Ukraine (2012)

Source: REEEP Policy Database (contributed by SERN for REEEP)

This policy & regulatory overview is not updated anymore since 2015. We decided to keep it online due to high demand but would like to make you aware of the fact that it might be outdated.

Energy sources

Total installed electricity capacity (2008): 54 GW
Thermal: 67%
Nuclear: 24%
Hydropower: 9%

In the recent past, Ukraine has increased its use of indigenous coal, replacing imported gas. Nearly half of Ukraine‘s electricity needs are met by nuclear power. Domestic use of renewable energy is small at about 7%, most of which is hydropower, and expected increases in renewable energy are modest. As a result, energy efficiency is the primary source for a non-polluting energy security option.

The total primary energy supply reached 136,143 ktoe in 2008.  The share of TPES was the following

  • Gas: 41%
  • Nuclear: 17.1%
  • Coal/peat: 29.8%
  • Oil: 10.7%
  • Hydro: 0.7%
  • Comb. Renew and waste: 0.7%
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In 2008, Ukraine imports 51% of its energy needs. Ukraine is a net importer of energy, particularly natural gas, where domestic production in 2008 accounted for only 32% of total use, and crude oil / petroleum products, where the corresponding figure was 30%. Although Ukraine is also a net importer of coal, domestic production is a relatively high proportion of use – around 83% in 2008.

Close Reliance

Extend network

Ukraine’s unified transmission system (UTS) is one of the largest power systems in Europe. The EU is interested in integrating power grids and establishing a single electricity market, since Ukraine has surplus power generating capacities left from soviet times. Today, electricity from Ukraine is being imported by Poland, Hungary, Romania and Slovakia.

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Capacity concerns

A further challenge for Ukraine is to replace ageing and obsolete assets and infrastructure with new or refurbished equipment that is more efficient, which will improve environmental performance and increase the quality and dependability of supply.

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Renewable energy

While the Ukraine has the highest potential for renewable energy production in Europe, it probably has the smallest share of bioenergy use compared to any other European country.

The estimated total potential of the Ukrainian hydropower generation is close to 20 billion kWh of electricity per year. For small hydro alone, the estimated potential is about 2,500 million kWh of which only 170 million kWh is currently being utilized.

Ukraine has a current operating capacity of approximately 4,880 MW. About 3,170 MW of capacity has been delayed after construction, and another 675 MW is planned.

Major equipment of many of the hydroelectric power plants (HPPs) has been operating for about 40 years and needs upgrading.  The majority of the hydro resources (including small HPPs) is concentrated in the Central and Western Ukraine on the Dnieper, Dniester, Yuzhny Bug and Tisa Rivers. The Dnieper river basin is the most developed. The main trends of further development of power sector with the leading role of hydro are stated in the National Power Program of Ukraine.

Programs of small hydropower development in Ukraine include reconstruction and renovation of previously constructed small HPPs, adding small HPPs to water management projects with already existing water-retaining structures with the aim of utilizing waste releases.

The greatest wind energy potential is located in the vast areas adjacent to the Black Sea and the Azov Sea, as well as the Carpathian, Transcarpathian and Lower Carpathian areas. Additionally, there are areas with elevated wind potentials in the Donbass terrain and Dnepropetrovsk Region. If all of these areas were brought on-line, wind farms can account for 20% to 30% of Ukraine’s demand for electric power. The total installed capacity of Ukrainian wind farms is approximately 89 MW. 

Ukraine currently gets under 0.5% of its energy from biomass resources and biofuels; however, it is estimated that Ukraine could produce more than ten times its current level. The government is committed to focusing on biomass as a renewable energy. In fact, a number of biofuel facilities and stations that sell biofuels have been established in the country in the past few years.

The total potential for biomass was estimated at 86,300 GWh per year in 2003. A majority of the potential came from cereal crops straw (wheat, barley, oat, etc.) at 29,500 GWh annually. Approximately 12,800 GWh per year came from animal manure, and another 29,500 GWh per year came from wood wastes. There are a few modern wood-fired boilers in operation in Ukraine. A number of boilers originally designed for coal and oil combustion have also been converted for wood combustion.

Solar radiation in Ukraine is of middling intensity. The average amount of solar energy received annually in Ukraine is about 1,200 kWh/m2 (4300 MJ/m2). Even so, the current use of solar energy in Ukraine is minimal. The southern and southeast regions of Ukraine, especially Crimea, possess the largest potential for solar energy. In times of the former USSR, Crimea was the all-Union test ground for solar energy. In the 1980s several projects were created in Crimea, including a solar steam-turbine power plant with a 5 MW capacity, and a large experimental complex of buildings with solar hot water and a heating and air-conditioning system.

Additionally, Crimea—especially its southern coast—is the largest resort zone in Ukraine, and the conservation of the unique natural environment is important. Therefore the use of solar energy for generation of electricity and heat has in Crimea the largest prospects in the country.

Ukraine has considerable geothermal resources that can be used mainly for heat supply. There are also prospects for binary geothermal power plant creation based on existing wells at abandoned oil and gas fields. At present thermal water is used for municipal heat supply and in agriculture in the western and central part of Crimea. Separate wells are used in the Transcarpathian region to supply thermal water in swimming pools or as an additional source of heat for the local boiler houses. The total thermal installed capacity of Ukraine is 10.9 MWt, which generates 119 TJ of energy per year. Currently, the geothermal energy is supplied to nine different systems. Two of the systems are associated with power plant co-generation producing 0.16 MWe and 1.8 MWe.

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Energy efficiency

Ukraine is among the most energy intensive economies in the world. Ukraine’s energy intensity exceeds that of Germany by a factor of 3.7 (0.45 kg of oil equivalent in Ukraine vs. 0.12 kg in Germany). Part of its energy efficiency problem is structural: Ukraine was an important source of heavy equipment in the former Soviet Union. Nearly 20 years later, most of these assets are using the same technology. As a result, the industrial sector is labour and energy intensive, made viable in the past by low cost energy and labour.

Similarly, district heating was designed based on low-cost energy. The district heating systems are inefficient, but have been reliable: boilers with limited metering and temperature controls are common in the supply system while most customers have no metering or temperature controls. With no controls and costing based on the size of consumer apartments, there is no incentive to avoid wasting energy at the consumer end.

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The Ukrainian market for electricity generation is divided into three groups of producers:

  • The state-owned company Ukrhydroenergo owns the 11 hydro power plants in the country;
  • The four nuclear power plants in the country are owned by the state-owned company Energoatom;
  • Five regional generation companies, known as “gencos”, own the thermal power plants in the country. Originally there were four regional gencos: Zakhidenergo, Centrenergo, Dniproenergo and Donbasenergo. These companies managed 14 large thermal power stations. A new genco, Skhidenergo, emerged out of a debt restructuring process through which Donbasenergo transferred three (4,000 MW) of its five power plants to settle unpaid claims. While Skhidenergo is privately held, the Energy Company of Ukraine owns the majority of shares in the other companies. The state owns 51% of the shares of the biggest “genco”, OJSC Dniproenergo, which has a total capacity of 8,185 MW. The remaining 44% are held by the Fuel-Energy Company Donbas, which is the largest private investor in the energy sector in Ukraine, and at the same time also owner of Skhidenergo.

There is an electricity distribution company in each of Ukraine’s 25 regions, plus one in both the cities of Kyiv and Sevastopol and the autonomous Republic of Crimea. Among these regional distribution companies, there is a mix of state and private ownership. The distribution companies, called oblenergos, also own small cogeneration assets, mainly to produce heat for district heating. Kyivenergo is somewhat unique in that it is a vertically integrated joint stock utility, which both generates and distributes power and heat to the capital, Kyiv.

Petroleum and Gas
The Ukrainian Ministry of Fuel and Energy was authorized to administer the Government’s corporate rights in the National Joint Stock Company Naftogas Ukrainy. Naftogas Ukrainy processes gas, oil, and condensate at five gas-processing plants that make part of the company, producing motor fuel and other oil products. The company owns a network of filling stations. More than 97% of oil and gas is extracted by the enterprises of the company. The company includes six subsidiaries. Additionally Gas-Teplo, a subsidiary of Naftogas Ukrainy, supplies gas to district heating companies.

Ukraine privatized the largest part of local gas distribution companies in 1998. Currently 42 distribution companies operate distribution networks and supply gas to final consumers. However, these companies do not own the gas distribution pipelines, but just the gas transmitted through them, though newly constructed pipelines can be privately owned. Independent suppliers (in particular, local and wholesale traders, which are not controlled by Naftogas Ukrainy) supplied about 4%-5% gas to final consumers, mainly industrial consumers in 2008. Independent traders supply gas to industrial companies at non-regulated prices based on a license issued by the National Electricity Regulation Commission. By the end of 2001 over 1,000 companies obtained licenses for independent gas supply.

Close Ownership


The Ukrainian wholesale market is operated since 1997 by the state company Energorynok, which serves as a single buyer towards the electricity producers and then resells the electricity to distribution companies and large customers. The state generation companies Energoatom and Ukrhydroenergo have a market share in the wholesale market of 60%-65%, leaving only 35%- 40% of the generation market available for independent power producers.

The Ukrainian market is only liberalized regarding the generation of electricity but not the distribution to final customers. According to the National Electricity Regulation Commission of Ukraine (NERC), the full liberalization of the electricity market for all final customers is expected for 2013

Close Competition

Energy framework

The Energy Strategy of Ukraine to 2030 as enacted by Cabinet Resolution №145 dated 15 March 2006. The adoption of an Energy Strategy was the first attempt by Ukraine to resolve part of the legislative problems and to bring the domestic energy sector to a new level.

This Strategy aims to:
- Increasing per capita consumption of energy in Ukraine and reducing per unit GDP consumption. Today, Ukraine’s indicator for energy consumption per unit of GDP is 3.9 times that of the EU;
- Taking advantage of location and attractive conditions for transporting oil and gas to European markets;
- Selling power to Europe, as Ukraine is capable of supplying a population two to three times larger than Slovakia’s;
- Strengthening state oversight to protect the interests of energy consumers;
- Instituting organizational and legislative changes to regulation, to prevent abuse of rates policy and to oversee the operations of natural monopolies;
- Reducing Ukraine’s energy dependence by:

  • increasing extraction of oil and gas;
  • constructing new facilities and modernization of old ones to increase extraction of lignite (brown coal) and its burning;
  • exploiting transport capacities;
  • expanding the Bohorodchany-Uzhhorod gas pipeline from 120bn cu m per annum to 140 cu m;
  • reducing gas consumption to 45-48bn cu m “by 2020-2030;”
  • expanding electricity consumption;
  • manufacturing nuclear fuel elements other than enrichment;
  • upgrading atomic energy stations (AESs).

In 1996, the GoU developed an Energy Efficiency Program, where it outlined its strategy of decreasing energy consumption in industrial, energy and housing. However, this program was not strictly enforced as it was not accompanied by an enforceable energy efficiency action plan. In its 2006 Energy Strategy looking out until 2030, the GoU set a target of improving Ukraine’s energy intensity by 50% by 2030.

In 2010, the National Agency of Ukraine for the Effective Use of Energy Resources (NAER) developed a Targeted Energy Efficiency Program, which was approved by the Cabinet of Ministers. The Program sets a target of decreasing energy intensity of Ukraine’s economy by 20% by year 2015.

Tax incentives
Under a Decree of the Cabinet of Ministers, 14 May 2008, “On importing onto the customs territory of Ukraine of energy-conserving materials, equipment and spare parts”, imports of high quality equipment are exempt from both import duty (10%) and value-added tax (20%). The Cabinet of Ministers has defined a list of equipment categories, the manufacturers of which can claim an exemption on income tax for 80% of the income they earn. The list includes energy saving and energy efficient materials and products, fuel and energy measurement control and management equipment, and equipment for the production of alternative fuels.

Enterprises that implement energy efficiency initiatives can claim tax exemption on 50% of the additional profits made from such measures. However, enterprises wishing to access these tax exemptions must enter their company onto the State Register, a procedure that is slow and cumbersome, and has deterred some enterprises from taking advantage of the benefits offered.

The law “On Energy Conservation” makes provision for the introduction of accelerated depreciation on certain types of energy saving equipment. There is a current proposal to include specified items of energy efficiency equipment in the category of assets that attract a depreciation rate of 15%, but the necessary secondary legislation has to be implemented.

Tax holiday for biofuel producers
Producers of biofuel are given a tax incentive under the law “On Incorporation of Changes to Some Laws of Ukraine Concerning the Promotion of Production and Use of Biological Types of Fuel” (2009).

This law, which entered into force on 1 January 2010, provides for a 9-year grace period on the taxation of income obtained from the sale of biofuel of own production, on import duty and value added tax for equipment and vehicles for biofuel production, that use biofuel and are not produced in Ukraine. The law also cancels the state monopoly of distilleries for bioethanol production.

State Target Economic Program on Energy Efficiency 2010-2015
This programme was adopted in March 2010 to implement the goals of the Energy Strategy, and supersedes the State Complex Program of Energy Saving, which comes to an end in 2010. It has the goal of reducing the energy intensity of GDP by 20% relative to 2008, reducing dependence on imported energy sources (particularly natural gas, where substitution to the tune of 15 billion m3 is the expectation) and increasing the use of renewable resources by a factor of five. Other expected outcomes from the programme are a reduction of 15%-20% in the level of harmful emissions to the environment, and a reduction by 50% in heat losses from residential and public buildings.

Under this programme, NAER have led ministries and regional administration in the process of drawing up regional and sectoral development programmes for EE – many of these are already adopted, or are close to being finalised. About UAH 45 billion has been allocated from national and local budgets for the implementation of the programme, out of a total programme cost of UAH 250 billion the balance of which is expected to be mobilised from other sources.

NAER is following this up with the preparation of a complementary National Energy Efficiency Action Plan (NEEAP). The NEEAP is designed to identify energy efficiency investments, barriers to implementation and agencies responsible for implementation.

Green Tariff Law
The new Green Tariff Law is in effect since 22 April 2009. It is established for wind, solar, biomass, small hydro (<10 MW) and geothermal power plants. Green Tariff is fixed until 2030 with guaranteed electricity off-take by the Wholesale Electricity Market Operator. It is revised on monthly basis to follow changes in UAH/EUR currency exchange rate (with guaranteed “minimum floor” in EUR). It applies to new construction as well as existing renewable energy producers.

Ukraine Energy Efficiency Programme (UKEEP)
The Ukraine Energy Efficiency Programme will provide loans to Ukrainian Participating Banks, which will on-lend the funds to end-users for industrial energy efficiency and renewable energy projects. The objective of the project is to assist individual prospective sub-borrowers identify sustainable energy opportunities, conduct energy audits and assess technical and economical feasibility of the identified projects.

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Energy debates

Currently National Electricity Regulatory Commission of Ukraine (NERC) is in process of drafting the Electricity market Law in line with the Ukrainian Wholesale Electricity Market reform implementation. One of the crucial tasks of the reform is to establish the Balancing Market on the WEM and implement market participants balance responsibility.

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Role of government

The Fuel and Energy Ministry (MinEnergo)
This Ministry is responsible for strategic planning and budgeting for the Committee for the Fuel & Energy Complex (FEC) and supports the drafting of proposals for bringing Ukrainian energy legislation in line with EU directives. MinEnergo was established in 2000 in a merger of the Ministry of Energy, the Ministry of the Coal Industry, the State Department for Electricity, the State Department for the Oil, Gas and Petroleum Processing Industries, and the State Department for Atomic Energy. MinEnergo controls the country’s main energy assets in the centralized heating system and in the oil, gas and power sectors, including NAK Naftogaz and NAK Energy Company of Ukraine.

The Coal Industry Ministry (MinVuhleProm)
This Ministry is responsible for the effective management and distribution of budget resources among coal enterprises, the privatization of the coal industry, and the restructuring and closure of unprofitable mines. MinVuhleProm was re-established in 2005 when MinEnergo was restructured.

The Ministry of Regional Development and Construction (MinRegion-Bud)
Among others, this Ministry is responsible for centralized heating and for instituting energy-efficient and energy-conserving technologies in the housing fund. MinRegionBud was established in 2007 after the reorganization of the Ministry for Construction, Architecture and Residential & Utility Services.

The Ministry of the Environment (MinPryrody)
This Ministry is responsible for optimizing the use of natural resources and reducing emissions of hothouse gases in the FEC, and for ecological, radiation and nuclear safety in Ukraine.

The Economy Ministry (MinEcon)
In addition to energy policy, this Ministry coordinates cooperation between Ukraine and the EU, including in the energy sector, and determines policy issues in the FEC.

The NERC, although not specifically concerned with energy efficiency and renewable energy, is an important body in this sphere, since it is responsible for setting the level of the green tariff charged for electricity from certain renewable sources.

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Government agencies

National Agency for Ensuring the Effective Use of Energy Resources (NAER)
Set up in 2005 to replace the State Committee for Energy Conservation, NAER formulates state policy on energy use, energy efficiency, and renewable and alternative energy sources. The Agency is subordinated to the Cabinet of Ministers as a state body with a special status

Interagency Commission on Energy Development
On 7 July 2010, the Interagency Commission on Energy Development was formed. The Commission’s main objectives are:

  • ensuring that measures to develop energy resource transport infrastructure are coordinated;
  • organizing work to optimize the ratios of the national energy balance;
  • establish positive economic conditions for attracting both domestic and foreign investors to the energy sector;
  • review the need and rationale for locating traditional and alternative (renewable) energy facilities in the regions in order to improve energy deliveries to consumers.
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Energy procedure

Rehabilitation Program (EBRD)
In 2011 the EBRD plans to extend a loan of up to EUR200 million, alongside the EIB, in order to upgrade the hydro mechanical and electro mechanical equipment of seven hydro-power plants owned by UkrhydroEnergo. These plants comprise half of Ukraine’s total hydro power capacity and many were originally commissioned in the 1960s. The rehabilitation programme will improve environmental impact, optimise water usage and increase safety in the plants.

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Energy regulator

Regulatory implementation is the responsibility of the Ukrainian National Electricity Regulator Commission (NERC). NERC was originally set up on 8 December 1994 by Presidential Decree No. 738/94, as a special independent state body reporting to the President of Ukraine.  After the Constitutional Reform of 2004, NERC changed its legal status, becoming a central executive authority, separated from the ministerial structure but subordinated to the Government. Despite its name, the NERC is responsible for regulation in electricity, oil and district heating sectors. (link in Russian)

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Degree of independence

The Chairman and the Members of the Board of NERC are appointed and dismissed by the Government upon nomination of candidates by the Prime Minister. According to the law, their service term is of six years and they can be re-appointed for a second term. They may be dismissed before natural expiration of their term due to: voluntary resignation; criminal sentence; gross violation of position requirements; certified grave health impediment; or retirement.

Close Degree of independence

Regulatory framework

Today, RE is regulated by seven pieces of legislation:

  • Law of Ukraine “On alternative forms of liquid and gas-like fuels” dated 14.01.2000 №1391-XIV
  • Cabinet Resolution “On approving the Ethanol Program” dated 04.07.2000 №1044
  • Law of Ukraine “On alternative sources of energy” dated 20.03.2003 №555-IV
  • Presidential Decree “On measures to develop the production of fuels from biomaterials” dated 26.09.2003 №1094/2003
  • Cabinet Instruction “On approving the ‘Energy Strategy of Ukraine to 2030’” dated 15.03.2006 №145
  • Cabinet Resolution “On approving the Program to Develop the Manufacture of Diesel Biofuel” dated 22.12.2006 №1774

Other laws that have relevance to renewable energy:

  • On Incorporation of Changes to Some Laws of Ukraine Concerning the Establishment of the "Green" Tariff (September 25, 2008, №601-VI);
  • Law on Incorporation of Changes to the Law of Ukraine "On Electric Energy" Concerning the Stimulation of Use of Alternative Energy Sources (April 1, 2009, N 1220-VI);
  • Law on Incorporation of Changes to Some Laws of Ukraine Concerning the Promotion of Production and Use of Biological Types of Fuel (May 21, 2009, N 1391-VI).
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Regulatory roles

The NERC is responsible for:

  • Regulation of natural monopolies activities in the power sector, in the oil and gas complex and in the sphere of heat generation;
  • electricity, heat, gas, oil and oil products consumers rights protection;
  • issuance of licenses to entrepreneurial entities operating in the energy sector;
  • ensures implementation of pricing policies in the power sector, in the oil and gas complex and in the sphere of heat generation;
  • regulation of relations in the retail electricity market.
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Energy regulation role

The Government can overrule NERC’s decisions that contradict Governmental policy in the energy sector. This possibility is given due to the legal status of NERC which as an executive body subordinated to the Government.

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Regulatory barriers

Because Ukraine lacks an economic strategy and strategic planning in general, its Energy Strategy is not connected to other spheres in the country’s economy. Over the more than four years since the Strategy was adopted, a series of concepts and programs have been developed and a slew of international agreements in the energy sector have been signed, yet none of them have been fully implemented, nor do any of them entirely complement the Strategy. In short, the Strategy appears to be quantitative rather than qualitative.

Ukraine’s current Energy Strategy does not provide a clear, strict path to ensuring energy efficiency and transitioning to alternative energy sources. Nor does it propose ways for Ukraine to achieve energy independence and security. The adoption of the Energy Strategy in 2006 failed to guarantee that it would be implemented.

Close Regulatory barriers


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World Bank (WB). Project Appraisal document on a proposed loan in the amount of US$200 million to the Ukreximbank with the guarantee of Ukraine for the Energy Efficiency Project. 21 April 2011. Available at: [Accessed 9th September 2013]

Global Environment Facilities (gef). Ukraine: Improving Energy Efficiency and Promoting Renewable Energy in the Agro-Food and other small and medium enterprises (SMEs) in Ukraine. 14 April 2011. Available at: [Accessed 9th September 2013]

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International Centre for Policy Studies (ICPS). Energy Security Chellenges in Ukraine. A Snapshot 2010. Available at: [Accessed 9th September 2013]

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Energy Regulators Regional Association. Membership Profiles. Ukraine- National Electricity Regulatory Commission of Ukraine (NERC). Available at: [Accessed 9th September 2013] Close References