Rebuilding Ukraine’s Energy Sector
Steve Burns: The impacts that occur, again, we're talking about Ukraine, extend well beyond the point of conflict. And so, when we are looking for solutions for Ukraine, it's important to note that whatever we're doing in Ukraine affects Moldova and Romania. It affects Hungary, Slovakia, Poland. And so there is a need there to have everyone working together.
Lisa Hyland: Hello and welcome to Energy 360, the podcast from the Energy Security and Climate Change Program at CSIS. I'm your host, Lisa Hyland. This week, we look at efforts to rebuild Ukraine's energy sector, following more than a year of ongoing warfare. My colleague, Ben Cahill, talks with Steve Burns of the US Agency for International Development or USAID.
Steve is chief director for Energy and Infrastructure for Europe and Eurasia there. USAID is working on multiple fronts in Ukraine, economic development, helping with public services like healthcare, emergency assistance, and of course, the energy sector. Steve shares with us the current state of Ukraine's energy sector and the extent of damage done by Russian attacks this past winter, especially to the electric power grid.
Then Steve and Ben discussed the role AID is playing in reconstruction efforts, along with its Ukrainian counterparts, and help from other regional and European partners to fix the existing energy infrastructure, restore power, capacity, and build for a more resilient and lower emission energy future. I'll turn it over to Ben now to kick off the discussion.
Ben Cahill: Okay. Steve Burns from U.S. Agency for International Development, thanks so much for joining us on the podcast today.
Steve Burns: Thank you. I appreciate the opportunity to talk to you about our work.
Ben Cahill: Great. So, the focus of today's conversation is USAID's work in Ukraine. But before we get into the details, it'd be great if you could introduce yourself and just talk a little bit about your background, including how you ended up at USAID and what your role is there.
Steve Burns: Yeah, sure. I'm happy too. So, I'm here at AID. I'm the chief of energy and infrastructure in our bureau for Europe and Eurasia. And as part of that, I manage and support technical assistance programs and projects in 10 countries throughout the former Soviet Union and Southeast Europe. I closely collaborate with our counterparts in EU member states, as well as the U.S. inter-agency here, particularly the U.S. State Department, Department of Energy, and others. I can get into some of what that is in a minute. In terms of my background, I think it was always predestined that I would be working in the energy sector. I grew up in a small town in western Pennsylvania that never gets any notice, so I always call it out whenever I can. It's a small town called Titusville, which is the birthplace of the U.S. oil industry.
Ben Cahill: Yeah, I know that name well.
Steve Burns: Yeah? So not too many people do, and so I try to get it out as much as I can. And then my father, he served in the U.S. Army. He was actually in Europe when the wall went up. And so, I grew up to stories in discussions about the Cold War and the implications. So, I guess my path just started from childhood. I always knew I was going to end up in this position one way or another, right? So, after doing a fair amount of private sector work and project development and finance, I decided I wanted to move my skills to a service-oriented position. And so, I spent, I think, the past 14, almost 14 years out of my 25 years of experience in the energy sector working here at AID. So, my divisions, there's eight or nine of us here on any given day. We do a lot of technical assistance programming, a lot of procurement support.
So, when you hear about the U.S. providing assistance to other countries, quite often a lot of that comes through USAID. And so, the work we do is principally energy sector focused, at least the work my team does is principally energy sector focused. And again, as I mentioned, we cover principally eastern Europe. So, a lot of our work is towards moving those countries into Europe, helping them diversify their energy supply over the past decade. Plus, a lot of that has been about moving countries away from some of the political leverage that Russia can hold over them as a matter of energy supply. And I think as we get into conversations on Ukraine, some of the programming we do will become self-evident.
Ben Cahill: Thanks for that background. So, you obviously have a lot of experience working across Eastern Europe, but today we're mostly going to talk about USAID's work in Ukraine. Steve, I wonder if you can just start by talking about the extent of damage to Ukraine's energy sector, and especially the electricity sector from the attacks this past winter. And what was the extent of damage to thermal power plants, as well as the grid?
Steve Burns: Yeah. It's sometimes hard to put into context big numbers, right? And so maybe I start with Ukraine's power system of availability, Ukraine's demand. At the start of the war, it was 20 gigawatts plus in terms of energy sector or peak demand. And to put that in context, that's a larger industrial country. That's a Spain, a UK, an Italy, countries of that size. After the attack, that demand went down to about 14 gigawatts in the early days. And now we're seeing figures in the 10 to 12 gigawatt range, and largely due to depopulation, lack of industrial output, and so on. And so, as demand has gone down, Ukraine has had the capability to cover it in spite of the damage. A lot of the text you see would refer to the fact that Ukraine had 55 gigawatts of generation capacity, but that figure's really misleading. A lot of that was Soviet era coal and natural gas plants that were effectively mothballed. So, they weren't contributing.
What we found is they really had more 25 to 30 gigawatts available, right? So, they had a comfortable reserve margin, and much of that generation asset is actually still in place. Since the October attacks, more of the generation has come offline. But still on balance, Ukraine has had enough capability to meet its demand. In fact, prior to the October attacks, Ukraine was actually generating revenue by selling power back to Europe. So, the country had enough generation to lean on. But now as more productions coming offline, it's not actually damage to the power plants, it's damage to the substations as part of the electric transmission and distribution network. And for those that don't really follow the power sector, the substation, those are the things we see when we're driving along the road, the gated areas that have multiple power lines coming in and out of.
So those are a much easier target obviously for attack. And you can do more damage in terms of preventing power supply by attacking those. Targeting one plant, you take out one plant. If you take out critical substation node, you're preventing power flow into several population centers, and also preventing power from being evacuated from some of the larger power plants. So, there's been a fair amount of damage to that network. I think at one point, because we've been trying to track as best we can, at one point, over 90 percent of the damage that we saw to the Ukrainian power system was to the transmission and distribution assets, so obviously very expensive, very hard to replace. So, in general, the power system in Ukraine as of today is stable. The majority of the population does have access to power. Obviously, there have been significant outages that have lasted for days.
But again, credit to our counterparts, in general, those outages have been addressed and power has largely been restored. I will say that the power system can only absorb so much damage. And I think what I worry about is as we get into the coming winter Right now in summer, demand tends to be a bit lower, power system demand, so there's a little bit more room for error. But as we get into the coming winter, I worry that continued damage to the system might get beyond what can be readily repaired, which again, is why we're prioritizing getting as much replacement equipment into the country over the summer as we can.
And then with the recent breach of the dam in southern Ukraine, there are a lot of substations downstream that have been damaged. I don't see a lot of generation assets that have been damaged, but we're still evaluating that. I think there are smaller sections within Ukraine that are without power. We'll see where this leads us to and if there's ways to get alternative power to those regions. Again, we've tried to get a lot of extra generators and so on, but that's obviously not a longer-term solution.
Ben Cahill: So, as we're recording this on June 9th, sounds like the full extent of the damage maybe is still a little bit hard to forecast at this stage.
Steve Burns: Absolutely. If I could, I just want to put in here, I really want to call out just the professionalism and the commitment of the workers in Ukraine on this point. Ukrenergo, which is the transmission company, the efforts have been Herculean. They very quickly get power back up when it comes down. They've been very successful at rerouting power flow. And what I would say to this point is Russia has lost its objective, right? The goal was to cause widespread system outages and failure, and it just hasn't happened. Having said that, we're not at peacetime. There's only so much equipment that could be replaced. But to this point, again, I think we really should just call out the heroism of the Ukrainians.
Ben Cahill: Yeah. From what I've heard, a lot of those workers were actually going out and doing repairs and policing themselves at risk. So, we've seen that unfortunately, a lot of Russia's attacks on energy infrastructure like the substations were precise, and they were really designed to inflict a lot of damage. So, you've said that the system is actually able to keep functioning better than Russia would've hoped. But can you talk a little bit about the economic toll of these damages? I saw an estimate from UNDP and the World Bank that said the tax might have inflicted 10 billion in damage. I don't know if you have an updated figure, if you agree with that, but can you talk a little bit about the economic toll of those attacks on the critical hard to replace infrastructure and where we are today?
Steve Burns: Absolutely. I think 10 billion is ultimately going to end up being a low-end estimate, just looking at just the cost of equipment replacement. Obviously, there's the huge economic toll, but then the secondary effects, when you look at the fact that unstable power carries down to water systems, it carries down to telecom and so on. You mentioned the transformers or the other equipment. That is something that is particularly challenging, and it's something that we're trying to work with our counterparts around the world within terms of getting equipment into Ukraine. The large-scale transformers, I mentioned that substations, right? They're largely unprotected. They're open. They're easy targets. The major pieces of equipment that sit in those substations, they're long lead time equipment. They always have been. They're custom equipment.
They have to be designed for a particular power system. They have to be designed for a particular use. And when I was doing work with the US utility industry, we would be planning one, two, three years out in terms of getting that equipment when we needed it. And here we are in Ukraine where the needs are not just one or two, or to have one or two replacements, but to have 10, 20, 30, 40 as the Russians take them out. So that is where I think they've, in many ways, done the most damage
Ben Cahill: Steve, can you explain a little bit about why those transformers are particularly challenging? Is it that they're just not available, they're not off the shelf, it takes time to manufacture them. Maybe explain the details a little bit there.
Steve Burns: Yeah, exactly. So, one, they are incredibly large. They can weigh up to I think a hundred tons, right? So, you're going to need one or two major transport planes, often transport ships, to get equipment to where it needs to be. I remember doing similar work in terms of getting transformers put together, tested and shipped down to Haiti after natural disasters there. It's the same thing. It has to be custom built. And one of the challenges that I think could easily be overlooked is not all power systems are the same. They operate on different frequencies. They operate at different voltages. And this equipment is pretty sensitive, and so it has to be tuned for whatever power system. And Ukraine and Europe's power system is different than the power system in North America. So, it's not as if there is a lot of just spare equipment sitting around the planet that can be moved into Ukraine. So, it's at least 12 months, sometimes 18 or more to get this type of equipment built.
Ben Cahill: Wow. So, let's talk a little bit more about some of the work that USAID is doing in Ukraine to repair this damage. So, I think you've already identified some of the greatest needs, but maybe you can just talk to us about how USAID is helping to find that most critical equipment, as well as all the necessary support systems and get it to Ukraine as quickly as possible.
Steve Burns: Yeah, so there's kind of an interesting parallel there. I had mentioned at the start that my father was stationed in Europe when the Berlin Wall went up, and so on. And last night, I was actually preparing for this conversation and my daughter came and sat down next to me, she's in middle school, and saw some of what I was typing. So, she was telling me that they just finished a unit in school where they were covering the Cold War and the Berlin Airlift. Anyway, so I do, as I tend to do with my kids, I talk about my job. And they usually only last a couple minutes before they walk away.
Ben Cahill: I know that feeling.
Steve Burns: Yeah, exactly. But it is an interesting parallel when you see just the pure amount of equipment that's moving into Ukraine. So we talk an awful lot about the autotransformers or big generators, or the type of equipment we're moving in. Behind the scenes, there's a significant amount of additional material I think we've sent. And the updates are changing by the day. We have over 80 kilometers of piping for heating systems, so on. We sent mobile boiler houses for heating, construction equipment, balance of plant equipment. So, the substation isn't just the transformer. There's also the conductor, the power lines, right? There's switch gear. There's several other pieces of equipment that need to be sent that are all critically important. We spent a while trying to get excavators over to Ukraine earlier this year because just dropping the equipment, the utility needs to have the tools, the earth moving equipment and others to get the equipment installed, and that that's something that's often overlooked.
It's that last mile of not just dropping equipment but actually helping get it installed. The other thing I'd like to highlight... And it's a little bit backward looking, but it's important because it is going to play into where we go in Ukraine in the future, and that's the fact that they've integrated into Europe's power system. This is something we had been working with Ukraine and Moldova leading up to the invasion. It had been a multi-year effort. I think we started working with them back in 2014, and then it became official in the 2017, 18 timeframe that they were going to disconnect from the Russian power system and connect into Europe's. And right on the eve of the invasion, Ukraine and Moldova were scheduled to run a test where they would disconnect from both systems and prove that they could operate and manage their own power system.
It was a critical test that would be necessary before Europe would accept them. And it was right during that test that the Russian invasion occurred. And so, I spoke to the heroism of the operators. Ukraine ran its own power system without any backup for over a month before Europe allowed for that emergency interconnection that occurred in March of 2022. And so again, credit to the Ukrainians and Moldovans, compliments to our European allies for taking that risk and bringing the system in. But now, what you see is power flowing both ways. When Ukraine was at surplus, it was selling, and now they have the capability for import as certain critical systems go offline. But that's part of our next step. It's about making Ukraine a fully functional member of the European power system, both technically, but wants piece of all into the European power market. There's a lot of generation there. And that's one thing we don't want to forget. We're still in the midst of a reform agenda, and we would like to see Ukraine take that step of becoming a fully westernized country with transparent market standards, independent regulatory agencies, and so on.
Ben Cahill: Yeah. I'd like to get into some of the details about the longer-term trajectory for Ukraine's power system and the potential to export in a bit, but maybe you can give us a sense of perspective. Ukraine has so many different infrastructure and reconstruction challenges in the years to come. So, when you think about USAID's priorities for the country, where does the energy sector sit?
Steve Burns: I think the energy sector is right up at the top. If not the number one priority, it is definitely in the top few. Obviously, there is budget support to the country, there's military support, and so on. But the energy sector is something that we are keenly focused on. I think the U.S. government as a whole is keenly focused on it, as you see with the billion-dollar supplemental that came from Congress for energy sector support. And the point I'd like to make there is that... I know we're focused on Ukraine, but the impacts of this invasion that they spread across Europe. And I think there's a lot of work we're doing in Ukraine, but there are important activities outside of Ukraine as well, particularly in Moldova. One of the things we're really trying to focus on there is when you look to the structure of Moldova, it's been too dependent on Russian energy supply for so long.
They've got the Russian controlled power plants in the breakaway region. They've got Russian gas supply. And so, by connecting Moldova, along with Ukraine, into Europe, we're taking steps to break that monopoly, if you will, for the first time this past year, we helped Moldova procure gas from a non-Russians source. So, it's that type of work that I think is... Again, it doesn't make headlines, but it's critically important. It's taking these steps. And I'm glad to see that we've got such strong congressional support that has seen the longer-term vision for what it is we're trying to do and maybe break the cycle we've been in of Russian political leverage for the past two plus decades in the region.
Ben Cahill: Yeah. So, USAID obviously has a really critical role in helping deal with these energy sector challenges in Ukraine, but you are working with other government agencies, I'm sure you're working closely with the embassy in Ukraine. Can you talk to us a little bit about how that interagency process is working to help identify the greatest needs and mobilize resources?
Steve Burns: Yeah. It's really been encouraging to see how the interagency has come together since the start of the conflict. Not that we weren't together before, but an emergency helps focus the mind. And so, we work really closely with counterparts, both here in Washington and in the field. There are a lot of requests coming from Ukraine, especially in the early days of the war, and they would come in at all levels, from working level folks where we had contacts at utilities all the way up to the Prime Minister. And so, what we've done here in the interagency is we work really closely with the Department of State, with the Department of Energy led by the White House in terms of coordinating our effort. So, we consolidate the assistance requests. We meet regularly to discuss together and prioritize our responses. And we're in constant contact with our counterparts in the field, but with the embassy and our field mission as well to make sure that we have the most up-to-date information. And so we are, I think, in lockstep in terms of our response back to Ukraine.
Ben Cahill: Okay. That's really helpful. And maybe you could talk a little bit about how the agency is coordinating efforts with other development partners. So obviously the US is focused on reconstruction needs and development needs in Ukraine, but you have counterparts in Europe, like the EBRD, the World Bank. So, is there a kind of division of labor, or is there an effort to join up technical capacity and financing in a couple critical areas? How are you coordinating with some of your counterparts abroad?
Steve Burns: So, we're coordinating at multiple levels. So, through the State Department, through senior levels in the Energy Bureau over at State Department and beyond, they've convened a G7 forum, both with principals, but also at the technical level to coordinate assistance to Ukraine to make sure that we're responding to requests in a timely manner, but also not duplicating efforts. There's the energy community secretariat that coordinates a fair amount of European assistance as well going into Ukraine, and we work really closely with them. In fact, while they are putting together a separate fund to bring equipment to Ukraine, we're helping by providing procurement agents for that fund. So, you see a fair amount of coordination between the United States and Europe there. So, there is, I think throughout, at all levels, the willingness and capability to coordinate. One point I do want to make is that I think some of our most important areas of coordination really do occur down at the technical level.
When a crisis occurs, there's a lot of conversation about moving equipment in. And I had mentioned earlier the last mile. I don't think we could have got equipment into Ukraine as effectively or as efficiently if we hadn't had that past 20 plus years of relationship with technical counterparts.
Ben Cahill: Yeah, that's really interesting. Let's talk about the short-term versus long-term issues. So, one thing that we've been focusing on a bit at CSIS is how to think about the long-term evolution of Ukraine's energy system. And not just fix the existing system and restore capacity, which is obviously important, but use this opportunity to invest and help lay the groundwork for a different type of energy system that's fit for a lower emissions future. So, I think that includes things like increasing the share of renewable energy, building a kind of grid and management systems that can accommodate intermittent sources. Nuclear energy has played a critical role in Ukraine's energy sector. That's probably going to change over the longer term, especially because those were Russia built plans. And obviously we all know about the challenges in the nuclear industry. Natural gas, Ukraine has pretty significant resources, and gas may have an important role there in backing up renewables, but I assume the long-term role of gas in the energy sector is going to change.
So maybe you can talk about how USAID thinks about these issues and helping to address the short-term critical needs versus meet some of the long-term needs in terms of the evolution of Ukraine's energy system.
Steve Burns: I think your question is well-timed. That is something that we are talking about regularly internally here at USAID, and also in the interagency. It's about trying to find a way to move that critical equipment, but also to do it in such a way that we are positioning Ukraine for the transition that that's going to need to occur. Obviously, we are trying to look to a decarbonized future in Ukraine, well globally, but also in Ukraine. And so, one of the key points there, or one of the key aspects of that, is going to be the grid and reconstruction of the power system. When you look at Europe's renewable energy plans, a major part of that plan is improving the country's interconnections. So, it's about being able to reroute power. It's about building a more dynamic, more robust power system.
And so, I would never imply that the destruction of a power system is a good thing, but where we are, as we're rebuilding now and trying to move equipment in, is we have an opportunity to think through that, right? And in Ukraine, I think that's what we're doing. And the Ukrainians have been very forward leaning as well in terms of responding to us about how they want to make their power system or build it back in a more distributed fashion that is less focused on massive generating facilities just moving power. So, there's I think a lot of directions that part of the conversation could go.
Ben Cahill: Yeah. Ukrainian officials have clearly set a priority to be able to provide zero emissions power and be an exporter to Europe. And you already talked about the connections with the European grid. That was a key priority for Ukraine even before the war. Now, it seems like the inevitable truth is that they're going to be connected to Europe and really cut off from Russia, and they want to turn everything westward in terms of connections with the grid, et cetera. So, can you talk a little bit about some of the potential there?
Steve Burns: Yeah. So, Ukraine obviously has vast resources, right? And it really could be a clean energy supplier into Europe. Now, and this is an area where USAID, I think excels in our thinking and in our planning, and where we're doing a lot of work also with some very intelligent people at the US national labs to think through how Ukraine could be rebuilt and some of the potential for clean energy supply. Now, this is usually where I get disinvited from parties when I start talking about this, is that... A lot of the work though was really boring. So, USAID, in many ways, we've been preparing Ukraine for this through our joint collaboration with them for well over a decade, if not longer. A lot of the work that needs to be done just isn't glamorous. It's laws and regulations. It's about getting the right incentive structure in place.
Just to be honest, there has been in Eastern Europe, concerns of oligarchs, and concerns of how certain regulations can be manipulated for, if you will, gouging or profit, or excessive profit. And so, it's about making sure that the regulatory structure is correct. It's about making sure that that utilities can address things such as queue management. And by that, I mean... A common misnomer that I see is that there are not enough renewable energy projects that can be built, and we need to find new ones. That's really not the case. A lot of the countries I work in have thousands and thousands of megawatts waiting to come onto the system, but the local utilities don't have the ability to do the appropriate analyses and make the changes fast enough to allow it to happen.
And there's a regulatory nuance there about making sure serious projects are in the system and speculative projects, if you will, clogging up the line. And so, there's a lot of that behind the scenes work that can be done. It's what we have been working on throughout the region for quite some time, and it's an area we're going to have to continue to work in as Ukraine emerges from the conflict.
Ben Cahill: I wonder if you could talk a little bit about some of the lessons that USAID is learning from this experience. So, you mentioned whenever there's a crisis, people come together and talk about solutions. It increases the sense of urgency. And what's happening in Ukraine is obviously unique because of the scale of the damage. But when the agency thinks about its work in Ukraine, are there things that we should keep in mind in terms of building more resilient and more secure energy systems elsewhere? What will you take away from this experience and try to build into your future work?
Steve Burns: Well, one thing, maybe I'll start on the softer side, and the point I would highlight to everyone is just how important relationships are. I think I had mentioned that in a prior response, that part of the reason we were able to move equipment into Ukraine was those relationships that we had built up over generations. I look to the region now and I see lots of ministers, heads of regulatory agency, senior officials and utilities around the region, and a lot of them have worked with USAID in the past. Either they’ve worked in USAID, they've worked for our implementing partners, or we've collaborated with them successfully. And that builds that trust, and it builds a positive view of the United States, and they take our advice as given. And so that, to me, is a major point to make, is that we have that credibility, and we need to continue to engage with the countries to make sure we keep that credibility.
Now, I can end with a thought there. I highlighted that Ukraine and Moldova were running tests when the invasion started. We had people embedded virtually in the control room of the main dispatcher during that test, offering assistance if necessary, and observing, right? And again, that is a very sensitive place to be, and it just shows that collaboration that we've built up over time. Technically, if I were to say lessons learned, to me, one of the big lessons learned coming out of this or coming out of the conflict was the need for pre-planning, which to some extent, we had done. We have, again, a long history of collaboration and have helped the Ukrainians think through their power system. The lesson learned I would take away is to some extent, expect the unexpected. Remember though that the impacts that occur, again, we're talking about Ukraine, extend well beyond the point of conflict.
And so, when we are looking for solutions for Ukraine, it's important to note, right, that whatever we're doing in Ukraine affects Moldova in Romania. It affects Hungary, Slovakia, Poland. And so, there's a need there to have everyone working together. And again, that's a history that we have. We've worked with counterparts in these countries for quite some time.
Ben Cahill: Well, Steve, thanks so much for sharing some of your experiences and the insight that you've gained from this. I just want to commend you and your colleagues at USAID for doing such important work, and we wish you all the best. And thanks so much for being on the podcast with us today.
Steve Burns: Thank you for the opportunity. Thank you for the highlight. And again, I would take that commendation and spread it to our colleagues in Ukraine and Moldova and the folks we're working with globally to try to bring assistance.
Ben Cahill: Absolutely. Thank you, Steve.
Steve Burns: Thank you!
Lisa Hyland: Thanks to Steve for joining us this week. We really appreciate the work. USAID is undertaking in Ukraine. There are some CSIS resources in the show notes for further reading about Ukraine's energy sector reconstruction. You can find more episodes of Energy 360 wherever you listen to podcasts and at csis.org. For updates, follow us on Twitter @CSISEnergy. And as always, thanks for listening.