The gossip
A leading US energy company said it will prioritize Ukraine for supplies of crucial, overdue hardware as the country fights to keep the lights on after losing half its power capacity due to Russian attacks.
At a Ukrainian recovery conference in Berlin, GE Vernova signed an agreement with the Ukrainian Energy Minister on Tuesday German Galushchenkocommitting to sell critical electricity hardware for the country, including small mobile gas turbines, microgrids, renewables and large-scale batteries.
“We have years of backlogs for a lot of this equipment,” Roger Martella, the company’s chief sustainability officer, told Semafor. “Rather than just answering the phones in the order they ring, we are having very serious conversations at the highest levels of the company about how we can move and reallocate equipment so that Ukraine comes first. ”
GE Vernova’s deal with Kiev represents one of the largest forays into Ukraine by a foreign energy company since Russia’s full-scale invasion in 2022. Power outages are becoming increasingly common in Kiev and other cities, and only promise to worsen once temperatures in the summer, requiring greater use of air conditioning, before starting to fall again and causing a sharp increase in heating demand.
Reconstruction work on the damaged power grid is being slowed by a combination of factors, including labor and equipment shortages; insufficient defense missiles to protect infrastructure from repeated attacks; the electricity market policy that, according to private project developers, deters investment; and cold feet among many foreign energy companies about operating in a war zone.
For GE Vernova, these challenges are not enough to stop the company from testing its vision for Ukraine’s clean energy system.
“This will likely be one of the largest infrastructure projects of our generation and really set the tone for the rest of the world on what a sustainable energy ecosystem looks like,” Martella said.
Tim’s view
Before Ukraine can achieve a clean energy future, the country will need many more fossil fuels, and moving beyond that will require some major policy changes that the government has so far been unwilling to make.
The Russian attacks on the energy network are intended to undermine Ukrainian morale. The situation in Kiev has been particularly tense over the past week as some of the country’s nuclear power plants, the only remaining source of stable baseload energy, were taken offline for routine maintenance. Even as these come back online, the roar of diesel generators is now a permanent part of the city’s soundscape, and home batteries that can at least keep phones charged and some lights on are becoming increasingly difficult to find. In addition to the daily annoyance of power outages, a stable energy supply is critical to Ukraine’s military preparedness and economic recovery.
The country’s pre-war electricity generation capacity, around 18 gigawatts, has now been halved due to Russian attacks on gas and coal-fired power stations, substations and other network infrastructure. Analysts expect no more than 3 gigawatts will be recovered this year; If consumption rises in the summer, power outages of 20 hours or more could become routine, a top power grid official warned last week. Russia is now also increasingly focusing on previously unscathed infrastructure, including solar parks and natural gas storage facilities and pipelines. Officials fear transformers near nuclear power plants could be next, with the risk of catastrophic meltdowns if missiles hit the plants themselves.
“These losses are truly unprecedented in any energy system,” Galushchenko told the Berlin conference. Ukrainian engineers have been deployed to scour Europe for disused hardware, he said, and the country is desperate for more aid and investment from abroad. “All the [energy] equipment we can get becomes our weapon to win the war.
Ukraine’s energy recovery has two phases: immediate and long-term. In the long term, the country has incredible renewable energy potential; a report this week from the consulting firm Berlin Economics predicted that, in a no-war scenario, the country would be able to add 14 gigawatts of solar energy by 2030, almost equal to Ukraine’s total production capacity today.
Rebuilding destroyed Soviet-era fossil power plants makes little sense and would in any case likely be impossible to finance if banks raise their ESG standards, said Andrian Prokip, director of energy at the Ukrainian Institute for the Future, a think tank. Excess clean energy could also become a lucrative export commodity to Europe.
But in the short term, there is little chance that renewables can be built fast enough, with the necessary storage and grid transmission capabilities, to make them effective. “We shouldn’t worry too much about pollution and stuff because the priority is just to have power,” Prokip said. Speaking in Berlin, German climate official Robert Habeck said the fastest stopgap solution would be a fleet of hundreds or thousands of small gas turbines that can be easily transported and set up to power individual facilities such as hospitals or small clusters of homes and businesses. Martella agreed: “For this winter there is priority and focus on conventional energy.”
Whatever the source, Ukraine’s energy recovery and transition are hampered by byzantine, government-controlled wholesale market and project financing rules. Electricity prices are kept artificially low, which the government sees as a crucial lifeline for struggling households but which deters investment, said Igor Tynnyi, a developer of solar, hydropower, storage and biogas projects and co-founder of the Ukrainian Association for the Trade in Renewable Energy. group, said. The state-controlled grid operator is chronically late on payments and currently owes at least $500 million to renewable energy developers, according to the Berlin Economics report. Banks require high collateral requirements and third-party guarantees for renewable energy projects, making them nearly impossible to finance, Tynnyi said. “If you want private companies to quickly develop those hundreds and thousands of small stations to replace what has been destroyed, you have to get rid of all these requirements,” he said.
Officials in President Volodymyr Zelensky’s government occasionally talk about liberalizing the energy sector and building a new decentralized system, Prokip said, but remain reluctant to cede control in wartime. A spokesperson for the Department of Energy did not return a request for comment by deadline.
“Last year they built about 500 megawatts,” Prokip said. “That’s not a success.”
Room for disagreement
The bureaucracy that frustrates Tynnyi is reassuring to Martella, who said the level of coordination between the U.S. and Ukrainian governments with private energy companies has been “the best example of public-private partnership in the thirty years of my career.” In the chaotic situation in Ukraine, companies like GE Vernova are best suited to deliver what the government asks for, rather than initiating projects on their own, Martella said.
Another concern regarding the gas turbine strategy is that Ukraine’s gas supply is also weak. Last year the country survived on its own supply, but increasing demand for small turbines and the destruction of gas storage facilities may force the country to start importing gas this winter, Prokip said – something the country can hardly afford.
The view from Baku
Meanwhile, European officials are trying to decide how to tackle the December deadline, which will likely cut off Russian gas that continues to flow to Europe through pipelines in Ukraine. The pipeline flows are a curious artifact of the pre-war period, a case of Ukraine and Russia working together effectively to meet European gas needs, and both profiting well from it. But Europe and Ukraine desperately want to cut off Russia’s fossil fuel revenues. Instead, Bloomberg reported, officials could work out a deal to replace Russian gas in the pipelines with imports from Azerbaijan.
