Ukraine Alternative Energy

Sector outlook

Ukraine has one of the most energy-intensive economies in the world (3 to 5 times higher than other Eastern European countries), but significant sources of savings are available. The share of renewables in total energy supply is still very low (below 2%) but the number of companies engaged in this sector is increasing.

The country’s wind technical potential is one of the highest among CIS countries (around 5,000 MWe). Biomass technical potential is also high: nearly 50 TWhth. Hydropower is another promising resource: the country already counts 6 major hydroelectric power stations on the Dnieper River and 55 smaller units on other rivers and the total hydro technical potential is estimated at more than 20 TWhe. Finally; solar technical potential is close to 4 kWh/ m2/ day.

Strategic direction/ specific schemes and incentives

With a view to lower the energy intensity of its economy and reduce its dependency on oil and gas supplies, Ukraine launched several initiatives to increase energy efficiency and develop alternative energies:

  • Energy Strategy until 2030 adopted in 2006 and National Environmental Policy until 2020 adopted in 2010: alternative energy expected to meet 20% of total energy demand by 2020; 
  • Introduction of Green tariffs (one of the highest in Europe) in 2008; 
  • Tax exemptions for: enterprises generating electricity from renewable energy sources, biofuel producers and coal bed methane extractors (until 2020), the sale of energy-saving equipment of own production (on 80% of the income), the implementation of energy-saving projects (on 50% of the income);  
  • No customs duties and VAT on equipments imported for renewable energy production; 
  • Integration into the European Energy Community in 2011.

Energy efficiency and renewables are also the focus of international organisations active in Ukraine:

  • European Union: budget support to the implementation of the energy strategy in the field of energy efficiency and renewable energy, capacity building on domestic solar heating, hot water and insulation for rural and remote areas, implementation of energy efficiency measures in several cities, etc.;
  • UNIDO – GEF project: improving energy efficiency and promoting renewable energy in the agro-food sector and among other SMEs in Ukraine.

Business opportunities

  • National project “Energy of Nature” (pre-feasibility studies, partner search and investment support): construction of wind farms (EUR 40 million for a 10 MW plant) and solar power plants (EUR 150 million for a 100 MW plant), with an IRR of 15-20% and a payback period of 5-7 years; 
  • National project “Biomass energy” (pre-feasibility studies, partner search and investment support): construction of co-generation plants using biomass in Kiev and other industrial cities and operation during more than 25 years (investment up to EUR 7 million) with an IRR of more than 25% and a payback period of 5 years; 
  • Biomass energy production based on agricultural and forestry waste: annual economic potential of crop waste expected to be equivalent to 14 million tonnes of coal; 
  • Production of biofuel feedstocks (rapeseed, corn) and export to the EU; 
  • Construction of small hydro power plants (possibly within the national project “Energy of Nature”); 
  • Production of energy-saving equipment and supply of energy-efficiency technology for agriculture, industry, city infrastructure and housing; 
  • Manufacturing of wind turbines, Kramatorsky Heavy Machine Factory, Fuhrlander, 40 turbines so far, ongoing

Partnering with local companies can facilitate the negotiation with the regional authorities, in charge of granting operating licenses, and accelerate the project implementation.

Some success stories

Fuhrlander (Germany), a pioneer in the use of wind energy, started maunifacturing wind turbines in Eastern Ukraine in 2011, at the Kramatorsky Heavy Machine Factory (KZTS). KZTS will produce around 40 generators in 2012.

WKN (Germany), a leading developer of turn-key energy projects, signed a cooperation agreement with the Ukrainian authorities to build and operate a 400-MW wind plant in Crimea’s Dzhankoy and Krasnoperekopsk districts for a USD 1 billion investment. Production is scheduled to start in 2013.

Aktiv Solar (Austria) is the developer and operator of the 7.5 MW Rodnikovo photovoltaic power plant, the 80 MW Ohotnikovo solar plant and the 100 MW Perovo solar station, all 3 located on the Crimea Peninsula.

Useful links and contacts

Ukrainian Chamber of Commerce and Industry

Invest Ukraine

State Agency for Energy Saving and Energy Efficiency

European Business Association

This publication has been produced with the financial assistance of the European Union. The contents of this publication are the sole responsibility of EUROCHAMBRES and can in no way be taken to reflect the views of the European Union.

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