How to Generate Additional Energy for Industry in Ukraine

The demand for gas generation is urgent, but it is expected to become even more necessary in the future to balance renewable energy sources (RES).

These projects are primarily relevant for cities and large industries, which face the challenge of optimizing their dependence on the energy system, where the overall capacity deficit is at least 2 GW. Currently, the energy system’s deficit is being addressed mainly through diesel and gasoline generators or through power outages, but this approach does not provide a long-term solution. It is important that temporary solutions do not replace strategic and long-term ones. Temporary solutions give a “head start” for the development of alternatives that require more time to install and secure funding.

At present, all circumstances and expert opinions converge on the prospect of reducing the deficit in Ukraine's energy system through distributed gas generation. However, opinions partially differ on how best to achieve this.

Now is the time to move from discussions to solving practical issues and unlocking the development of the sector, creating opportunities for various pilot projects. This can be done through two key paths:

1. Creating backup generation based on state-owned or municipal enterprises under the control of the Cabinet of Ministers and in coordination with the dispatching of Ukrenergo. This electricity will most likely be supplied at a regulated price under special conditions for the country's socio-security needs.
2. As an investment direction for the business sector, aiming to produce electricity for private facilities and industries for whom the stability of electricity supply is more important than its price and subsidies from the state.

In my opinion, it is not worth focusing on a single standard model of operation; both directions should be developed simultaneously. It makes sense to involve foreign and private investors who can relieve donors of their burdens and organize the optimal operation of gas generation within the country. Meanwhile, state-owned companies can focus more on the segment of socially vulnerable and security consumers.

These two directions for the development of electricity generation require different regulatory incentives: for state-owned companies, the possibility of preferential capital investments and compensation to cover new operational costs; for private investors, it is more important to obtain permission to sell electricity without price restrictions and under conditions of continuous power supply for industrial consumers.

We should stimulate all additional electricity generation that meets the conditions of distributed generation, is close to the consumer, and can benefit society at its location. We should also prioritize electricity generation that has effective production indicators and contributes to optimizing emissions.

Today, industries are allowed to import more expensive electricity for their own needs with protection against planned electricity supply restrictions. But why not start generating it themselves? Gas generation for electricity in Ukraine is not a worse resource for Ukrainian industries, particularly the metallurgical sector, especially considering the physical limitations of imports. The proper conditions for these investments could create a significant multiplier effect across the entire economy. The lack of electricity is a more negative factor than its relatively premium price for industry.

After the war, medium and large-capacity gas generation could serve as a baseline for many regions where there will be a noticeable shortage of electricity due to the destruction of thermal generation, or it could serve as a balancing source for green energy, which will undoubtedly become more and more prevalent. This type of generation was “exotic” for Ukraine before the full-scale invasion, but it could help us all survive the difficult times of war and make the transition to fully green generation over the next 10-15 years smoother.