Analysts of the Ukraine Facility Platform have prepared a document on how Ukrainian communities can begin building their own generation capacity by leveraging existing grid connections and the prosumer mechanism established under Ukrainian law. The concept is the product of UAFP's engagement with at least 18 communities and of its analysis of European approaches to financing Ukraine's reconstruction that must rest on a foundation of private investment.

The prosumer model offers a decisive practical advantage: it enables communities to launch new generation projects within existing infrastructure, without legislative changes, and to do so rapidly. This approach can serve as the starting point for the systemic development of decentralised generation in Ukraine – a process that has yet to materialise.

The practical value of the approach is multifaceted:

  • strengthening the energy system's resilience against infrastructure strikes,
  • building a balanced technology mix of generation capacity at the community level,
  • drawing private business into energy projects; and securing backup power supply for critical infrastructure.

The volume of capacity that can be brought online through this model is relatively modest at the level of any individual municipality – yet it remains the most realistic and expedient means of ensuring energy supply to critical infrastructure ahead of the next heating season.

There are tens of thousands of locations across Ukraine where new generation can be installed at municipal utility sites under the prosumer model. If utilised effectively, the total installed capacity from such sites could reach hundreds of megawatts.
Oleksandr Vizir
Sectoral leader for Energy & Climate at the Ukraine Facility Platform

Сommunities hold enormous potential for applying the prosumer model. Many have municipal utilities with substantial electricity consumption – and, equally, significant permitted connection capacity, at least 50% of which, according to UAFP estimates, goes unused.

These include water utilities and district heating companies, but also metro systems, urban electric transport, water treatment facilities, street lighting authorities, and others. Their permitted grid connection capacity is a valuable asset that can be put to effective use.

Every large electricity consumer in Ukraine is also a potential producer and a site for new energy project development.

In practice, new generation for self-supply under the prosumer model can be brought online relatively quickly: a solar power plant requires approximately three months; a gas piston unit or an energy storage installation, approximately six months each.

The Ukraine Facility Platform highlights the following advantages of the prosumer model for investors:

  • A wide choice of grid connection points
  • Cost savings in project implementation
  • Greater economic attractiveness compared to alternative approaches

Advantages of the approach for communities:

  • Powered water and district heating utilities
  • Rapid deployment of donor-supplied equipment
  • Reduced electricity costs for municipal utilities
  • Attracting investment to the region

The key challenges to implementing this approach include a lack of expertise, concern that Russian forces may target even small-scale generation, insufficient funding for associated equipment and works, and the absence of an established mechanism for cooperation between local authorities and businesses. The main concern of entrepreneurs is that agreements may not be upheld following changes in local government, creating a risk of losing energy generation equipment.

The prosumer model can be implemented without significant systemic changes; however, certain steps could facilitate the launch of such projects.

UAFP Recommendations:

  1. The first priority is an audit of community consumption and resources: permitted capacities and connection points to electricity, gas, and heat networks. On the basis of the data gathered, optimal energy mix options should be developed for specific locations. UAFP is working on both of these tasks to build a quality database of community capacities and the solutions best suited to them.
  2. The government could facilitate the launch of decentralised generation in the regions by establishing a framework for community–business cooperation on energy projects using municipal utility infrastructure. Such cooperation should be organised on a competitive basis: communities issue tenders for services, which can subsequently be remunerated from the revenue generated by managing the generation installation.
  3. Businesses could engage more confidently in such projects by using political risk insurance mechanisms, while communities could offer cross-guarantee mechanisms. In particular, in the case of a loss-making tariff for a municipal utility, the local self-government body could assume responsibility for its debts.
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