Doing Business in Ukraine: Strengthening Ukraine’s Electricity System

Ukraine’s electricity system is in dire condition as Russia continuously targets the country’s critical infrastructure, such as power plants and grid systems, with drones and high-precision ballistic missiles. Half of Ukraine’s energy system is either damaged or destroyed, according to Ukraine’s Foreign Minister Dmytro Kuleba. Ukraine’s Prime Minister, Denys Shmyhal, said that Russia has destroyed 80 percent of Ukraine’s thermal power plants. Ukrainian officials and experts anticipate years to repair the damage. Before the full-scale invasion, Ukraine’s energy sector faced other major challenges –e.g., corruption, lack of transparency, and monopolization. The energy sector inherited a centralized Soviet-system which remained monopolized in the post-perestroika period. Corruption still permeates Ukraine’s energy sector although progress is being made in terms of transparency and accountability.

A more decentralized and diversified energy system could enhance Ukraine’s energy resilience. For example, Volodymyr Kudrytskyi, CEO of Ukrainian electricity transmission system operator Ukrenergo, said that Ukraine should be aiming to construct a nationwide network featuring hundreds of smaller power plants instead of relying on 15-20 large electricity generation plants, which are 50-60 years old. DiXi Group, a leading Ukrainian energy think-tank, says this diversification will enable Ukraine’s electricity production to become more flexible and green.

Innovative financing from Ukraine’s partners and public-private partnerships will be key to a swift recovery of energy system and decentralization of energy infrastructure in Ukraine. Importantly, the focus of development finance institutions will have to move from supporting individual projects to scaling programs at a national level, and the Ukrainian government will have to push through the energy sector reforms.

This event took place during the 2024 "Doing Business in Ukraine" conference.

This event is made possible through general support to CSIS.