Thanks to enterprising local companies such as DTEK and enlightened government reforms, Ukraine’s energy sector is starting to meet the needs of the 21st century. However, huge potential remains for investors to develop fuel resources and boost renewables
In the wake of Ukraine’s 2014 democratic revolution, the country had to move fast to transform the energy sector from a situation of reliance on Russian gas and Soviet-era infrastructure into a cleaner, modern and self-sufficient sector. For that, it is estimated that €80-95 billion in investment is needed by 2035. Accordingly, the government has focused on making Ukrainian energy one of the most attractive sectors for foreign capital.
Reforms have opened up the sector both upstream and downstream, attracting more international investment and private firms, especially in the renewable and gas sectors.
DTEK, a strategic holding company that develops business in the energy sector, entered the oil and gas business in 2013, tripling production since then. “Today we produce 1.7bcm of gas. Our ambition is to bring production to about 3bcm over the next three years,” says CEO Maxim Timchenko.
As Ukraine’s largest private investor in energy, DTEK’s diversified businesses are also national leaders in renewable energy, implementing projects alongside multinational companies such as GE, Vestas and Sinomach. Timchenko believes that renewable sources are the future for Ukraine, which he says is currently using less than two percent of its renewable potential. “Our goal in renewables is to increase our capacity to 1GW, which will require around €1 billion in investment.”
Ukraine’s proven natural gas reserves (m3)
Estimated potential market in Ukraine to boost energy efficiency
potential increase in electricity trade between Ukraine and the EU after 2022
Foreign investments in renewable energy facilities in 2018
DTEK’s investments in RES in 2018
– Reforms in gas and electricity markets.
– An independent regulator: the new Energy Regulatory Commission was selected according to the methodology developed with the participation of European experts.
– The transition from the administrative, “manual” pricing policy for energy resources toward the moment of complete liberalization
– Since 2015, $850 million of foreign investments have been attracted to renewable energy facilities, according to the Ministry of Economic Development and Trade.
– Gas trading: a number of foreign companies have entered the market, and the number of private companies in the gas import segment for 2017 increased from 20 to over 40, according to data from Ukrtransgaz.
– Gas production: a variety of foreign contractors for drilling and services have entered the market from countries including China, Croatia and
In the long run, attractive areas for investment are:
– Intensive development is promoted by a high green tariff, legally fixed by the state.
– Ukraine has favorable conditions for the development of wind and solar energy, but only 1-2 percent of this opportunity is utilized.
– Ukraine ranks second in Europe in terms of explored gas reserves after Norway (1.1 trillion m3).
– Ukraine annually extracts less than 2 percent of its gas reserves. At this rate, Ukraine’s own reserves will last for 54 years. According to the R/P ratio, Ukraine ranks first in Europe, where the average value is 12 years.
– Due to a systematic lack of financing, wear and tear of the grids is 65-80 percent. According to the National Commission for State Regulation in Energy and Utility Services, the remaining operating life is 10 years.
– For well-balanced RES development, grids need to be modernized, and about 40 percent of all investments in the energy sector shall be aimed at updating the grids. A Regulatory Asset Base (RAB)-tariff needs to be introduced.
– The target is to reduce the energy capacity of GDP by two times, which will allow Ukraine to approach European standards. The estimated potential market for ESCO companies in Ukraine is €12 billion.
DTEK’s development strategy is fully in line with Ukraine’s energy strategy. Its plans by 2020:
One gigawatt (GW) of installed capacity in renewable energy
DTEK is the largest investor in the Ukrainian renewable energy sector. The company has already invested €730 million in the SPP and WPP construction projects.
– DTEK implements its projects in cooperation with the leaders of the energy and engineering industries. Their partners are Vestas, GE, and CMEC (China). CMEC is a member of Sinomach Group, a Chinese state-owned corporation and the largest energy contractor in the world.
– DTEK effectively uses renewable energy facilities: the equipment availability at the existing (Botievo) wind farm is 98.8 percent, which is of fairly high value considering the 96–97 percent availability in common practice.
Upgrade of power units
– A strategy for the reconstruction or decommissioning of operational power units and the construction of new units will be developed.
Three billion cubic meters (bcm) of annual natural gas production
– DTEK is a private gas producer, no. 1 in the country.