Since 2018, USAID through its Energy Security Project (ESP) has been providing comprehensive technical assistance to the Ministry of Energy of Ukraine (MoE). This assistance is aimed at strengthening the country’s energy security, integrating Ukrainian energy markets into European ones, and reforming the energy sector following the principles of sustainable and reliable energy supplies, energy affordability for Ukrainians, and efficient operation and development of energy infrastructure.
During the meeting of Ukraine’s Energy Minister Herman Halushchenko with USAID Administrator Samantha Power and the U.S. Ambassador to Ukraine Bridget Brink earlier this year, the Minister emphasized that the synchronization of Ukraine’s power system with the European system one year ahead of schedule was an important impetus for further integration of energy markets. “All this creates more opportunities to strengthen energy security and sustainability of the energy sector of Ukraine and the European continent in the future. We are grateful to USAID for its assistance in this area,” the Minister said.
The joint work of USAID and the Ministry of Energy over the past year, the most difficult year in the history of the Ukrainian energy sector, demonstrated efficiency and powerful results.
“Today, in preparation for the heating season, Ukraine is undergoing the largest repair campaign at energy facilities since its independence. Generating facilities and distribution system operators’ networks are under repair. We understand that as winter approaches, the enemy may intensify attacks on civilian energy infrastructure. Accordingly, we already need to build up equipment reserves to recover as quickly as possible in the event of damage,” said Herman Halushchenko in the summer of 2023 during a meeting with Erin McKee, Assistant Administrator of the United States Agency for International Development (USAID).
During the meeting, the Minister thanked the U.S. Government, the American people, and USAID for the significant technical assistance and political support already provided to strengthen Ukraine’s energy security.
The key role of USAID in restoring Ukraine’s energy sector and preparing for winter was also discussed during a meeting between Herman Halushchenko and USAID Deputy Administrator Isobel Coleman in the United States.
“The assistance of our American partners is very important for the Ukrainian energy sector. With the help of specific cooperation projects, we are restoring energy facilities, providing distributed generation to individual communities, and returning light and heat to the homes of Ukrainians,” said Herman Halushchenko.
The meeting also highlighted the role of the USAID Energy Security Project (ESP) in supporting Ukrainian energy sector professionals, as well as implementing joint projects to restore and rebuild the energy sector on the ground and create distributed generation.
In total, over five years of cooperation, a number of projects have been implemented in the areas of legislation and regulatory policy, communication, human resources development, and institutional capacity building of the Ministry, including through the implementation of gender equality and social integration principles, the supply of critical equipment to Ukrainian energy companies to maintain and/or restore energy supply to households and industry.
Since the beginning of Russia’s military invasion of Ukraine on February 24, 2022, USAID has increased assistance to both government institutions and Ukrainian energy sector companies to protect and ensure the functioning of the country’s energy infrastructure, repair, restore, modernize, and rebuild energy facilities damaged and/or destroyed by targeted shelling and military attacks by the Russian Federation.
Supporting Ukraine Fulfilla European Integration Commitments
The USAID ESP team is working to improve the legislative framework and regulatory policy, thus helping Ukraine fulfill its obligations under the Association Agreement between Ukraine and the European Union (EU). USAID ESP assisted the Ministry of Energy in conducting an audit of Ukrainian energy legislation for compliance with the EU energy acquis. In cooperation with the Ministry of Energy of Ukraine and the Government Office for Coordination of European and Euro-Atlantic Integration, USAID ESP is helping to translate key European regulations and acts into Ukrainian and transpose them into national legislation.
“The USAID Energy Security Project is one of the largest international assistance projects in Ukraine’s energy sector in terms of funding, technical and advisory support. With ESP’s help, we have made significant progress in integrating Ukraine’s energy markets into the European markets. ESP has also played an important role in strengthening the resilience of the energy sector in the context of the COVID-2019 epidemic and the full-scale military invasion of Ukraine by the Russian army. With the recommendations provided by the ESP expert team, we have significantly improved the energy security and performance of our power system,” says Yaroslav Demchenkov, Deputy Minister of Energy for European Integration.
Since building integrity and transparency in the energy sector is crucial for Ukraine’s integration into the EU and the country’s economic development, USAID ESP helps bring the country’s energy markets closer to European ones, primarily by transposing the basic principles of the EU Energy markets on the Ukrainian ones. The USAID Energy Security Project experts helped develop Law of Ukraine No. 3141 “On Amendments to Certain Laws of Ukraine on Prevention of Abuse in Wholesale Energy Markets” (which transposes the provisions of EU Regulation No. 1227/2011 on Integrity and Transparency of Wholesale Energy Markets (REMIT)), the adoption of which demonstrated Ukraine’s intention to fulfill its obligations to European partners under the Association Agreement with the EU and the Energy Community Treaty. The Law prohibits insider trading and market manipulation, creates a legal framework for improving market transparency, and enables the national energy regulator, the NEURC, to introduce a proper and effective market regulation system consisting of mechanisms and tools for monitoring and supervising energy markets and investigation of violations of the Law.
To enable the implementation of the Electricity Balancing Guidelines (EBGL) on the integration of balancing and ancillary services into the European energy market, the ESP team analyzed gaps in the relevant regulatory and legal acts. ESP experts developed recommendations for amendments to the Law of Ukraine “On Electricity Market” and the Tax Code of Ukraine and continue to assist in the development of relevant bylaws.
Our experts also developed recommendations for the draft Law on Capacity Allocation and Congestion Management (CACM), which is being finalized in consultation with the Ministry of Energy of Ukraine and the National Energy and Utilities Regulatory Commission (NEURC).
The introduction of EBGL and CACM into Ukrainian energy legislation will enable the integration of such segments of the Ukrainian electricity market as the day-ahead market, intraday market, balancing market, and ancillary services market with the EU and Moldovan markets. This will expand opportunities for commercial exports and imports,increasing competition, security and reliability of electricity supply, and diversification of resources and sources of supply.
The USAID ESP team also developed an updated model and assessment of all Public Service Obligation (PSO) mechanisms. In cooperation with the Energy Community Secretariat, the NEURC, and the Ministry of Energy of Ukraine, we are developing a plan for a PSO phase-out that helps household consumers manage their electricity costs and protects vulnerable consumers.
Procuring the Equipment under the Energy Support Fund
Sincetarting April 2022, the USAID Energy Security Project, on top of its main activities, has acted as an independent procurement agent for the Ukraine Energy Support Fund (UESF) helping to procure the critically needed equipment to meet the pressing needs of Ukraine’s energy sector. The ESP provides this assistance for free, in close cooperation with the Energy Community Secretariat and the Ministry of Energy of Ukraine.
Thus, from January 1 through November 30, 2023, the USAID ESP concluded over 130 contracts worth over EUR 100 mln. for procurement of equipment for the Ukrainian energy sector on behalf of the UESF and delivered the equipment to 20 Ukrainian companies. It will help secure the supply of energy, heat, and hot water to millions of Ukrainians during the upcoming winter.
To rapidly respond to the pressing needs of Ukraine’s energy sector, all assistance requests are verified by the Ministry of Energy of Ukraine and USAID ESP. At the same time, the requirements for funding by criteria of necessity, urgency, absence of alternative funding, priority, etc. are being considered.
“From the start of the full-scale invasion, the USAID Energy Security Project has demonstrated its strong support to the Ministry of Energy and assumed responsibility for ensuring transparency of the process related to the procurement of the required equipment under the Ukraine Energy Support Fund. The USAID Energy Security Project has a high reputation among partner countries that sponsor the Fund. We are grateful for the work already done and at the same time for the openness to cooperation in searching the ways of improvement and acceleration of the procurement process. In addition, recently USAID became the sponsor of the Ukraine Energy Support Fund, having formalized its grant commitment of USD 25 mln. into the Fund. Such support is extremely important to strengthen the resilience of Ukraine’s energy sector,” Svitlana Grynchuk, the Deputy Minister of Energy stated.
Strengthening the Communication Capacities of the Ministry of Energy
To improve the communication capacity of the Ministry of Energy of Ukraine and strengthen protection against cyber threats, ESP helped the Ministry to develop a new website and the 2023-2025 Communication Strategy that includes counteracting information attacks, risk management (including that during the war), and crisis communication.
Since the start of the Russian invasion of Ukraine, the ESP team has rapidly reformatted the work of consultants from communication strategy into the operational activity of the Minenergo communication team. The function of the Ministry’s Communications Department team in such challenging times was strengthened by activities focused on international media, speechwriting, and partially SMM.
Developing the Human and Institutional Capacity
Backed by USAID ESP, the Ministry of Energy of Ukraine conducted the functional audit under the methodology of the National Agency for Civil Service (NASC) and provided recommendations on the optimization of a number of the Ministry’s employees. In addition, the USAID ESP team helped the Ministry to conduct a gender audit and include the principles of gender equality and social inclusion (GESI) in the strategy of the Ministry. Following the audit, the ESP experts developed and implemented a five-month educational program and helped 32 employees of the Ministry to obtain practical skills in gender analysis, development, and implementation of gender equality, non-discrimination, and inclusion policy. The result of the integration of the gender component into the Ministry’s activity is to establish the Gender Committee that will have an advisory and consulting function and promote the development and introduction of a gender and inclusive approach in the Ministry’s activity.
As a follow-up of supporting the Ministry on implementing the principles of gender equality, ESP also conducted a workshop for Minenergo employees focusing on Ukraine’s ratification of the Council of Europe Convention on preventing and combating violence against women and domestic violence (Istanbul Convention). The abovementioned projects helped to lay down the principles of further development of the country’s energy sector based on international standards and advanced GESI practices.
USAID continues to stand shoulder to shoulder with the Government of Ukraine by providing comprehensive technical assistance to protect the energy sector and support the modernization of Ukraine’s energy sector through the Energy Security Project.