USAID Energy Security Project (ESP), together with representatives of the NEURC, the Ministry for Communities and Territories Development (MinRestoration), municipalities, and district heating companies, held a discussion on technical, economic and legislative issues surrounding distributed energy generation in Ukraine’s district heating sector.
Kathleen Kirsch, Deputy Director of the USAID Ukraine Office of Critical Infrastructure, thanked Ukrainian public sector partners for the fruitful work to develop distributed generation. “USAID continues to support Ukrainian cities to ensure the sustainability of vital utility services during Russia’s armed aggression against Ukraine. On the eve of the new heating season, it is extremely important to ensure the resilience of heat and water supply systems. One important component of USAID’s assistance is the transfer of power-generating equipment to cities for delivery to critical infrastructure facilities,” Ms. Kirsch said. She noted that USAID ESP has transferred 91 cogeneration units (CGUs) with a total capacity of 56.5 MW to 32 Ukrainian cities and 2 universities during 2023-2024.
Over the past 2.5 years, USAID ESP has successfully cooperated with the Verkhovna Rada, the NEURC, and the MinRestoration to improve legislation governing the energy and utilities sectors in order to remove barriers and create a favorable environment for the commissioning of new distributed generation facilities, including CGUs. Even though much has already been changed (link to the newsletter), there is still a great deal of work to be done in the legislative and regulatory environment.
Vasyl Shkurakov, First Deputy Minister of the MinRestoration, noted the positive practical results of collaboration with the USAID ESP. Specifically, this includes the of technical training workshops for municipalities and district heating companies on opportunities to improve the energy efficiency of district heating systems conducted in 2024. Additionally, successes stem from the provision of power generating equipment and the preparation of a regulatory framework for organizing better development of distributed generation and improving the efficiency of heat supply in Ukraine.
Mr. Shkurakov noted that the Ministry is continuing to cooperate with international partners, as well as the NEURC and other state authorities, to eliminate key constraints on the development of distributed generation. In addition, in cooperation with USAID ESP, the Ministry has developed a Draft State Targeted Program to Support District Heating Companies (DHCs). This Program creates incentives and opportunities to accelerate the modernization of Ukraine’s heat supply systems. “Our strategic goal of cooperation between the Ministry and USAID ESP is to make DH companies economically self-sufficient, profitable, and able to invest in their own development,” the First Deputy Minister explained.
Michael Trainor, the USAID ESP Chief of Party, drew the attention of roundtable participants to the benefits of distributed generation, in particular cogeneration, to maintain the necessary wartime resilience of Ukraine’s energy system. This is one of the main reasons to continue working on the development of distributed generation. At the same time, he urged energy sector professionals to pay attention to the economic and investment components of the process of distributed generation development, modernization of energy infrastructure, and decarbonization.
NEURC Commissioner Kostiantyn Ushchapovskyi said that the installation of generating units (gas turbine, gas piston, cogeneration, etc.) is a priority for his agency in order to cover the power shortage in the Ukrainian energy system and ensure reliable power supply to consumers and critical infrastructure facilities. For its part, the NEURC has simplified licensing procedures. In particular, electricity generation by businesses, including with the use of CGUs, is not subject to licensing if the electricity:
- is produced without the purpose of selling it and is consumed for the entity’s own needs, regardless of the installed capacity of the power-generating equipment
- is mobile (autonomous, during the of martial law in Ukraine and within six months after its termination or cancellation) if the total installed capacity of electricity generating equipment at one metering site does not exceed 5 MW, or the total installed capacity of electricity generating equipment at all metering sites does not exceed 20 MW
- if generation is not subject to incentives by law through the establishment of a feed-in tariff or identifying an auction price.
In addition to this:
- The procedure for connecting the CGUs to electricity, gas, and heating networks has been simplified and optimized.
- Amendments were made to the Distribution System Code, which defined the procedure for organizing “energy islands” at the local level as one of the possible options for uninterrupted energy supply to consumers, including critical infrastructure facilities, during Russia’s ongoing strikes on Ukraine’s energy infrastructure and the threat of an emergency in the United Energy System (UES) of Ukraine.
- Amendments were made to the regulatory framework in the gas sector which provide, in for the use of customer’s materials in the construction of a CGU installation site.
The NEURC also developed a draft Resolution on approving amendments to the Methodology for Calculating Tariffs for Heat Energy Generated by Combined Heat and Power Plants, Thermal Power Plants, and cogeneration units. This resolution proposes a simplified approach to calculating tariffs for heat energy production and procedures for determining tariffs.
Summarizing his speech, Commissioner Ushchapovskyi expressed hope that the Commission’s work with USAID ESP will contribute to ensuring prompt energy supply to critical infrastructure facilities in Ukrainian communities, ensuring stable operation and simplified conditions for CGU operators in in the electricity market.
Despite the great work done, heat-generating enterprises still face a number of challenges to the effective deployment of a cogeneration network on the ground, including planning the installation and commissioning of CGUs, connection to gas distribution and power networks, financing projects for CGU installation, and commissioning and putting them into operation. The roundtable participants agreed to work together to develop solutions to emerging problems and make every effort to develop distributed generation.