Conference Organizer: AHK Ukraine - German Chambers of Commerce Abroad
Topics Covered: Organizational and technical aspects of ensuring energy independence of a business, legal aspects of production for own needs, and contractual issues.
Speakers: Khrystyna Kasianova, green hydrogen business development manager at RP Global, Ivan Bondarchuk, head of energy at LCF Law Group, and Yulia Usenko, head of the All-Ukrainian Agency for Investment and Sustainable Development.
Outline: Ensuring Energy Security for Ukrainian Businesses
- Khrystyna Kasianova emphasized the importance of energy security for businesses, particularly ahead of the winter season.
- Yuliya Usenko discussed short- and long-term solutions for energy resilience, stressing the need for enhanced energy management and efficiency practices within businesses.
- Usenko emphasized the role of chief energy officers in monitoring and optimizing energy consumption, and the importance of combining technologies such as solar panels, batteries, and backup generators.
- She outlined the current energy deficit in Ukraine and encouraged businesses to explore distributed generation and backup power systems to mitigate power outages.
- Ivan Bondarchuk focused on the legal aspects of securing energy for businesses, including simplified regulations for installing energy equipment during martial law.
- Bondarchuk discussed different project models for energy independence, such as the active consumer mechanism, leasing power generation equipment, and energy service contracts.
- A Q&A session followed, addressing topics like energy contracts, sales of excess electricity, and the certification process for energy projects.
Transcript:
Khrystyna Kasianova: [00:00:00] Greetings to you, dear participants of the webinar. We are about to begin. Those who still wish to join, I believe, will have time. It's quite symbolic that today Ukrenergo again implemented emergency power outages and restrictions in the Poltava and Sumy regions due to new damage, another attack. And, of course, I would say I am happy to welcome you to our meeting, dedicated to discussing ways to ensure energy security for businesses. But I would also gladly welcome you to a meeting dedicated to the topic of the investment climate, innovation development, and, in fact, the future of our country.
However, this topic is relevant, considering the number of registrations and participants joining. It is clear that the issue of ensuring the current and future energy needs of businesses, both technically and economically, remains one of the most pressing today for business operations. So, the war continues. Businesses in Ukraine continue to function, and I think we can begin. My name is Khrystyna Kasianova. I head the Energy and Energy Transition Committee of the German-Ukrainian Chamber of Industry and Commerce.
Today, I would also like to introduce our speakers. Yuliya Usenko, head of the All-Ukrainian Agency for Investment and Sustainable Development, an expert with 12 years of experience in the energy sector, and a public figure. And Ivan Bondarchuk, a lawyer, partner at the law firm 12 Group. A few words about our committee. The Energy and Energy Transition Committee deals with issues that concern German and Ukrainian businesses operating in Ukraine.
Khrystyna Kasianova: [00:02:25] And we are addressing, let's say, all the challenges that hinder the energy transition for businesses. That is, we deal with issues that prevent businesses in Ukraine from developing their energy sectors. How do we do this, and how do we communicate with the government and among ourselves? First of all, we provide expert reviews, examine the legislation adopted in Ukraine, and also look into financing issues.
All this is happening within the framework of German-Ukrainian cooperation. This is the key goal of both the committee and the chamber's activities. But you can learn more about the chamber from the representatives of this business association, who are present today. Perhaps, if there are any questions, you can write them. Regarding today's event, I would like to say a few words about our principles. We have several principles in both the committee and the chamber. These are partnership, openness, dialogue, transparency, and environmentally responsible business.
Therefore, today's meeting aims to provide a vision and understanding for businesses of the ways available today to ensure energy supply from a technical, economic, and legal perspective. Ukrainian businesses have demonstrated significant resilience during the war, especially after the full-scale invasion. A lot of resources have been mobilized, and we can even talk about certain projects that have already been implemented.
However, the issue of energy supply remains the most urgent after some of the staffing challenges. Today, we will talk about the organizational and technical aspects of ensuring energy supply for businesses. We will look at the legal framework. And then I would like to leave some time for discussion so that you, dear participants, have the opportunity to ask questions.
Khrystyna Kasianova: [00:04:45] So, please send your questions in the chat. Depending on how our discussion unfolds, we might even have the opportunity to interact and even talk with the speakers. We will observe the dynamics of this event. Therefore, I am counting on your engagement, your respect for the speakers, for our agenda, and for our timing. So, Yuliya, I would like to turn to you.
I have stopped sharing my screen and would like to start our discussion with you by sharing some brief statistical data. We know that, according to open data provided by our operator, Ukrainian energy generation has decreased by 10 to 20 percent due to destruction by the Russian aggressor. Also, in preparing for this meeting, analyzing various reports on business resilience, we see that 10 to 20 percent of Ukrainian businesses have experienced a decline in their operations or a cessation of operations precisely due to a lack of electricity. Due to power supply interruptions and the cost of electricity.
At the same time, another 10 percent of businesses have already taken steps, are seeking solutions, and, probably over these two and a half years, have ensured backup power sources and some alternatives for supporting their business operations. Today, on October 4th, we are meeting on the eve of the heating season. In your opinion, what measures can be taken to ensure energy supply for businesses, and can we divide them into short-term and long-term solutions? We would be grateful if you could outline your vision in this direction.
Yuliya Usenko: [00:07:03] Thank you, colleagues. First of all, thank you to our organizers and partners for the opportunity. Yes, this platform allows us to discuss important questions related to energy resilience with the business community. In response to your question about which specific types of solutions we want to share with you today, to remind you that they exist, show some insights, and demonstrate practical applications.
By reviewing the presentation materials and listening to us, you will realize that we are not only talking about this winter but also about the steps that will help build a longer-term strategy for how businesses can strengthen their energy resilience. This is something that needs to be addressed now. To jump ahead a little, I will remind you that, in principle, there is information, which we hear from all sources, that this winter will be the most difficult.
But considering the course of events, let's say, we cannot predict how future events will unfold in terms of military aggression from Russia. We cannot predict when the constant shelling of energy infrastructure will stop. Therefore, we understand that the investments in solutions being made now, the measures businesses are taking now, will pay off and will be relevant in the long run. And what exactly are these measures? I suggest we move closer to the presentation and discuss this in more detail. If you haven’t heard yet.
Khrystyna Kasianova: [00:08:52] Yuliya, the floor is yours, thank you.
Yuliya Usenko: [00:09:23] Great. Thank you very much. So, we propose dividing our topics with my colleague Ivan according to this principle. I wish to cover more organizational aspects of ensuring business energy security, while Ivan will elaborate more on legal tools. A couple of words on why I am here and why I am addressing this topic.
I head the public organization All-Ukrainian Agency for Investment and Sustainable Development. For nine years, we have been trying to make the energy sector greener, more efficient, and contribute to the transformation of energy markets, taking into account the interests of all participants. Likewise, we now support the direction of distributed generation as one of the most relevant solutions for communities, businesses, and household consumers.
By the way, we are actively working with communities now on creating microgrids, exploring and researching conditions. We will be happy if businesses, by the way, join these processes. This is very important. Now, speaking in the context of business energy resilience, we have already touched on this with Khrystyna. The context is clear to everyone.
Here, I deliberately cite Ukrenergo, which predicts that this winter we may face a deficit of about two and a half gigawatts or even more. It depends on how mild or harsh this winter will be in terms of temperature conditions. We understand this. I would like to remind you that we have an allowed import of 1.7 gigawatts and emergency assistance of 100 megawatts.
So, this is still not enough to deal with such a deficit. And even in the case of the planned or announced increase in this import to two gigawatts, as predicted by energy sector specialists, we are still close to a situation where this capacity will not be enough to cover the emerging deficit.
Yuliya Usenko: [00:11:47] So, it is clear that outage schedules are inevitable. If there are no new attacks, Ukrenergo predicts that there will be two shifts, around eight hours. But, as we understand, this duration could be much longer. What solutions can be considered, and what should we prepare for? There are many, and they are diverse. But today, we will consider two sets of such solutions: organizational and technical.
What is the essence? Organizational solutions allow us to reduce energy consumption, achieve some savings, and redirect these savings, these funds, toward implementing technical solutions that help us cope with the challenges of power interruptions. What are these organizational solutions?
I would like to remind everyone that first and foremost, it's energy efficiency and energy management. I often hear from business owners and managers about the role of an important person, the chief energy officer. In my opinion, this is no longer sufficient in modern conditions. Chief energy officers, who previously were responsible only for the technical operation of internal networks and equipment, now must take on the function of energy management.
They should develop and review appropriate plans, monitor how the technological processes at the enterprise comply with energy efficiency policies, constantly analyze data, and based on this analysis, provide recommendations to their managers or business owners to implement energy consumption reduction policies and become more environmentally friendly. This is obvious. Our European colleagues do this, considering the European integration processes.
We also have to and will be doing this in the coming years as part of the obligatory steps. Regarding data analysis, it’s important to remember that automation of processes helps improve the quality of these analyses. For example, automated commercial electricity metering systems can quickly provide the ability to analyze consumption across all areas of your enterprise and draw conclusions about potential overspending that can be reduced.
Yuliya Usenko: [00:14:34] The next set of solutions in this organizational line is the choice of a supplier. I also hear a stereotype from different managers when they say, "We don't want to change the supplier. We've been working with them for two or three years. Why create problems? It's difficult," and so on. Unfortunately, these stereotypes still exist. Although the enterprise may have developed over two or three years and become more interesting to suppliers for better offers.
Here, I advise you not to be afraid. Don't wait for someone to come to you. Likewise, don’t stay passive. Again, assign tasks to the person responsible for energy management, collect the necessary data for a request for proposals, and communicate with various suppliers. Believe me, everything is possible, and you can find better options.
There should be no burden when changing suppliers that stops you because there shouldn’t be any. This is all regulated by the rules of the retail market. I also emphasize that our energy regulator, the National Commission for State Regulation of Energy and Public Utilities (NKREKP), also highlights this.
As for technical solutions, this is directly the energy manager’s work on implementing energy efficiency measures. Don’t forget about energy audits, as a properly conducted energy audit can provide excellent recommendations that can significantly save your energy resource expenses.
I share my own observations. In 1991, I had the chance to work with the results of such decisions. I leave the source, it will be interesting to see. But the main examples are from industrial enterprises—from the simple replacement of bakery lighting to more complex processes in machine-building factories, where outdated equipment in technological processes was modernized.
Yuliya Usenko: [00:16:47] Savings can range from 10 to 20 percent of total energy consumption. This applies to both electricity and the use of natural gas and thermal energy. So, it really works. It’s also very important when developing such measures, when looking for energy efficiency measures, to pay attention to technological processes.
For example, a concrete plant, a plant for reinforced concrete structures. During the energy audit, attention was paid to the technological process of producing concrete mix and filling the forms for the production of this reinforced concrete product. There, in that area of the process, significant energy was being consumed.
They decided to check the technological charts. A working group was created with a technologist, an energy manager, and an energy auditor, and they came to the conclusion that these charts were still based on Soviet-era standards, where the safety margin was three times higher than what was actually needed to ensure quality production.
By reviewing these technological processes, they were able to reduce their energy consumption. This is important. The second type of technical solution is the installation of distributed generation. We have already approached this point—businesses are actively setting up their own power generation capacities for energy supply. And it’s important to combine technologies. I will explain why.
Here I diverge from organizational measures a bit. I mentioned that you can choose a very good electricity supplier, but the supplier cannot guarantee the reliability of the electricity supply. They cannot sell you reliability. No way, because their task is to trade in the market and purchase the required volume of electricity for you under the conditions and price agreed upon in the contract.
But physically, you are still connected to the grid of the distribution system operator. And if an emergency situation occurs at the section that includes your enterprise's connection points, the electricity supply will not save you, and you will have no electricity.
Yuliya Usenko: [00:19:25] Returning to the topic of distributed generation installation, it won’t help either if you install a grid-connected solar power plant. I know enterprises that installed grid-connected stations three years ago. At that time, constant outages were not an issue, but now they find themselves in a situation where they have to retrofit these facilities, purchase a hybrid inverter, integrate batteries, and ensure the operation of the station in hybrid mode.
Batteries allow you to consume autonomous electricity for a while. Combining technologies is important—smaller businesses can install their own generators. Diesel generators are common for those with more resources or for those needing heat. Of course, businesses turn to cogeneration plant solutions, and it works.
Now, we will look at the conditions for developing these projects, how to make decisions, and which technologies to choose. Again, several issues arise related to the specifics of your production. The starting current of specific equipment can significantly influence the combination of different power-generating facilities.
So, again, you need to involve your energy manager and specialists who will suggest the solutions and energy sources that can be combined. The second important point and risk is time. If we talk about organizational decisions and the development of strategies, their gradual implementation, changing suppliers, reviewing conditions, etc., this can be done now or even in the winter—it does not affect anything.
If you plan to quickly install a power plant, not everything will depend on you. Consider the manufacturing time of the necessary equipment and the conditions on which you depend in terms of integrating your facility into the existing infrastructure.
Yuliya Usenko: [00:21:40] If you want to install something for autonomous energy consumption, that's one story. If you intend to sell excess energy, don’t forget about mandatory market rules and conditions for access. Interaction between different participants also requires detailed analysis and risk mitigation. And all of this should be done before you actually pay for the equipment being ordered. That’s all for now.
Additionally, I’d like to share something practical from my experience in Vinnytsia a couple of weeks ago. We discussed the issue of energy resilience in communities, but local businesses were also present. There was an interesting case brought up by business representatives: when considering the active consumer mechanism, for example, a solar power plant at one facility, while the same business owner has another facility in the same city.
How can you use this mechanism to save on electricity bills for the second facility, which is located in the same city but belongs to the same owner? And how can the excess be properly distributed financially? We tried to solve this issue, and I even plan to discuss it with experts. But when I returned to Kyiv and started discussing it with the supplier again, we agreed that these issues, if within the same city, can often be solved without changing the regulator.
So, I would like to end by saying that communication is crucial. You should try to find the optimal and quick solutions for yourself within the existing mechanisms. We, as consultants, are here to help. That’s all. Thank you for your attention. I will be happy to take questions.
Khrystyna Kasianova: [00:24:00] Thank you, Yuliya. Thank you for your presentation. By the way, I would like to tell our colleagues who have joined our meeting today, please write your questions in the chat. I think that even some project-based questions would be appropriate because I am truly grateful to our speakers.
They are experts with practical experience. So, I think this is a great opportunity for you to clarify and sharpen any questions that concern you if you are currently on the path to creating your own energy supply system. That's what we could call it. Yuliya, I have a question for you. I have a pool of questions, but we will leave most of the discussion for the second part, and I will ask just one clarifying question.
For businesses, of course, resilience and reliability of energy supply are important, but so is the cost. Expenses are crucial. From your practical experience, could you perhaps share some insights? What combination works best under current conditions in Ukraine? Considering, let’s take, for example, a medium-sized business, because Ukraine now has large businesses, as well as micro-businesses. Let's take a medium level of consumption, and I think the most relevant case that I see from our committee and segment is small solar power stations for self-consumption, plus a small storage system, plus perhaps a diesel generator, and maybe some backup solutions via direct contracts, for instance.
How do you see this ideal model in terms of costs? What could be most cost-effective for businesses? You understand?
Yuliya Usenko: [00:25:57] The issue here is that there is no clear answer, because, in my opinion, you can’t focus solely on the price. Again, for me, as an engineer, as someone with an engineering background, the first priority is to understand the priority needs of my business. The modes of operation. What are the key areas of energy consumption?
Will the cheapest option, a solar power station, for example, meet my priority needs compared to, say, a gas piston unit, which is a completely different technology? Will it meet my key needs? That’s why there is no one-size-fits-all answer in terms of price alone. From my point of view, just choosing the cheapest technology isn’t optimal.
If we are talking about finding price solutions, we gave the example of organizational decisions. We work with different suppliers, showing them our specific requirements, and openly say that, for now, we don’t want to install our own power-generating equipment. We want to negotiate with them. Again, in this niche, electricity suppliers will propose solutions.
As for backup power schemes, that’s a matter of connection, and you need to modify the technical conditions. These solutions need to be considered together with the distribution system operator, in other words, your local power company. But once again, standalone generation units and power generation, even with the sale of excess energy, are hard to compare by price alone.
Hybrid stations are more expensive. We know that battery storage systems are not cheap; they are more expensive than the power plant itself. For example, in simplified procedures, connecting to the grid is envisaged in the case of simplified procedures for wind or solar plants. The regulator has mandated a four-hour battery backup.
This simplifies the project significantly, but most businesses are not using this procedure. I don’t know of any projects that have connected under this simplified procedure for wind or solar power plants. So, the question remains, right?
Khrystyna Kasianova: [00:28:47] Thank you for your answer. I am reminded of the thought that, of course, these decisions can also be classified based on the companies that have already implemented solutions, in part just to put out the fire, so to speak.
Decisions were made in very urgent conditions to install additional innovative facilities. And companies that are now considering these strategies should probably pay attention to proper evaluation. You mentioned evaluation and comparison. That is, consumption needs and modes should also take into account the risks that exist on the other side, whether related to connection or obtaining the necessary permitting documentation.
But I think we will return to this, if time permits. We already have one question, but now I would like to move on to the legal part. As you know, business, like any institution, closely collaborates with the government. And we know that the government has taken measures aimed at quickly installing alternative energy equipment, simplifying some bureaucratic procedures, particularly during wartime.
For instance, it has simplified the development of local urban planning documentation for business entities. We also know that a law was passed exempting certain equipment groups from import duties into Ukraine. Additionally, there were various programs for financing the construction of renewable energy facilities. And, of course, there are specific laws regarding the non-application of blackout schedules to enterprises that import electricity.
I’ve listed what I consider to be the key points. Ivan, in your opinion, how does the current legal framework for ensuring energy supply for businesses look, and what risks exist, as Yuliya outlined? Are there any frameworks that are already working well, or are there gaps that still need to be addressed? We would be happy to hear your perspective.
Ivan Bondarchuk: [00:31:25] Greetings, Khrystyna! Thank you very much for inviting me to participate in the event. Greetings also to all the participants of this event.
Ivan Bondarchuk: [00:31:35] Once again, just a couple of words about who I am and what I do. I am a partner and head of the energy project practice at the law firm LCF. We started our journey in the energy market by supporting large projects—what is often referred to as bringing 1,000 renewable energy projects to life, including solar and wind.
But in the last year, due to the current situation, we have also been receiving requests from businesses and are consulting and structuring projects aimed at ensuring energy conservation.
Ivan Bondarchuk: [00:33:22] Indeed, the issues Yuliya mentioned are extremely relevant. That's true. And my conclusion from working on similar projects over the past year is that, just like in other energy projects, even in relatively small projects for businesses, it is an art of compromise. On one hand, it's the art of compromise between technology, economics, and regulatory acts.
When we look at what we would like to have technically, how it will pay off economically, and whether it is even feasible. On the other hand, these projects often require the involvement of partners: a technical partner for supply, a bank as a financial partner, and possibly a professional company to manage the energy equipment. So, it's also the art of compromise among the participants involved in the project.
Additionally, before moving to the presentation, I can comment on what you said earlier. You are absolutely right. Recently, almost everything that could be simplified in terms of placing energy equipment has been simplified. Indeed, gas piston units can now be installed without urban planning conditions on any type of land, without changing the purpose of the land, and essentially without requiring design or construction permits.
All the time-consuming processes have been removed. This doesn’t mean, for instance, that they don’t need to be designed—they still need to be. But all the associated permitting procedures, such as project expert reviews, have been simplified or removed. The same applies to solar installations, which can be placed without urban planning conditions. There’s the possibility to reconstruct buildings with the installation of solar panels without the need to obtain building permits, and so on. Many opportunities are available.
And so, in my presentation, I want to focus a little on the tools and models for building cooperation—essentially how to structure the framework for this project. I’ll now share my presentation.
Khrystyna Kasianova: [00:38:21] Well, we seem to be having some technical difficulties. While Ivan is reconnecting, I’ll wait a minute to see if he can get back and continue speaking. If not, we have some good time for a discussion. So, colleagues, please write your questions in the chat, and if someone would like to make an important comment or ask a question, feel free.
Khrystyna Kasianova: [00:38:55] Yes, we have a question.
Vitalii Humeniuk (question from chat): Good afternoon! Please tell us more about the scheme for transferring energy between several objects owned by one person (without changing regulation)?
Ivan Bondarchuk: [00:39:16] Colleagues, I’m back with you. I’m back.
Khrystyna Kasianova: [00:39:19] Yes, we can hear you. We can hear you. Yes.
Ivan Bondarchuk: [00:39:23] Great! Great! So, I’d like to start where Yuliya left off. When we talk about the energy independence of businesses, we have two main components. The first component is the reliability of power supply. If we don’t have electricity to ensure stable and quality production, to keep equipment running, and to make sure the equipment doesn’t break down, the company simply won’t be able to function.
But we must also not forget that electricity forms a significant part of the cost of production. When we discuss any energy solutions, we need to ensure they either strengthen the economic side of the business or at least don’t worsen it, allowing us to remain competitive in the market we operate in.
This is why I talk a lot about compromises, because not everything we want is always economically feasible. Businesses, for instance, don’t always have the resources to draw from working capital to make capital investments and spend one or two million euros on building a new energy system, for example, with gas installations or solar systems, and so on.
Khrystyna Kasianova: [00:41:56] We had a question that Yuliya already answered, by the way. Yes, this is one of the lesser-known schemes, in my opinion. I’m not sure how well it works. From your experience, Yuliya, have many companies or communities used this tool? I’m referring to the contractual relationships between consumers and suppliers.
Yuliya Usenko: [00:42:30] Yes, this concerns, as I understand it, the relationship between several objects that are owned by the same individual.
Yuliya Usenko: [00:42:42] So, are we answering Vitalii or Serhiy's question?
Khrystyna Kasianova: [00:42:46] Yes, Serhiy's question is already addressed. Serhiy mentioned a form and a certificate.
Chat Question: Serhiy Dronov: Hello! I would just add about the need for a military administration certificate regarding the need to install a generation facility. Julia Usenko (to everyone): Yes, in practice, this is a quest for many. There is no defined form.
Yuliya Usenko: [00:42:53] Yes, I’ll finish discussing this. I personally know companies in the agricultural sector that have used this opportunity, but I also know of negative experiences where obtaining such a certificate became a quest because there is no clear understanding or defined content of this certificate. Why does the military administration decide that this specific enterprise is strategic? What criteria do they use to determine this? Therefore, according to the simplified procedure, in my experience, there are successful cases, but they are not as numerous compared to the standard procedure. And this certificate really is one of the barriers to implementing this.
Khrystyna Kasianova: [00:43:55] And here, Lubomyr comments that, in his opinion, it’s worth raising the question with the regulator about the topic of temporary connections during the martial law period, specifically regarding the payment for connections to future small generating stations (SGS). Even with the certificate for connection to the grid and the interpretation of the regulator's resolutions, there are discrepancies among various participants in the legal field—developers, designers, and grid operators—regarding the size and fact of payment for connection.
Additionally, there are legal and regulatory provisions regarding functionality that are supposed to ensure compliance with the regulator’s requirement for four hours of continuous capacity. Mechanisms to ensure profitability for such solutions are part of what will be used to sell electricity on the market. There is also a question regarding corporate contracts. It's worth asking the regulator whether the legal conflict will be resolved where contracts for selling electricity cannot be concluded for more than one year because such a limitation makes corporate client crediting impossible. Lubomyr also adds that they have already successfully obtained these certificates three times. Thank you for your comments.
Khrystyna Kasianova: [00:45:49] Could you please, for those not deeply familiar with the topic, explain briefly what this certificate is and at what stage it should be obtained? Just to put all participants in the context.
Yuliya Usenko: [00:46:05] Sure. There is a temporary procedure for connecting objects to electrical networks during the period of martial law. Amendments were made to this temporary procedure to stimulate projects of distributed generation, primarily. As far as I know, this was done to promote projects related to natural gas generation because, again, these are more stable solutions. I fully support this. There are often debates, particularly among renewable energy advocates, about why we still use natural gas.
But natural gas is still necessary for us, and these technologies are considered transitional fuel solutions. Even within the context of energy transition, they fit well into this concept. Given our energy challenges, I fully support such incentives. According to this procedure, the list of documents is simplified. Connection deadlines for such installations are significantly shortened, and technical conditions are issued in just two calendar days.
However, among the mandatory documents is a certificate from the military administration stating that the object is strategic. I’m forming the content based on my own understanding because, once again, there is no officially defined template or form for this certificate. So, we have what we have. If colleagues have had multiple experiences obtaining this certificate, I want to point out that this can vary by region. For example, in the Sumy region, there are no issues with obtaining this certificate—it’s relatively easy. If you have experience and are willing to share, I see Kyiv, Ternopil, and Zakarpattia have also been mentioned.
Khrystyna Kasianova: [00:48:26] So, there are positive experiences.
Yuliya Usenko: [00:48:28] Wonderful! Thank you for sharing your experiences. It seems everything works well. But there are regions or specific enterprises that, for various reasons, have not been able to obtain the necessary document. That’s all I can comment on.
Khrystyna Kasianova: [00:49:12] While we are waiting for Ivan, I’ll take this opportunity to address some questions. Maksym is asking: how can companies that install generation as active consumers sell excess electricity to the grid if they cannot plan their consumption on an hourly basis? Essentially, they only know how much they will supply to the grid at the moment of production and consumption. Only balancing the market remains for the excess.
Do traders or suppliers purchase such excess, and what prices do they base it on, specifically in the balancing market? I think we don’t need to go into commercial details that you may not be able to disclose.
Yuliya Usenko: [00:49:54] I think these questions should be addressed directly to the market participants, that is, to the traders and suppliers who do this. The only comment I can make is that I don’t see a problem for the suppliers themselves since the active consumer mechanism is not something new. It’s evolving, and many offers are coming from the suppliers to consumers. I know this personally from business examples.
They are ready to buy excess through the active consumer mechanism, forming their offers. These offers may range from minus 10 to minus 20 percent of the market price, but they are still buying this volume. One thing I’d like to mention from practical experience that I don’t like is the emergence of negative signals.
For example, companies are being intimidated by penalties for exceeding the contracted capacity by just 10 percent, with threats of significant fines. I don’t have specific information because consumers don’t want to officially complain to the regulator, as they don’t want to damage relationships. However, I’ve heard that these fines are being threatened, and they may withhold payment for certain amounts of electricity delivered. I know this for sure from practice.
Other than that, you can discuss with the suppliers how they view this and how they form their trading strategy in relationships with active consumers.
Khrystyna Kasianova: [00:51:35] In general, this topic seems to be moving into a more complex area. Maksym, we may come back to this later. Give me a couple of minutes, as I want to understand if we’ll still have the presentation. I don’t want to disrupt the timing.
Khrystyna Kasianova: [00:52:01] Oh, Ivan is back. Ivan, can you hear us?
Ivan Bondarchuk: [00:52:08] Yes, I can hear you. Can you hear me?
Khrystyna Kasianova: [00:52:09] Yes, we can hear you. Let’s try again. We’ve taken the opportunity to answer some of the questions for Yuliya, and we have about 10 minutes left. I’d ask you to try and wrap it up in about 10 minutes so we can leave some time for discussion.
Ivan Bondarchuk: [00:52:31] No problem. Please bring up my presentation on your side.
Ivan Bondarchuk: [00:54:05] So, what I wanted to say is that the simplest and most organizational way to ensure electricity supply—at least the right to avoid being disconnected—is through importing electricity. Indeed, you can sign a contract with a supplier to purchase electricity on a prepayment basis. In this format, your business would have the right not to be subject to disconnections.
But there are practical challenges with this. First, you need to have a separate power supply line, meaning a dedicated line to your enterprise that won’t be disconnected. This can be an issue. The second problem is that if an accident occurs on the line, even in this case, I believe the network operator won’t be able to ensure power supply to your business.
Additionally, imported electricity can be very expensive, especially in winter, potentially much more expensive than Ukrainian electricity. So, from a technical standpoint, this may be an organizational solution, but from an economic standpoint, it’s probably not viable. Therefore, we are moving toward models that allow you to install your own generating facilities.
For about a year now, Ukrainian law has had provisions regulating the work of active consumers. This status allows, on the one hand, for electricity generation on installations connected to your networks, and on the other hand, the sale of surplus electricity, up to 20 percent of your annual consumption, to the grid operator. This can be done without a license as long as the capacity of your installations does not exceed five megawatts.
Ivan Bondarchuk: [00:56:26] One important remark: the limitation on the capacity of the electricity installations you can set up is your allowed capacity according to your connection agreement. In other words, if an enterprise has five megawatts of connected capacity, it can install five megawatts of generating installations, whether solar, gas-powered, or otherwise. Moving on to the next slide. Here are the details of the self-production mechanism, which is the mechanism by which you can sell surplus electricity to the grid operator.
What’s important to understand in this scenario? First and foremost, it’s a matter of price. If, for example, we are talking about a solar power station, everyone hopes that in the summer, you will sell electricity and use those funds to pay for your winter electricity. But this might not work out because suppliers usually buy electricity in the summer at the hourly price of the day-ahead market.
The hourly price of the day-ahead market is formed considering industrial solar generation. So, during the hours when industrial solar generation is at its peak, and thus your solar generation is also at its best, the market price can drop significantly. Instead of getting 3,000–5,000 hryvnias per megawatt, you might only receive 100 hryvnias per megawatt—basically, just a few kopecks per kilowatt. This is something you need to clearly understand: the decisions we are discussing now are primarily aimed at meeting your own needs. Only the surplus can be sold to the grid, but don’t expect to make much profit from it.
Ivan Bondarchuk: [00:58:33] Now, what will change? Here, I specifically mention draft law 11392. What will it change? Currently, the self-production mechanism applies to active consumers who have installed alternative energy sources such as solar, biomass, or sometimes even wind, although that’s more of a rare case. According to draft law 11392, which passed its first reading and is awaiting its second reading, the right to operate under the self-production mechanism will also be granted to gas-powered generators.
So, the restriction on alternative energy sources will be removed, allowing all categories of consumers to operate under this mechanism. What’s also important is that the active consumer mechanism allows you to negotiate with any third party that will build a power station for you, connect it directly to your electrical networks, and sell you electricity. You, in turn, will maintain your status as an active consumer with all the associated privileges.
This type of electricity sale is not subject to the regulation of the electricity market—it’s based on a civil contract. It’s flexible. And importantly, electricity sales directly into your network are not subject to distribution and transmission tariffs, meaning the consumer saves not only on the cost of electricity but also on distribution and transmission fees.
These can amount to a significant amount of money, a couple of hryvnias per kilowatt, further reducing your consumption. This opens the door for new players and service providers who can build and operate stations for you. We’ll discuss this in more detail later. Another important aspect is financing—because businesses aren’t always happy about having to spend working capital on capital investments.
We’ll talk about two options for financing: bank financing and third-party financing.
Ivan Bondarchuk: [01:00:48] Bank financing of projects is now typically popular under the 5-7-9 program, which is a state financial support program for entrepreneurship. It allows you to raise up to 150 million hryvnias for energy-related projects, with fairly reasonable interest rates of 7-9 percent. But there are a few restrictions, the key one being that if an enterprise has a foreign beneficiary, it cannot take advantage of the state support program because it was created for national producers.
Just a few days ago, I spoke with a bank, and they said they had a large and reputable borrower who wanted to implement a major project, but unfortunately, they couldn’t fund it under the 5-7-9 program. So, we need to look for alternatives. Other issues could include insufficient collateral, working capital, or financial performance, and in some cases, bank financing simply won’t be an option. In such cases, there are two other options. Next slide, please.
The first option is export credit agencies. These organizations, based in foreign countries, offer financial support. Examples include Hermes from Germany, Finnvera from Finland, UK Export Finance from the UK, and so on.
Ivan Bondarchuk: [01:02:58] What do these export credit unions do? They help manufacturers from their countries export goods, such as equipment. If you purchase German equipment, for example, you can receive additional guarantees from a credit agency that insures your supplier’s risks. This makes the terms of the supply more favorable for you.
There are many consultants and banks in Ukraine that work with export credit agencies. The advantage of this is that the restrictions that apply to the state support program won’t apply to you, so practically any reliable client can use these services. Let’s move on.
If you can’t get a loan, or don’t want to use export credit agencies, you can negotiate with a third party to build a generating facility for your business and either sell you the electricity or lease the equipment to you. This is another option. When you sign a power purchase agreement with an active consumer, this is the tool I mentioned.
The advantage of this mechanism is its flexibility because it’s based on a free-form contract. You won’t bear the risks associated with the efficiency of the equipment, but we’ll get to that later. Next slide, please.
Let’s start with the leasing option. What does it mean? It means that a company buys the equipment you want, leases it to you, you install it on your premises, use it to generate savings, and pay rental fees.
Ivan Bondarchuk: [01:05:10] Typically, your partner will want the rental fees to be tied to the cost of electricity, so that you not only pay fixed amounts but also benefit from the savings you achieve. The first option is leasing, but there are risks to consider. The first risk is the efficiency of the equipment. You choose what to lease, and you are responsible for how effective it is. Additionally, there are operational risks and risks of accidental destruction.
If the equipment is on your premises, you’ll likely be responsible for any risks associated with its operation—whether it catches fire, God forbid, or is damaged by shelling or debris. The second option is buying electricity as an active consumer. Next slide.
This is straightforward: you agree with an electricity producer, they build a power station for you, connect it to your network, and sell you electricity. The advantage here is that you don’t bear the operational risks; the producer, who owns the station, does. They are responsible for supplying it with energy carriers, ensuring the panels function properly, and maintaining them. They also bear the risk of accidental destruction—if, for example, a drone is shot down above you and debris damages the panels.
So, this is the downside to this previous agreement.
Ivan Bondarchuk: [01:07:05] The thing is that the producer will want a margin. So, most likely, this electricity will be more expensive for you than if you owned all the equipment and financed it yourself. There will be certain contractual conditions involved. The energy service is another popular option, and it is widely used for public buildings, schools, kindergartens, and water utilities.
Essentially, this is an agreement where your service provider implements energy efficiency measures for you—this could be installing management equipment, insulation, replacing LED lighting, installing more efficient pumps, etc. Once these measures are implemented, over a long period, typically up to ten years, you and the energy service company will share the savings achieved through these measures.
In the public sector, this is quite complicated due to strict procurement procedures and defined terms for energy service contracts. In the private sector, it’s easier to implement, but it still involves certain agreements.
The biggest challenge in this case is determining the baseline consumption from which the savings will be calculated. For example, for companies with steady operating schedules, this could be a good option. However, for businesses with varying schedules, depending on workload and work format, there are nuances. In such cases, an energy service contract may not be the best mechanism. But these are the main frameworks. I’ve gone over them quickly, but these are the key frameworks that allow structuring projects in practice.
Khrystyna Kasianova: [01:09:12] Thank you, Ivan! Thank you very much for your presentation. I have a clarifying question regarding the last slide about energy service projects and contracts. I’ve received feedback, mostly from the public sector rather than business, that it’s not that easy to implement them, and in fact, this is a non-functioning tool.
Could you share from your perspective, based on what you presented, where your clients and partners are, what works best for business in the private sector? We are not discussing financing here because that’s a very individual issue. I’m asking specifically about the models.
Ivan Bondarchuk: [01:10:03] The most successful projects we have now involve businesses leasing electrical installations. There are projects where businesses build these facilities themselves, sometimes using credit, and implement the active consumer mechanism if they have the means to finance such a project.
We also have the first projects where businesses have ordered the construction of a station for themselves and signed a direct purchase agreement with the producer as active consumers. These first three models work well. Energy service—I have experience with energy service projects in both the public and private sectors. It’s a functioning model, but it works best for large-scale, comprehensive projects.
For example, if you are dealing with generation, storage, lighting replacements, and other processes that all need to be bundled into one contract, then an energy service contract might be more comprehensive. In the public sector, most of the problems with energy service are related to budget legislation, public procurement, and how it all works. So, in this case, the risks won’t arise in the same way, but the practice is generally as I’ve described it.
Khrystyna Kasianova: [01:11:37] Thank you very much. First of all, I want to thank our speakers for finding the time. I know there are many projects, and not many specialists are working in Ukraine right now. So I appreciate you joining us and sharing your expertise. To summarize, our discussion today has once again confirmed the complexity of energy security issues.
On the other hand, this situation, as challenging as it may sound, is also creating new project opportunities for businesses. Since we are in the committee and part of the Chamber of Commerce and Industry, I can’t help but mention this. Both the active consumer model, equipment leasing, and leasing solar power stations demonstrate that we need strong companies and partners to implement projects in Ukraine. So, I believe that work won’t become less abundant in this area.
Another thought I have after today’s webinar is the importance of competent specialists who can help implement these projects. Incidentally, while reviewing the sustainability assessment of businesses, I noticed that personnel issues and mobilization are ranked equally with energy problems. These two factors are now the main driving forces.
Khrystyna Kasianova: [01:13:22] As a business community, we advocate for improving coordination between businesses and the government, as there are still a number of issues raised by colleagues in the chat. The government sets the framework and the vision, and businesses implement this at the local level. This cooperation is crucial.
To conclude our event, I’d like to ask one final question to each of our speakers—almost as a summary. What one recommendation would you give to businesses, focusing on the private sector rather than communities or public institutions? Considering the complex market situation in Ukraine, changes in consumer needs, and reductions in the number of consumers producing their own goods, businesses have had to reduce consumption, shift their operations, and relocate.
So, with this complex context in mind, what would you recommend that businesses focus on first when creating their energy strategy? If that’s too difficult to narrow down to one thing, you can mention two.
Ivan Bondarchuk: [01:15:06] I’ll start from my side. I’d say that, as you rightly pointed out, this crisis also creates many opportunities. For example, the high cost of electricity has increased the profitability of projects. A successful project can not only ensure energy independence for a business but also help gain a competitive edge.
So, don’t be afraid, and I encourage you to look for opportunities. Treat this as a project rather than just signing an electricity supply contract to keep the lights on. Look at this situation as an opportunity—assess your technical needs first, as well as your resources, especially human and financial. Do you have the personnel, and what can you invest in this project? Once you have a clear assessment of your technical and financial needs, seek out opportunities that meet your specific needs.
Don’t just go for the first online offer. Most projects can be done now, as many barriers have been removed. Almost any project is possible, in the configuration that suits your business. So, my advice is to look for and take advantage of opportunities. Thank you.
Khrystyna Kasianova: [01:16:34] Thank you. Yuliya?
Yuliya Usenko: [01:16:36] Yes, thank you. I can only add that I’ll always remember something from when I started my engineering education. Our rector had a plaque that said, "Those who don’t want to, find excuses. Those who want to, find opportunities." This should be the motto for every entrepreneur and every active person in Ukraine.
As I mentioned at the end of my presentation today, while there may not be as many existing tools as you’d like, there are quite a few, and they shouldn’t be underestimated. Don’t wait for regulatory improvements—create these precedents. From experience, I can say that when there’s a collective request, when it’s not just one consumer but 10, 20, or hundreds, the regulator will have to compromise and implement the necessary legislative changes.
So, look for opportunities and use the tools available. And I’ll emphasize once again—focus on energy management in your business. If you are producing goods with effective energy management, you’ll be able to survive this winter, face future challenges, and build a long-term strategy. One of my key recommendations is that with good energy management, organizational and technical measures will help you survive the next two seasons.
And this is just the beginning—you’ll refine and improve it over the second year, and you’ll see it’s addictive. You’ll want to further improve and invest in process modernization and your own energy supply. And don’t forget, it should also be environmentally friendly because climate policy obligations are also coming. Thank you.
Khrystyna Kasianova: [01:19:08] Thank you, Yuliya! You summed it up very well. In fact, I’d say you covered all the key German principles on which energy is based. Our German partners always ask when we discuss renewable energy, "Have you looked at consumption? Have you reviewed energy efficiency?" Because no matter how much you generate, it's important to see how you consume and plan your energy model. This is their main driver.
And working to align German-Ukrainian business interests, we adhere to this vision as well. We appreciate that experts like Yuliya and Ivan have highlighted these issues and provided insights. I also want to thank the Chamber—Elisabeth, Iryna, and colleagues—for organizing this event. Of course, thanks to the participants for joining and sharing your thoughts. I apologize to those who didn’t get a chance to speak, but we see your comments, and I can already announce that we hope to hold an offline meeting at the AHK office in early November, if the situation allows. Our members will be notified.
So, what we didn’t cover today, we can discuss in person in Kyiv. I look forward to it. Most importantly, thank you to the Armed Forces of Ukraine for giving us the opportunity to work for the future of our country. I’m closing the meeting, and I hope you found it insightful. We’ll be happy to continue collaborating. Goodbye, and feel free to wave goodbye.
Ivan Bondarchuk: [01:21:23] Thank you very much.
Khrystyna Kasianova: [01:21:24] Thank you. Goodbye. Goodbye.
