Development of Distributed Generation in Ukraine: Opportunities for Investors

21 February 2025 - Publication

Legislation governing the development of generating capacities in Ukraine is continuously improving, facilitating the modernization of energy infrastructure and attracting investment in the electricity generation sector. One key area of this process is distributed generation, which enhances energy supply reliability, reduces network losses, and creates favorable conditions for the growth of renewable energy sources.

Unique opportunities are emerging for investors in distributed generation to implement their projects in Ukraine. For example, the transmission system operator NPC UKRENERGO has announced a competition on its official website and published the relevant documentation for the construction of new generating capacities.

Successful bidders can benefit from attractive financial incentives. Competition participants can secure a stable financial income through the established fee for developing generating capacity. The maximum purchase price for this service is €854,977.5 per 1 MW, with a minimum payment period of 10 years.

The competition terms are fairly flexible. According to the published documentation, 1,400 MW of highly maneuverable power plants with quick start-up capabilities are planned for construction. The competition consists of two stages:

First stage: 700 MW, divided into two lots:

Lot 1: 500 MW in priority regions
Lot 2: 200 MW in other regions

The minimum and maximum installed capacity of a generating unit at the connection point are 5 MW and 80 MW, respectively.

The construction and commissioning of generating capacities must be completed by December 31, 2027. If a project is completed ahead of schedule, the participant will have the opportunity to start receiving payments for provided services sooner.

The auction winner must complete the construction of the generation facility on time and submit the required commissioning documents to the transmission system operator. Upon verification, they will receive a refund of the guarantee deposit (€100,000 + €1,000 per 1 MW of capacity) and a monthly service payment in the hryvnia equivalent, based on the established euro-denominated price.

Notably, under the contract terms, the winner is not allowed to participate in other competitions or receive additional government incentives for the same generating unit.

The development of distributed generation in Ukraine presents vast opportunities for investors looking to contribute to the transformation of the energy sector. The announced competition marks a significant step toward stabilizing the energy system, attracting investment, and creating new high-tech generating capacities. Legal support for such projects is crucial to minimize risks and maximize the opportunities provided by this state initiative.

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