The European Bank for Reconstruction and Development’s (EBRD) €160 million loan to Ukrnafta, announced at the Ukraine Recovery Conference in Rome, marks a significant step in Ukraine’s efforts to decentralise its energy system and bolster resilience against ongoing Russian attacks. This loan, supplemented by €121 million in grants from external donors and a €1 million grant from Sweden’s Swedfund for technical assistance, will enable the installation of 250 MW of small-scale gas-fired distributed power and co-generation capacities. This follows an earlier €80 million loan from the EBRD last December, which supported the installation of around 100 MW of similar capacity.
Ukraine’s power sector has been severely compromised by the war, operating at about one-third of its pre-war generating capacity. The decentralisation of its energy system is thus a critical priority, aiming to mitigate the impact of rolling blackouts that have disrupted the lives of millions. The gas-fired engines funded by this loan will provide immediate energy supplementation, but their versatility extends beyond the short term. These engines can later support Ukraine’s transition to a higher share of renewables in its energy mix, serving as a balancing mechanism for intermittent renewable energy input.
The project also includes workforce management and leadership training programmes, as well as a veteran rehabilitation programme. This aligns with the EBRD’s Gender SMART approach, which aims to promote gender equality and support vulnerable groups. The EBRD has been a significant financial supporter of Ukraine since the start of the war, with over €7 billion made available, including more than €2.4 billion for the energy sector. The bank’s priority investment areas in Ukraine include energy security, vital infrastructure, food security, trade, and the private sector.
This development could have profound implications for the energy market. The decentralisation of Ukraine’s energy system could serve as a model for other countries facing similar challenges, demonstrating the feasibility and benefits of distributed energy generation. The integration of gas-fired engines with renewable energy sources could also pave the way for more flexible and resilient energy systems globally. Moreover, the focus on workforce development and gender equality could set new standards for energy projects, promoting more inclusive and sustainable practices.
However, the success of this project will depend on several factors, including the continued availability of funding, the stability of the political and security situation in Ukraine, and the effectiveness of the training and rehabilitation programmes. The project’s long-term impact on Ukraine’s energy sector and its potential to influence global energy markets will be closely watched by industry stakeholders and policymakers alike.