency, preventing emergency shutdowns and equipment damage. In the case of large imbalances, frequency monitoring is no longer enough and large amounts of power must be quickly injected, otherwise the power system will be instantly divided into isolated areas and some of them will go out of service. For example, in South Australia, the large 100 MW Hornsdale battery storage complex instantly backed up the grid twice when a coal-fired power plant suddenly shut down. This helped avoid blackouts and increased grid stability.

2.3. The role of the consumer

But the biggest impact on the power system is now created by the installation of SPPs and storage systems at the consumer’s premises. It is now a fashionable trend to design the consumer’s energy so that it has zero or minimal power supply from the grid. In terms of investment, such a full autonomy solution is always more expensive than purchase options, and the optimum is partial self-generation and partial purchase. These are the tasks of the company’s energy management services, and for household consumers, the service of deploying HEMS (Home energy management system) is being actively developed – a system installed in the house and combining planned generation from photovoltaic panels, emergency generation from a generator, household storage, household appliances, and in the future – an electric car. A specialized microcomputer analyzes household habits and consumption schedules, weather forecasts and production schedules, current and expected electricity prices, and automatically manages the entire household to minimize the cost of electricity purchases.

However, this autonomous consumer behavior leads to additional instability in the power system, as there is a gap between the real consumption of the end user and the supply of electricity from the power system “at the meter”. This is manifested in the blurring of the typical schedule of a household consumer, which is the basis for planning the daily operation of the country’s power system. This, in turn, leads to an increase in the need for backup in storage systems that maintain the balance in the power system and, accordingly, the cost of electricity for end use. 

The installation of batteries at the end-user level is already helping to provide electricity to important facilities during blackouts in Ukraine. The batteries can keep hospitals lit, communications and the Internet running even when the central grid fails. According to NREL (USA). A striking example is the Direct Relief charity project, which is installing more than 2,000 battery systems for Ukrainian hospitals in 2023-2024. These batteries ensure the continuous operation of medical equipment during attacks on the power grid or in extreme weather conditions when the supply from the external grid is interrupted.

Batteries + RES: an amplifier for the sun and wind

Renewable energy sources (RES), such as solar and wind power plants, generate electricity according to weather conditions. The sun is shining, the wind is blowing, and the generation schedule often does not coincide with the consumption schedule. This is where energy storage comes in, creating a synergy between renewables and batteries. 

Batteries help smooth out fluctuations in generation. When clouds cover a solar power plant or the wind suddenly dies down, the batteries can instantly compensate for the decline in output. Conversely, during peak generation (midday sun, nighttime wind storm), the batteries accumulate “extra” energy that would otherwise be lost. In this way, solar-battery and wind-battery systems supply a more even flow of energy to the grid. This solves the problem of unpredictability of renewables and makes them friendlier to the grid. In turn, this helps to avoid restrictions and dumping of green energy. 

It often happens that the grid or consumption cannot accept the entire volume of electricity from RES during peak production – in this case, it is necessary to turn off some solar panels or wind turbines (this is called curtailment, forced generation limitation). If there is a battery nearby, it absorbs the surplus and stores it until demand increases or grid restrictions disappear. The US experience shows that BESS installed at large RES farms reduce forced outages of RES and increase the utilization of power lines. According to NREL estimates, the joint operation of a wind farm and a battery allows for better grid utilization: during the day, when consumption is lower, part of the wind power is used for charging, and in the evening it is supplied to the grid, unloading the lines.

• Availability during peak hours. Solar generation is highest at noon, when consumption can be relatively low, but in the evening, the demand for electricity increases (people return home and turn on appliances), but the sun is no longer out. A battery system connected to a solar power plant solves this problem: the daytime sun works for the evening peak. After charging during the day, the battery delivers energy to the grid during the hours of the highest load, covering the evening consumption spike. This reduces the need to switch on shunting gas or coal units, saving fuel and money. This model – a solar plus storage hybrid – is rapidly gaining popularity around the world. For example, in California, solar power plants with batteries are already competing with gas-fired peaking power plants in terms of generation costs. According to IEA forecasts, by 2030, solar power plants with storage will become one of the cheapest sources of electricity, outperforming even traditional coal and gas plants.

• Reserve for wind. Similarly, large wind farms are supplemented with batteries to improve predictability. If the night is windy and the generation exceeds demand, the excess will go to the batteries, and in calm or peak load times, the batteries will provide additional power. As a result, a wind power plant with a battery can operate closer to a traditional one, providing dispatchable (on-demand) power supply. Although the wind cannot be forced to blow, electricity from it will be available when it is needed, thanks to the battery buffer. It is worth emphasizing that battery systems are useful not only for large renewable energy farms, but also at the level of households and businesses with their own solar stations. Home batteries allow you to save “solar kilowatts” from day to evening or even for backup during outages. In Europe and the US, private PV+Battery systems have become popular: people reduce their electricity bills and insure themselves against power outages. In Ukraine, where blackouts are frequent due to shelling, this trend has also gained momentum: solar panels with a battery are installed on the roofs of houses, schools, and hospitals.

• An example from practice. The world’s largest storage system at the time of launch, the Tesla Hornsdale Power Reserve in Australia (129 MWh), was built specifically to integrate a wind farm. In the first months of operation, it not only smoothed out wind fluctuations but also saved the South Australian grid from an emergency shutdown by instantly picking up the load in the event of a thermal power plant accident. Over the year, this “big battery” saved the state’s consumers about $40 million by reducing the cost of backup services and partially replacing gas turbines. This case has become a textbook: it proved that RES+storage can not only operate stably but also significantly reduce costs in the power system.

Thus, batteries have become the key to unlocking the potential of renewable energy. They make the sun and wind predictable and “obedient” sources that supply electricity according to the consumption schedule. Without the massive deployment of storage, it is hard to imagine further increasing the share of renewable energy in the world, which is why they are sometimes called the “Missing Link” of green energy.

Global storage boom: trends and forecasts

Demand for battery storage is growing explosively around the world. While in 2015, there were only a few gigawatts of industrial storage systems, today dozens of countries are deploying hundreds of megawatts, and forecasts for the next decades are ambitious. 

Let’s look at the key global trends:

• Rapid capacity expansion. According to BloombergNEF, at the end of 2021, there were only ~27 GW of battery systems (56 GWh) in the world, but by 2030, a boom is expected – up to 411 GW (1194 GWh). This is 15 times more than in 2021! From 2022 to 2030 alone, it is planned to install ~387 GW of new storage facilities. The US and China are becoming market leaders, accounting for more than half of all installed systems. Europe is also sharply increasing its battery capacity amid the energy crisis and the transition to renewable energy sources. In fact, the world is entering an era of massive deployment of storage systems, just as the explosive growth of solar and wind power plants began a decade ago.

• Cost reduction and technology development. Prices for lithium-ion batteries have fallen by more than 80% over the past decade, making it possible to use the storage devices cost-effectively. Mass production for electric vehicles has played a key role in reducing the cost of stationary batteries. Although prices rose slightly in 2022 due to the rise in lithium prices, the overall trend remains downward. The IEA predicts that by 2030, thanks to innovation and scaling, the cost of storage systems for power plants will decrease by another 40-55% from the level of 2022. This will make solar farms with batteries cheaper than new coal plants, and battery farms will be able to compete with gas peakers for peak load. At the same time, performance is improving: modern batteries can withstand more charge-discharge cycles, their efficiency is increasing, and solutions for longer storage (6-10 hours or more) are becoming more common, including through new chemical compositions.

• Ambitious forecasts for 2030 and 2050 To achieve climate goals and ensure the transition to clean energy, the global energy system needs huge volumes of storage. According to the IEA’s Net Zero 2050 scenario, global storage capacity is expected to increase sixfold by 2030, to 1.5 TW. This takes into account all types of storage, of which ~90% are batteries (about 1.2 TW of batteries by 2030). In the future, the pace will not slow down: by 2050, the world may already have 4-6 TW of storage, a significant part of which will be battery BESS. BloombergNEF’s analysis shows that to achieve zero emissions in 2050, global battery installations must increase 50 times from the level of 2023, reaching about 4 TW. This means that storage will become as commonplace as thermal power plants today.

• New players: alternative technologies. The dominance of lithium-ion batteries does not mean that there is no competition. Sodium-ion batteries, which use cheap sodium instead of lithium, are on the way. It is expected that by the end of the decade, they will occupy up to 10% of the stationary storage market. Developments in this area are progressing rapidly: it is planned to build plants for the production of Na-ion batteries with a total capacity of 335 GWh by 2030. Such batteries are about 20-30% cheaper than lithium LFPs due to cheaper materials. At the same time, redox flow batteries (based on liquid electrolytes) for large capacity, systems based on gravity and compressed air, supercapacitors, etc. are being developed. According to IDTechEx, by 2025, chemical storage technologies alternative to lithium will already occupy more than 10% of the stationary storage market, and their share will continue to grow. This is important in the context of potential shortages of lithium, cobalt, and nickel: the world is diversifying its approaches to energy storage.

• New markets and business models. The energy storage sector is attracting huge investments. Already in 2023, global investment in batteries (including electric vehicles) reached about $120 billion, and by 2030, according to the IEA, it will grow to $800 billion annually. Countries are introducing incentives: for example, in the United States, the Inflation Reduction Act of 2022 provides a 30% tax credit for the installation of storage devices, which will dramatically boost the market. Europe is preparing payment mechanisms for the readiness of batteries to provide reserves. New models of use are also emerging: aggregation of home batteries into virtual power plants, rental of batteries for balancing, and reuse of used EV batteries in stationary storage facilities. All of this shows that storage is turning into a separate energy sector, integrated with smart grids and digital control. 

Global trends are clear: energy storage systems are one of the fastest growing energy segments in the 2020s. They are experiencing a boom comparable to that of renewables a decade earlier. 

Types of storage technologies

Energy can be stored in different ways – not only in lithium batteries. And although batteries are the most popular today, it is worth mentioning other types of storage systems, as each has its own niche:

• Lithium-ion batteries. This is the de facto standard of modern BESS. The same technologies are used as in electric vehicle batteries: the most common chemistries are lithium-iron-phosphate (LFP) and lithium-nickel-manganese-cobalt (NMC). Advantages: high efficiency (90%+), relatively high energy density, fast response time (milliseconds), and cost reduction due to production scale. Such batteries are compact – a container the size of a sea container can hold 5-10 MWh. They are optimal for covering short-term peaks and operating in the range of several hours. Disadvantages: limited service life (after ~5000 cycles, the capacity decreases), flammability of the electrolyte (requires safety systems), and dependence on critical materials (lithium, cobalt, nickel). Nevertheless, lithium-ion provides more than 90% of all new chemical storage projects on the grid and is projected to remain dominant until 2030 (80-90% of the new market).

• Sodium-ion batteries. A promising alternative to lithium. Such batteries use sodium salts instead of lithium salts, a cheap and abundant element (common table salt NaCl is a source of sodium). Advantages: no scarce materials (neither lithium nor cobalt), potentially lower price – 20-30% less than the cost of Li-ion LFP in mass production. They are also safer (not flammable) and work better at low temperatures. Disadvantages: lower energy density (more weight for the same capacity) and a slightly shorter cycle life. Sodium-ion batteries are already being commercialized in China (CATL has launched production). Stationary storage is expected to become the main area for Na-ion, where price is more important than compactness. S&P analysts predict that by 2030, up to 10% of battery storage could be sodium-based. The first pilot plants (1-2 MWh containers) are already being tested.

• Pumped storage power plants (PSPPs). The most powerful type of storage historically is the “water battery”. When there is a surplus of electricity, water is pumped from the lower reservoir to the upper one. When electricity is needed, the water is pumped down through turbines to generate electricity. PSPPs are capable of storing thousands of MWh and delivering them for hours or even days. This is the main and largest method of energy storage in the world – more than 95% of all stored gigawatt-hours are due to hydroelectric storage. The total installed capacity of PSPPs is about 160 GW (for comparison, the world’s nuclear generation is about 390 GW). Pros: huge capacity, durability (mechanisms serve for 40-50 years), relatively high efficiency of ~75%. Disadvantages: dependence on geography (appropriate landscapes and water resources are required), long and expensive construction cycle, inferior performance to BESS, environmental restrictions. However, there are limited new sites for large PSPs in the world, so battery technology is gradually catching up: although lithium-ion is still far behind in terms of total energy storage, batteries will provide most of the new storage capacity growth. 

• Hydrogen storage systems. Conversion of electricity into hydrogen by electrolysis, followed by storage of hydrogen and its use for electricity generation (in fuel cells or turbines). This technology is at the intersection of electricity and gas systems. Hydrogen’s strong point is its long-term and seasonal storage. It can be stored for months, using excess summer solar energy to cover winter peaks. No battery can economically store energy for weeks – hydrogen has no competitors here. Disadvantage: low overall cycle efficiency (electrolyzer ~75% * fuel cell ~50% yields less than 40%), which means that a lot of energy is lost. However, in order to switch to 100% RES, some electricity will still be “excessive” in certain periods, so it is better to return at least 40% than nothing. Hydrogen storage is still in its infancy – pilot projects are being launched in the EU and Australia (with capacities of up to tens of MW). The IEA considers hydrogen to be a promising element for seasonal balancing of renewable energy. In Ukraine, hydrogen energy can also potentially develop after 2030, given the large potential of renewable energy in the south (hydrogen can be produced in summer from the sun’s surplus, and in winter it can be burned or used to generate electricity in fuel cells).

Ukraine: state of play and prospects for implementing energy storage

The topic of energy storage is extremely relevant for Ukraine. First, a high percentage of solar and wind power plants (almost 14% of generation in 2021) already requires flexible reserves. Secondly, the war and shelling of infrastructure have highlighted the need for decentralization of generation in the power system (distributed generation) and backup power supply. 

Let’s look at what has already been done and what are the prospects for the development of BESS in our country.

• Legislative framework. For the first time, energy storage has been given the green light as a separate participant in the electricity market. For a long time, there was no legal category for energy storage in Ukraine – no license, no tariffs, no rules. This effectively blocked investment: companies did not understand how to operate and pay off BESS systems. Only in 2022, a special law No. 5436-d was adopted, which introduced the concept of “energy storage facility” and storage activities in the electricity market. The law (signed in April 2022) defined the storage system operator as a separate market participant, allowed RES producers to accumulate energy without losing the feed-in tariff, and established requirements for licensing such activities. As a result, a company can officially build a BESS, obtain a license from the NEURC, and provide balancing services or sell electricity from the storage facility. This created legal preconditions for the energy storage market. The law also allowed the transmission system operator (NPC Ukrenergo) and regional power distribution companies to have their own storage facilities under certain conditions, meaning that even grid companies will be able to install batteries to improve grid reliability.

• First projects. Even before the law came into force, in 2021, DTEK launched a pilot industrial 1 MW/2.25 MWh storage system at Zaporizhzhia TPP, the first BESS in Ukraine. The system, implemented jointly with the US-based Honeywell, was successfully tested and demonstrated the ability to provide ancillary services (frequency regulation). However, its commercial use was limited due to the lack of market rules at the time. After the law was passed, new projects began to be announced. In 2022, the Ukrainian energy company KNESS received a €9.6 million loan to build a 30 MW storage facility in Vinnytsia region. But the real breakthrough came in 2023-2024, when, amid the war and energy crisis, attention to BESS increased to the highest level.

• Ukrenergo’s auctions launched the market. In August 2024, NPC Ukrenergo held a long-term special auction for the purchase of frequency support reserve (FSM) services for the first time, which is actually a rapid response capacity ideal for batteries. As part of the auction, the transmission system operator will conclude 5-year contracts (paid in euros) for a total of 99 MW of reserve from new storage systems. The event caused a real stir: 39 companies participated, many of them new to the market, and 12 companies won (mostly those planning storage installations). According to Volodymyr Kudrytskyi, who was heading NPC at the time, battery projects proved to be the most competitive, winning the bulk of contracts (even though traditional gas turbine and hydro reserves were also allowed to participate in the auction). This auction has actually launched the construction of almost 100 MW of new BESS in Ukraine, as the winners are obliged to install the equipment and start providing services from October 2025. It is important that the contracts are long-term and guaranteed to be paid, which reduces risks for investors and allows them to attract financing, even international financing. Thus, Ukraine has moved from talks to concrete incentives: the state, through Ukrenergo, guarantees a market for storage services, which triggers the mechanism of their payback. The operator plans to hold further auctions for other types of reserves (emergency frequency restoration reserve, etc.), where batteries can also participate. The first experience proved to be successful: the price of the reserve service during the auction decreased by almost 30% from the starting price, and as a result, a whole cohort of new players – storage system operators – will appear in Ukraine.

6.1 Investments by state-owned companies: the strategic role of Ukrhydroenergo

The contribution of state-owned companies to the development of energy storage systems, in particular Ukrhydroenergo, deserves special attention. In April 2024, Ukrhydroenergo entered into a financing agreement with the International Bank for Reconstruction and Development (World Bank) to implement a large-scale infrastructure project – the deployment of 197 MW of energy storage systems and the construction of 35.9 MW of solar power plants.

The project is critical to the stability of Ukraine’s energy system in times of war. It is financed with loans from the IBRD ($177 million), the Clean Technology Fund ($104 million), and grants from the Clean Technology Fund ($1 million). This is the first time in Ukraine that a state-owned company is implementing a large BESS project based on public international financing. According to the company’s management, the goal is to ensure the flexibility of the power system, increase resilience to attacks, and integrate renewable energy sources.

Ukrhydroenergo’s project includes the installation of battery storage next to existing hydroelectric power plants, which will combine the benefits of hydroelectric generation with fast response batteries. This will not only allow for real-time frequency control but also efficiently balance daily load fluctuations. In parallel with the implementation of BESS, it is planned to build solar power plants, which will create a hybrid system – hydro + solar + storage.

The implementation of this project is an important precedent for the public energy sector. Ukrhydroenergo demonstrates that state-owned companies can be drivers of energy storage innovation by working effectively with international financial institutions. This approach should be scaled up in other state-owned entities, including thermal generation, railways, and municipal energy services.

6.2. Investments by private business

It is noteworthy that the largest private energy holding DTEK has relied on storage. In January 2025, DTEK announced a large-scale renewable energy project: 6 storage systems with a total capacity of 200 MW (400 MWh) located in different regions of Ukraine. The total investment is €140 million, and all the plants are scheduled to be launched by the fall of 2025. Each facility will have 20-50 MW of capacity, and this will be the first BESS portfolio of this size in Eastern Europe. DTEK chose the technology from Fluence (a joint venture between Siemens and AES), which already has experience in integrating 201 MW of batteries in Lithuania and 450 MW in Germany. The main goal of the project is to stabilize the Ukrainian power grid and minimize consumer outages. The batteries will be able to instantly provide power in case of attacks on the grid or sudden shortages, helping to avoid emergency outages. DTEK is clear: the decentralized nature of the system (six plants located in different parts of the country) will help restore stability on the ground faster and avoid massive blackouts. 

Apart from DTEK, other companies are also showing interest. For example, Ukrainian renewable energy developer Kness already operates several small-scale storage facilities along with solar power plants (for its own needs, at enterprises) and plans to expand. Foreign battery manufacturers are also considering the Ukrainian market: the Norwegian startup Morrow signed a preliminary agreement in 2023 to supply its storage systems to Ukraine. In the fall of 2023, AVL (Austria) donated mobile storage systems to Ukraine to support the energy sector. Cooperation with donors financing projects to install solar-battery sets in public utilities is also ongoing. Thus, an ecosystem is gradually being formed where energy storage is becoming attractive for investment, even despite the military risks.

6.3. Benefits for businesses and communities

Energy storage is interesting not only for large energy companies. After the blackouts of 2022-2023, Ukrainian businesses are actively installing backup power systems. In addition to generators, battery solutions are increasingly being considered – from portable batteries to industrial SES+Battery. Shopping malls, chain stores, and manufacturing plants have started investing in their own power plants with storage to protect their processes from outages and save on diesel. Experts note that retailers and other businesses are now massively implementing solar panels to reduce costs and increase energy independence. By adding a battery, a business can not only generate but also store energy: by charging it with cheap or solar electricity during the day and consuming it in the evening instead of expensive electricity from the grid, the company cuts off peak consumption from the general grid and saves significant money. 

According to market participants, modern energy storage systems pay off for commercial consumers in 5-7 years due to savings on tariffs and backup services. In addition, companies value an environmentally friendly image and the use of innovations, which further motivates them to invest in green batteries.

In the social sphere, storage can be invaluable. The Energy Community’s YESS (Ukraine Energy Support Fund) program has already financed the installation of solar panels with batteries for a number of hospitals in Zhytomyr, Kyiv, and Khmelnytsky regions. Charitable foundations (RePower Ukraine, Direct Relief, and others) provide critical medical facilities with battery backup systems. For example, SMA has donated a set of solar panels and batteries to a hospital in a frontline city, allowing doctors to continue operations during air raids. In schools and universities, solar mini-power plants with storage provide lighting for shelters and boiler rooms during blackouts. Decentralized solar+battery solutions for communities are becoming part of the concept of sustainable cities. Condominiums are installing a common storage system to back up elevators, heating, and water supply in a high-rise building – residents are effectively creating a microgrid that is independent of external failures.

In general, the current state can be assessed as the start of active integration of storage into almost every segment of electricity generation and transportation in Ukraine. Despite the war, the country has taken important steps: it has adopted legislation, launched the first projects and incentive mechanisms. Now the main thing is to maintain this momentum and cope with the challenges that stand in the way.

Challenges and needs: what hinders development

• Financing and cost. Storage is not cheap. Initial investments in BESS amount to hundreds of thousands of dollars per megawatt, and the payback period is highly dependent on market conditions. In Ukraine, financial risks have been increased by the war: loans are expensive and investors are cautious. There is a lack of public funds – as the Ministry of Economy notes, about $40 billion is needed to achieve energy and climate goals by 2030, and it is currently unclear where to get a quarter of this amount. In such circumstances, the development of storage systems is possible only with private capital and international assistance. Special financial instruments are needed: soft loans, war risk guarantees, donor grants for critical infrastructure. A positive signal is Ukrenergo’s contracts in euros for 5 years, which will make it easier to attract loans from the EBRD and the World Bank for specific projects. However, large-scale plans (6 GW of storage by 2030 or 12-13 GW of new maneuvering capacities announced by Ukrenergo) will require billions of dollars in investments. According to the Ukrainian side, the decentralized deployment of ~12 GW of new generation and storage in the next 3-5 years will require at least €10 billion in investments. Solving this problem is the key to energy security.

• War and security. The ongoing shelling of the energy sector makes any construction difficult and dangerous. Investors are afraid of losing equipment as a result of a missile strike. Large centralized facilities are especially vulnerable, so it is logical that Ukraine is relying on dispersed projects (small 10 MW plants across the country instead of one 500 MW plant). Batteries fit into this concept just fine. But even they need to be protected: containers should be placed in relatively safe areas or properly reinforced. Fortunately, drives can be installed closer to the consumer, even in basements or bunkers, which increases their chance of survival. The risk of outages due to grid failure also has an impact: BESSes can automatically switch to stand-alone mode (island mode) and maintain power only locally. This is useful for consumers, but all aspects of working in such modes have not yet been regulated by law. The war slows down logistics and equipment deliveries, forcing more drives to be used for critical purposes instead of commercial ones. At the same time, the war has become a catalyst for the development of decentralization: what was planned for years in advance is being implemented now for reasons of survival. According to the IEA, the transition to a distributed energy system is the only way to ensure resilience to attacks. Therefore, Ukraine accepts this challenge and adapts, but the risks to projects remain as long as the aggression continues.

• Infrastructure constraints. After the massive attacks in the fall and winter of 2022/2023, the power system is operating at a fractured level. More than 10 GW of generating capacities (TPPs and HPPs) have been lost, and they provided flexibility and balance for the power system as an integral object. This loss creates a constant shortage of maneuvering reserves, which cannot be covered until new batteries or gas turbines are launched. In addition, high-voltage networks are also damaged – although Ukrenergo heroically restores them after each attack, the situation leaves little capacity reserve. In such conditions, quick solutions become a priority – mobile GTUs, electricity imports from the EU, and consumption savings. It takes 1-2 years to build a large storage park, so this is a medium-term contribution to sustainability, but not an instant panacea. Another issue is the lack of operational experience: for our grid operators, BESS is a new element, requiring staff training, adaptation of grid codes and dispatching systems. However, these problems are solvable, and Ukrainian engineers are already cooperating with colleagues from the EU who have implemented similar solutions.

• The need for a strategic plan and support. Despite the 2022 law, many regulatory details still need to be worked out: the procedure for access to ancillary services markets for storage facilities, connection tariffs, taxation of energy transactions in storage facilities, etc. It is important that the rules of the game are transparent and stable, so that businesses will actively invest. At the same time, the government should integrate the development of storage systems into all energy recovery plans. According to the IEA, the optimal path for Ukraine by 2030 includes the addition of ~6 GW of storage along with 24 GW of RES. This is an ambitious goal that requires coordination with partners. For example, international assistance programs (USAID, EU) could provide grants or interest rate compensation specifically for BESS projects, as they increase energy security. It is also worth considering mechanisms for insuring war risks for investors – without this, large capital will be wary of Ukraine. We should also note another challenge: human resources and technology. Storage is a high-tech industry that requires electrochemists, power electronics programmers, and system engineers. Ukraine needs to develop competencies, either through its own R&D projects (for example, at universities) or through partnerships with Western companies entering the market. This will help localize some production and create jobs in the new sector.

Conclusion

Energy storage has already proven its effectiveness globally, and now Ukraine is relying on it to modernize and secure its energy sector. Batteries improve the quality of electricity supply, provide flexibility for the integration of renewable energy sources, and serve as insurance against blackouts. Global trends are in favor of this technology: prices are falling, the market is growing exponentially, and new opportunities are opening up. For our country, battery systems can become one of the symbols of the “build back better” concept – to rebuild the energy sector to be more modern, decentralized and cleaner. Of course, there are many obstacles – from finances to the ongoing war. But the first steps have already been taken: the law has been passed, projects have been launched, investors are interested, and consumers have realized the value of backup power.

If the government and business work together to overcome the challenges, in a decade Ukraine could have a new power system where hundreds of industrial batteries will work quietly day and night. The grid will become more stable, renewable energy will become more powerful, and consumers will forget about power surges and blackouts. Batteries in the energy sector are no longer a fantasy, but a working tool, and our task is to use it to the fullest for the country’s bright energy future.

Sources: IEA, BloombergNEF, IDTechEx, NPC Ukrenergo, Ukrhydroenergo of the Ministry of Economy, Direct Relief, DTEK, NREL, Atlantic Council and others