What is energy security, and why is it crucial for Ukraine?

January 11, 2022

Energy is a strategically important economic realm – the proper functioning of all economic sectors requires a reliable, sustainable, and safe energy sector.

Energy security means confidence that affordable and quality fuels and energy are available and will remain available both under normal conditions and in emergency situations. In other words, energy security means the protection of the country, its citizens, and its economy from any energy deficit.

The energy security of Ukraine is seen as an integral component of its wider national security. It is also vital for the energy security of Europe.

The current reforms in the energy sector in Ukraine seek to promote the further development of the country’s energy complex and its European integration, as well as to ensure compliance with EU norms and standards and to form well-functioning markets for natural gas and electricity with transparent pricing and appropriate consumer protection.

In 2011, Ukraine joined the European Energy Community and thus confirmed its intention to become a part of the EU energy market and to build a competitive domestic energy market with strong ties to its European neighbors.

According to a report of the Energy Community Secretariat, Ukraine has for two years been the second-best country at implementing EU energy legislation. Importantly, the country achieved the greatest progress in 2021 in the field of cybersecurity.


The implementation of EU legislation and the introduction of EU standards supported and accelerated some positive changes in the energy sector, shored up the country’s energy security, and enhanced the quality of services to domestic consumers.

EU integration to strengthen the energy security of Ukraine

According to the EU-Ukraine Association Agreement, both parties are committed to strengthening energy security, developing energy infrastructure, supporting market integration, ensuring compliance with the key provisions of the EU acquis, promoting energy efficiency, supporting renewable energy and more.

Considering that the Agreement provides for separation between competitive activities (upstream, midstream, and downstream) and monopolistic activities (transmission and distribution of gas/electricity) Ukraine has ensured the required unbundling in the gas and electricity markets. These reforms were designed to demonopolize energy markets, enhance competition, ensure transparent supplies, and strengthen the overall energy security of Ukraine.

A competitive domestic energy market cannot properly function without an effective regulation to implement and enforce market rules. Pursuant to the Third Energy Package, the national regulator is to be independent of both industry and the government. Plus, the national regulatory agencies in the EU member states are to cooperate to promote competition, support market opening, and ensure safe and efficient energy infrastructure. In order to support cooperation between national regulators and ensure effective and uninterrupted functioning of the European energy market, the EU established the Agency for the Cooperation of Energy Regulators (ACER) as a coordination center.

Transborder cooperation is an important component of energy security. The national operators of the main transmission networks are responsible for ensuring transparent and non-discriminatory access to electricity and gas networks and it is important that they join efforts and cooperate with other partners in the EU in order to optimize the management of EU networks. This is being done through the European Network of Transmission System Operators for Electricity (ENTSO-E), and the European Network of Transmission System Operators for Gas (ENTSO-G). These regulators develop standards to harmonize electricity and gas transmission through various countries.

Russian hybrid aggression and the need to diversify imported energy resources

Energy security became an acute issue as soon as Ukraine gained independence. It is even more acute now following Russian hybrid aggression. The ongoing threats to stop energy supply from Russia prompted a fundamental revision of the energy security issue, which is critical to the very existence of the independent Ukrainian state.

The energy threats from Russia are compound. One of these is the newly built Nord Stream 2 Gazprom Project. Its goal is to transport gas from Russia to Germany, bypassing Ukraine. As of today, the pipeline is yet to be certified by the German regulator. The Russian goal is to diminish the role of Ukraine as a gas transit country and thus weaken Ukraine in the face of Russian aggression. To achieve this, Russia has reduced its gas supplies to Europe thus causing record high prices and presenting serious challenges throughout this year’s winter season.

The Joint Statement on US-Ukraine Strategic Partnership characterized Nord Stream 2 as a threat to the energy security of Europe in general, and Ukraine in particular.  Our US partners are dedicated to preserving Ukraine’s transit role and guaranteeing safe supplies to Ukraine.


Considering that Russia continuously manipulates its energy resources and policies, Ukraine needs to diversify and reduce its energy dependence in order to enhance its energy security. This is why Ukraine’s current policy is to diversify its energy supplies. We purchase natural gas for domestic consumption solely on the EU market and, at the same time, seek to integrate our energy networks with the European electricity and gas transmission systems.

Developing domestic energy resources

Presidential Decree No. 874.201 of 12.02.2019 “On Urgent Measures to Ensure Energy Security” provides for updating the National Program for the Development of the Mineral Resource Base of Ukraine for the Period up to 2030 and revision of the Energy Strategy of Ukraine for the Period up to 2035 “Security, Energy Efficiency, Competitiveness” as adopted by the Decree of the Cabinet of Ministers of Ukraine No. 605-r of 18th August 2017, and the implementing measures for the Energy Strategy considering Ukraine’s international commitments in the energy sector, as well as the emerging threats to national security as identified in the National Security Strategy of Ukraine.

Electricity and renewable energy

On 1st July 2019, a new wholesale electricity market was launched in Ukraine. The old market model provided for government price regulation throughout the whole system – from production (apart from the production of thermal energy) to end consumers. Such a model was considered to be a source of political, investment, and corruption risks, including the risks of abuse of dominance and monopolization. The new model promotes competition amongst power suppliers and allows consumers – so far, non-household consumers only – to select their suppliers on a competitive basis.

See also: Integration of Ukrainian and European power networks: what are the benefits for Ukraine?

Power storage

In September 2021, a package of agreements was signed in order to support the investment Project “Ukraine – Improving Power System Resilience for European Power Grid Integration” providing for hybrid power generation systems at the facilities of PJSC Ukrhydroenergo. The project’s value is USD 249 m.

The concept and design of this project is based on modern technologies to combine the capacities of Ukrhydroenergo hydroelectric facilities and energy storage systems in order to promptly react to any load/capacity fluctuations within the Integrated Power System of Ukraine, and thus extend the service life of hydropower units, reduce operating costs, and enhance the overall reliability of the Ukrainian energy system.

At each hydropower plant under the administration of Ukrhydroenergo, photovoltaic modules will be established to accommodate the plants’ own needs and reduce the company’s operating costs at the local level.

The employment of cutting-edge technologies will support the decarbonization of the energy sector, enhance overall energy efficiency and strengthen the energy security of Ukraine.


On 16th November 2021, the Ukrainian Parliament adopted a law regulating power storage – the draft Law “On Amending Some Laws of Ukraine with Regard to the Development of Power Storage Systems”.

See also: The innovative power storage system developed with support from USAID will enhance the efficiency of Ukrhydroenergo and help Ukraine’s integration with European power networks.

Renewable energy

Ukraine has great potential in renewable energy– about 70 Mtoe according to some estimates. We have one of the most dynamic and rapidly growing RES markets in Europe. According to the Ukraine Investment Promotion Agency (UkrInvest), throughout the last two years total investments in renewable energy amounted to nearly USD 1.15 bn.

The high feed-in-tariff in Ukraine is a source of additional cost burden on consumers. Also, within the Integrated Power System of Ukraine, large plants generating power from renewable sources, such as solar and wind energy, are characterized by high intermittency. This is a source of higher dispatch costs and requires substantial reserve capacities to regulate generation by wind and solar modules. Indeed, sufficient reserve capacities to support a balance between supply and demand in the power market is one of the key factors of a reliable and safe power system.

On 1st August 2020, the Law “On Amendments to Certain Laws of Ukraine on Improving the Conditions of Support for Electricity Production from Alternative Energy Sources” No 810-IX entered into force. This Law is to resolve the government’s debts to the investors in clean energy. Some important changes in this market, including the changes provided by this Law, provide for a lower feed-in-tariff and financial liabilities of RES producers associated with imbalances.


Thus, the auction model has replaced the feed-in-tariff model. These new approaches aim to balance the interests of power consumers and other market participants, ensure further development of renewable energy, and reduce the cost burden on the final price.

See also: Auctions could have reduced feed-in tariffs in Ukraine by a lot.

Domestically produced gas

Ukraine uses about 30 bcm of natural gas annually. Most of this is domestically produced gas, covering 65-70 percent of total demand.

The country produces nearly 50 mcm daily. The biggest natural gas reservoirs are in the Oblasts of Kharkiv and Poltava – the Eastern Oil and Gas Basin. Kharkiv Oblast alone provides for 46 percent of total domestic demand while Poltava provides 42 percent. The rest is produced in western and southern regions.

Since gas consumption is subject to seasonal fluctuations, not all produced gas is used at once. Some goes to underground gas storage facilities under the administration of the Storage System Operator.  Ukraine’s total inland storage capacity is 30.95 bcm. This is the highest in Europe, excluding Russia.

Natural gas imports

Ukraine is a transit country, through which Russia transports gas to other European countries. Therefore, Ukraine’s gas transmission system is linked to the systems of Russia, Belarus, Hungary, Poland, Slovakia, Romania, and Moldova.

The introduction of EU rules in the gas market will allow for physical imports along a separate GTS route, as well as virtual imports through a virtual reverse flow. In addition, Ukraine’s massive gas storage facilities have the capacity to stock gas for European neighbors as well.


Hundreds of gas traders, including European companies, operate in Ukraine. There are dozens of gas producers. The Ukrainian Energy Exchange (UEEX) has been established. Daily balancing has been introduced. The country imports gas from Europe, and preconditions are in place to form a gas hub in Ukraine.

Development of hydrogen energy

Recently, the European Union recognized Ukraine as the priority partner for the Hydrogen Strategy for a climate-neutral Europe by 2050. Today, the Hydrogen Strategy for Ukraine is already being developed, including ongoing assessment of the gas transmission system in terms of its potential use for hydrogen transportation to the EU.

The increased reliability of Ukraine’s energy system enabling integration with its European counterpart, the development of healthy and effective competition in the energy sector, and investments in clean energy technologies are all determinants of the further development of the energy sector and of Ukraine’s overall security.

Energy security strategy

On 4th August 2021, the Cabinet of Ministers of Ukraine adopted the Energy Security Strategy of Ukraine for the period through to 2025.

This document considers energy security as an integral part and one of the key success factors of European integration, including synchronization of the Ukrainian energy system and markets with those in the EU, and transparent development of the country’s energy sector.

The strategy contains a list of threats to Ukraine’s energy security including:
•       Synchronization of the Ukrainian and Russian energy systems
•       Completion and certification of Nord Stream 2
•       Outdated energy infrastructure
•       High shares of imported energy

One of the major goals of the Strategy is to stop power imports from the Russian Federation and Belarus. Other major goals are testing the Integrated Power System of Ukraine in an island mode in 2022, physical separation of the Ukrainian system from those of the Russian Federation and Belarus, and synchronization of the Integrated Power System of Ukraine and the European Network of Transmission System Operators for Electricity.

The Strategy also provides for the following:

  1. Independent formulation and implementation of domestic and foreign policies in the energy field.
  2. Ensuring national interests in the energy field, which, in practical terms, will mean more independence from external suppliers.
  3. Appropriate level of diversification of energy resources and technologies.
  4. Higher volumes of production of natural gas and other energy resources.
  5. The introduction of effective mechanisms of public-private partnerships to enhance energy security.
  6. Launching long-term Ukraine–EU and Ukraine–NATO forums to discuss regional energy security and to support the development of a legal and regulatory framework, and plan actions to return assets and resources seized as a result of the temporary occupation of some Ukrainian territories by the Russian Federation.
  7. Coordination of international economic cooperation to enhance the competitiveness of the Ukrainian energy sector in international markets and diversify energy sources and transportation routes.

Where do professionals in this field “grow up”?

The USAID Energy Security Project jointly with the Pre-Azov State Technical University are implementing two programs in the field – Energy Security Bachelor’s Course and Energy Independence Master’s Course.

The University staff prepared the electronic manuals “Energy Independence” and “Energy Security and Energy Efficiency”. These are educational resources for university students in the field of power and thermal energy engineering and other qualifications in the energy field, post-graduate students, scholars in the fields of design and maintenance of power supply systems, staff of energy companies, and all those interested in strengthening the energy security of Ukraine.