The European Bank for Reconstruction and Development (EBRD) aims to invest €1 billion ($1.1 billion) into its energy programs in 2025, promising to reach a total volume of €3 billion ($3.3 billion) in direct financing by the end of this year.
EBRD has already deployed €6.5 billion ($7.2 billion) in Ukraine across roughly 150 projects, according to Vice President Matteo Patrone. “Energy is going to remain an extremely important priority,” he said in a meeting with reporters in Kyiv on Thursday.
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The institution’s investments span several key sectors: energy security, infrastructure (transport and municipal), agribusiness, food security, and private sector resilience.
Most of these projects (around 85%) are in the private sector, Patrone explained.
Energy financing is EBRD’s major focus, aiming to address vulnerabilities exposed last year following Russia’s attacks on energy transmission.
By March 2023, Ukraine’s actual capacity dropped from 36 GW of pre-war actual capacity to 14 GW as a result of Russia’s missile attacks on thermal and hydro power stations.
Losing Zaporizhzhia nuclear power plant – Europe’s largest nuclear facility – along with thermal plants, proved to be the most “painful” losses for Ukraine’s energy system, National Bank of Ukraine (NBU) Deputy Governor Sergiy Nikolaychuk previously told Kyiv Post.
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Ukraine is shifting from generating electricity at large power stations (that can become an easy target), to distributed generation using smaller power plants and renewable energy. This is why EBRD has stepped in.
“We are moving our focus from support to the transmission system operator to support the generation of electricity,” Patrone said during the meeting.
EBRD`s renewable energy projects
Ukrainian companies are trying to set up their own electricity generation from diverse sources. So far, however, they have been unable to scale up the production of renewable energy due to the challenge of tariff fluctuations, Patrone told Kyiv Post.
Currently, renewables form a 10% share in the Ukrainian energy mix, EBRD reported.
“It’s difficult to calculate your return on investment because there is volatility, fluctuations in the tariffs – especially if you do it on a merchant basis,” Patrone explained.
EBRD wants to help by developing the right program to tackle this issue.
“We are working together with the government to set up a framework that would stabilize the return on investment for those who are willing to invest in the renewable energy sector,” Patrone said
This framework aims to create a range of fluctuations. This facility aims to compensate investors if prices fall below a minimum level. Conversely, if prices rise above a certain level, investors contribute a portion of the difference back into the facility.
It would be premature to say when the EBRD and the government will reach a final agreement, according to Patrone. That said, he added that businesses are “keen” to find a solution.
“It’s always difficult to set up these things, especially if they have a feature of novelty,” Patrone added.
Ukrainian companies actively setting up distributed power generation
Until EBRD’s solutions for tariff fluctuations are ready, Ukraine’s private sector and state-owned enterprises have already begun establishing their own large-scale energy generation.
EBRD has signed a €157 million ($174 million) of project finance debt to a private wind power project.
“The total cost of the project is estimated at €225 million ($249 million), with the rest to be met by equity from the project sponsor, GNG Group or Galnaftogaz, widely known in Ukraine as OKKO Group,” the press release says.
OKKO Group will construct and operate wind power plants in Ukraine with a combined capacity of 147 MW.
Rooftop panels and small equipment have become popular among households and SMEs, purchased through the Energy Security Support Facility – a program through which EBRD provides Ukrainian banks with portfolio guarantees worth €700 million ($774 million), and banks provide loans to their clients. If the client defaults, EBRD covers the risk. If the clients repay the loan, banks earn extra profit and the economy gets extra distributed generation capacity.
EBRD also lent €180 million ($199 million) to Ukrainian Railways to fund small-scale power generation. Ukrzaliznytsia (UZ) will install up to 270 MW of decentralized small-scale gas-fired power generation capacity.
Additionally, financed state-owned oil and gas Ukrnafta for €80 million ($88 million) – the company will finance supply and installation of a total of about 100 MW of power generation capacity.
EBRD-signed energy projects in Ukraine
- €157 million ($174 million) for a private wind project to boost Ukraine’s energy security
- €60 million loan ($66 million) from the EBRD for the construction of a bioethanol plant to GNG (OKKO)
- €200 million ($221 million) loan package to Ukraine’s main hydropower generation company, Ukrhydrenergo
- State-owned Ukrnafta received €80 million ($88 million) is to build a state-of-the-art distributed gas generation system
- An agreement has been reached to establish the joint venture company Goldbeck Solar Investment Ukraine, which aims to implement up to 500 MWp of solar projects in Ukraine in the next three to five years
- EBRD has launched an energy security support line to finance €700 million ($774 million) of investments in distributed generation (Kyiv Post spoke with Head of the Financial Institutions Group at the EBRD Francis Malige about the project)