Encouraging Private Investments into Flexibility

In this publication, Yuri Kubrushko, Georg Zachmann, Olga Gruzhinskaya and Viktor Koval argue that

• Ukraine needs substantial amounts of new decentralised, flexible electricity generation and energy storage capacities;
• Achieving such an ambitious program requires active participation from private investors;
• The current market and regulatory environment does not adequately support the bankability of these projects.

Based on profitability analysis and many interviews, they show that current prices indicate a business case for batteries and gas peakers. The Ukrainian administration's recent liberalisation and facilitation measures have also helped.

However, the publication also highlights that substantial risks and challenges still hold back private investments, including excessive uncertainty about future market development, remaining market interventions and visible policy risks (debt), skill constraints, etc.

Georg Zachmann believes that resolving these will require a concerted effort from Ukrainian authorities in addressing key sector issues (e.g., debts) and international partners safeguarding investors with some form of guarantees. This could unleash a virtuous cycle where private investors, guided by market signals, quickly put appropriate solutions in the best places. Such investments would reduce scarcity, lower prices and hence make the market financially sustainable without guarantees to be activated.

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