Energy in Ukraine: Investment Realities and Legal Regulation in 2025

Ukraine’s Energy Sector in 2025: Challenges and Transformation

Ukraine’s energy system has faced severe challenges. As a result of the full-scale war, up to 60% of its generation capacity—over 22 GW—was destroyed or damaged. These losses have led to a significant electricity shortage across the country, especially in the summer of 2024 and during the autumn-winter season. This caused widespread power outages and made Ukraine reliant on electricity imports from Europe.

To meet current consumption levels, at least 4 GW of new or restored capacity must be added to the grid. Solar generation was the least affected, with only around 8% of solar power plants (SPPs) destroyed or damaged. These circumstances have triggered the active development of the renewable energy sector—particularly solar—as a key element of a decentralized and energy-resilient electricity supply system.

Key Trend: Explosive Growth in Self-Consumption by Solar Power Plants

The year 2024 marked a turning point for Ukraine’s solar energy market. According to estimates from the Solar Energy Association of Ukraine (SEAU), around 800 MW of new solar capacity was installed during the year, mostly in the form of self-consumption solar power plants.

The main drivers of this rapid growth include:

• The war and blackout threats – Damage to infrastructure, power shortages, and the risk of outages have pushed businesses, communities, and agricultural producers to seek autonomous energy sources.
• Tax incentives – As of 27 July 2024, Ukraine abolished VAT and customs duties on the import of photovoltaic panels and energy storage systems (ESS), making such equipment significantly more affordable. These changes were introduced by Law of Ukraine No. 3853-IX On Amendments to Subsection 2 of Section XX ‘Transitional Provisions’ of the Tax Code of Ukraine Regarding Exemption from Value Added Tax on Import Operations of Goods for the Production and/or Repair of Mechanized Demining Machines and Law of Ukraine No. 3854-IX On Amendments to the Customs Code of Ukraine Regarding Exemption from Import Duty for Goods Intended for the Production and/or Repair of Mechanized Demining Machines, Goods Contributing to the Restoration of Ukraine’s Energy Infrastructure, and Certain Specifics of Customs Clearance for Goods Intended for Security and Defense Needs, which amended Ukraine’s Tax and Customs Codes. These incentives will remain in effect until 1 January 2026.
• Global decline in equipment costs – The steady decrease in the prices of solar panels and ESS made these investments profitable within just a few years.
• Striving for energy independence and cost control – for businesses, this is not merely a matter of a “green image” but a strategic tool for risk and expense management.

The most active adopters of solar power in 2024 were:

• Enterprises in the food industry, logistics, and retail;
• Local communities and municipal institutions (e.g., hospitals, water utilities, schools);
• Farming enterprises.

There was virtually no construction of industrial-scale solar power plants in 2024 due to:

• High wartime risks for large investors;
• An unstable regulatory environment;
• A lack of transparent auctions and guaranteed grid access.

Agrivoltaics: An Emerging Trend

The term “agrivoltaics” is not yet legally defined in Ukraine. However, European legislation provides useful guidance. France’s APER Law (2023) defines agrivoltaics as:  “Installations that simultaneously generate electricity and support or enhance agricultural production, animal welfare, or protection from drought, hail, wind, or other climate-related threats.”

Germany offers the DIN SPEC 91434 standard—a non-binding but widely accepted industry guideline—defining agrivoltaics as: “A system that enables the combination of agricultural production and solar energy generation on the same land plot, provided that agricultural productivity is maintained.”

In Ukraine, this model—where energy generation (primarily from renewables) is combined with crop cultivation—is only at an early stage. Most current projects involve rooftop solar power plants installed on farm buildings. Classical solutions, where photovoltaic panels are installed 5–7 meters above fields allowing machinery to pass underneath, are still rare and limited to a few pilot projects.

While agrivoltaics remains a niche sector in Ukraine, its popularity is growing. Key reasons behind its promising future include:

• Remote agricultural enterprises can solve their energy supply issues by building solar power plants;
• A growing need for energy autonomy across rural regions;
• The anticipated drop in equipment and construction costs.

Energy Storage Systems (ESS)

The year 2024 marked the beginning of ESS integration into solar power plant (SPP) construction projects. Today, these systems are seen not as an optional add-on but as a necessity for the sustainable operation of SPPs—especially given the grid’s unstable load.

Ukrenergo, Ukraine’s national transmission system operator, has initiated competitive special auctions for the procurement of ancillary services with 5-year contract terms. Current service providers and investors planning to build and operate ESSs of more than 1 MW are invited to participate. Winners will sign Euro-denominated contracts with Ukrenergo for a 5-year term, with a one-year grace period before service delivery begins.

Another promising opportunity for investors operating on the wholesale electricity market is to build SPPs together with ESSs. In this model, ESSs can be charged during the day from solar generation or at night from the grid when electricity prices are at their lowest. The stored energy can then be sold during peak hours at higher prices.

Key Benefits Include:

• Excess daytime generation can be used at night or during peak demand periods;
• The current cost of “SPP + ESS” in Ukraine is comparable to the cost of a stand-alone SPP five years ago;
• Financial models show profitability, especially for self-consumption scenarios;
• The ability to provide frequency restoration reserve services under a fixed euro-denominated contract with Ukrenergo for a period of 5 years;
• Combined SPP + ESS systems enable participation in electricity sales on the wholesale market.

Corporate PPAs: Trust is Building Slowly

Despite growing attention to direct power purchase agreements (PPAs), their widespread adoption in Ukraine is still in its early stages. PPAs are long-term contracts under which businesses purchase electricity directly from producers—often from renewable sources. These agreements provide stability of supply and fixed pricing for electricity.

Key challenges include:

• Concerns from both consumers and producers about price fluctuations, contract stability, and volume guarantees;
• A lack of standardized contract templates;
• A limited number of scalable case studies.

It is expected that successful first-mover cases will trigger a wave of PPA adoption in 2025–2026.

Legal Regulation

The adoption of Law of Ukraine No. 3220-IX On Amendments to Certain Laws of Ukraine Regarding the Restoration and ‘Green’ Transformation of the Energy System of Ukraine on 30 June 2023, effectively marked the end of the “feed-in tariff” era for industrial solar power plants (SPPs) in Ukraine. New instruments are now available on the market for potential investors:

• Self-consumption mechanism;
• Self-generation mechanism (Net billing);
• Electricity sales on the wholesale market;
• Green auction mechanism.

Self-consumption Mechanism

This model involves constructing an SPP exclusively for meeting the energy needs of an industrial consumer, with no possibility of selling electricity to the grid.

Key features:

• A Corporate Power Purchase Agreement (CPPA) is signed with the industrial consumer;
• SPP capacity is limited to 20 MW;
• No electricity generation license is required;
• Construction permits may be needed in some cases.

Self-generation Mechanism (Net Billing)

This mechanism enables electricity to be generated primarily for self-consumption, while also enabling partial sales to the grid.

Key features:

• A CPPA is signed with the industrial consumer for the entire volume of generated energy;
• SPP capacity up to 20 MW;
• Only the industrial consumer is permitted to sell electricity to the grid;
• The volume of electricity sold to the grid is limited to no more than 50% of the SPP’s capacity;
• No licenses are required for electricity generation or sale;
• The industrial enterprise must acquire the special status of an “active consumer”;
• Construction permits may be required in some cases.

Electricity Sales on the Wholesale Market

This model involves building an SPP to participate directly in wholesale electricity markets.

Key features:

• Electricity can be sold on various market segments: the bilateral contracts market, day-ahead market (DAM), intraday market (IDM), balancing market, and/or ancillary services market—at free (market) prices;
• The SPP may also sign a CPPA with an industrial consumer and sell electricity directly to them;
• No limit on electricity volume sold;
• No limit on the installed capacity of the SPP;
• The SPP bears responsibility for its own imbalances;
• Registration as a participant of the wholesale electricity market is required;
• A generation license is mandatory;
• Construction permits may be required in some cases.

Green Auction Mechanism

This model involves constructing an SPP to participate in the wholesale market and receive state support.

Key features:

• The investor (SPP owner) participates in support auctions conducted by the State Enterprise Guaranteed Buyer;
• If successful, the investor signs a market premium contract (“contract for difference”) with the Guaranteed Buyer;
• The market premium cannot exceed the former feed-in tariff—€ 08/kWh;
• The support period is 12 years;
• Electricity can be sold on various market segments (bilateral contracts market, DAM, IDM, balancing market, and/or ancillary services market);
• The SPP may also sign a CPPA with an industrial consumer;
• No limit on the volume of electricity sold;
• No limit on SPP capacity;
• The SPP bears responsibility for its own imbalances;
• Registration as a participant of the wholesale electricity market is required;
• A generation license is mandatory;
• Construction permits may be required in some cases.

Legislative Changes in 2025: Progress in Settling Debts Owing to Renewable Energy Producers

At the beginning of 2025, Ukraine adopted Law of Ukraine No.4213-IX On Amendments to Certain Laws of Ukraine in the Fields of Energy and Heat Supply Aimed at Improving Certain Provisions Related to Business Activities and the Operation of Martial Law in Ukraine of 14 January 2025 . This law stipulates that the National Energy Company Ukrenergo will allocate UAH 10.7 billion—saved on dispatching services in 2023—to repay debts on the balancing market, to the Guaranteed Buyer, and to household solar producers, in the proportion of 45/45/10. The amount saved in 2024, also to be allocated for this purpose, is subject to verification by the National Energy and Utilities Regulatory Commission (NEURC). Preliminary estimates suggest a figure of around UAH 3 billion.

In addition, for 2025 the NEURC approved Ukrenergo’s electricity transmission tariff at UAH 686.23/MWh (excluding VAT), which is almost 30% higher than the 2024 tariff. As a result, for the first time in years, the tariff for 2025 is considered as being non-deficit.

While the overall situation is stabilizing, chronic debt in the solar sector continues to have negative consequences:

• Investor confidence erosion: Accumulated debts undermine the trust of investors in Ukraine’s renewable energy market. Concerns over the return of investments deter new projects;.
• Financial strain on current producers: Delays in payments lead to working capital shortages among solar energy producers, complicating loan servicing, procurement of equipment for repairs or upgrades, and timely wage payments;
• Slowed development: Instead of fostering growth, debt accumulation is stalling the sector’s expansion. Producers lack funds for scaling up or investing in new technologies;
• Legal disputes: The debt issue has triggered numerous lawsuits between renewable energy producers and state-owned enterprises, further complicating the legal and financial environment.

Addressing this issue requires a comprehensive approach, including debt restructuring, identifying new funding sources (e.g., international aid), and establishing a transparent and predictable settlement mechanism.

Conclusions

• Self-consuming solar power plants are the undisputed market leader. Businesses, agricultural producers, and communities—often in partnership with investors—are actively building SPPs with energy storage systems;
• Utility-scale solar generation remains on hold, awaiting institutional mechanisms and regulatory stability;
• Agrivoltaics, self-consumption SPPs, and energy storage systems are the three main growth vectors for 2025–2026;
• The key prerequisites for large-scale investment are the presence of transparent rules of the game and a reduction in war-related risks.

Ukraine has the sun, the land, the experience as well as the ambition. Now is the time to build a market worthy of these resources.