The Ukrainian energy system has come under heavy Russian attack as winter approaches. The goal is to inflict massive damage to critical infrastructure that plays a key role in the functioning of the economy and society in order to turn the tide of the war in their favor. It is very likely that the escalation will intensify before the January inauguration of the newly elected US President Donald Trump, who has already announced his intention to force Moscow and Kyiv to sit down at the negotiating table to finally end the war, and to do so the very next day after the start of his term.

With increasing pressure from the aggressor on the battlefield, scenarios of regular power outages for Ukrainian consumers are becoming increasingly real. The spread of tension is facilitated by numerous manipulations and disinformation from the Kremlin. Rumors are circulating about power outages lasting more than 20 hours a day, or the refusal of Western institutions to support the Ukrainian energy sector during the winter, when stable energy supply is of particular importance.

In order to clarify the real situation in the Ukrainian energy sector before the onset of winter, the DiXi Group think tank recently held another online event, Energy Security Talks. The occasion was the presentation of the study “Winter Outlooks: Assessment of the State of Ukraine’s Gas and Electricity Infrastructure, Risks and Scenarios for the Autumn-Winter Period 2024/2025”. As noted by DiXi Group President Olena Pavlenko, experts used information from open sources to prepare it, which gives a clear idea of the current state of the energy sector and allows us to predict possible scenarios for the development of events in the winter period based on verified figures and facts.

Ukrainian Energy listened to the speakers of the presentation and found out what trends consumers expect this winter in Ukraine and Europe.

What is happening with the electricity industry

According to DiXi Group, thermal generation losses in Ukraine reached almost 90%, but in the summer and autumn they managed to carry out another large-scale repair campaign, which was supposed to add up to three gigawatts of renewable capacity to the network, according to the calculations of the Ministry of Energy. Another gigawatt was supposed to appear in the network due to the installation of distributed generation facilities.

At the same time, high winter demand is expected in Ukraine, which could reach 19 GW. The situation can be worsened by intensive Russian attacks on energy infrastructure, changing weather conditions, a shortage of hydro resources, and a seasonal decrease in the share of renewable energy sources (RES) by 40-70%. According to DiXi Group General Manager for Security and Resilience Olena Lapenko, these are the main threats to the Ukrainian power system in winter. As for the state of the network, the most difficult situation remains in the frontline regions. Donetsk, Kharkiv, Sumy, Zaporizhia, and Odesa regions suffer the most from attacks by the aggressor country.

An important achievement is that Ukraine managed to preserve the electricity market, which continues to operate despite martial law. However, there are price caps - maximum prices in the commercial segment, which are determined by the National Commission for Energy Regulation and Housing and Communal Services. Such price restrictions by the state risk becoming an obstacle to attracting maximum import volumes, which will be critical in the event of a cold winter.

From December 1, Ukraine will have increased opportunities to import electricity from the EU - 2.1 GW instead of the current 1.7 GW.

This will potentially cover up to 12% of demand during peak hours. Ukraine will also receive additional access to a guaranteed 250 MW of flow capacity from the territory of the European Union countries in case of emergency assistance.

Deputy Minister of Energy of Ukraine Mykola Kolisnyk drew attention to the fact that commercial use and emergency assistance, as well as energy transfer between different balance zones in the power system, are important components for understanding the full picture. For example, the structure of consumption and production in the Western Unified Power System is significantly different from the Northern and Eastern ones, which is due to objective factors and the availability of power transmission intersections. This is one of the factors that determines the reliability of the power system.

“At present, it is important to correctly calculate the balance of available power and consumption, as well as to ensure energy transfer between zones. These aspects are becoming critical points at which the enemy’s attacks are directed. This requires special attention. Given the enemy's activity, information about the state of the power system must remain closed, which is key to its protection and stability," Mykola Kolisnyk noted.

He also noted that the scenario where consumers will be without electricity for 20 or even more hours is unlikely. In extremely complex network disruptions, consumers receive electricity according to schedules that include a significant number of queues. Decentralized supply schemes have been introduced in large cities, which will allow even in crisis conditions to minimally satisfy the needs of critical infrastructure facilities, such as boiler rooms, boiler rooms, water utility compressors, etc. “In addition, critical infrastructure facilities are equipped with backup power sources, which allows them to operate even in the worst-case scenarios. Thanks to this, electricity supply is provided in the form of “energy islands” for the most important needs, regardless of the risks,” explained Mykola Kolisnyk.

What is happening to gas

The risk of military attacks or worsening of the situation at the front remains, according to DiXi Group analysts, the greatest threat to the security of gas supply. All other risks associated with a reduction in gas production by private companies or an increase in consumption can be offset by additional imports and increased gas production by companies such as Ukrgazvydobuvannya and Ukrnafta, which are part of the state-owned holding company Naftogaz of Ukraine.

Experts say that the main challenges for the Ukrainian gas infrastructure are attacks on main pipelines, gas distribution networks, and possible damage to above-ground facilities of underground gas storage facilities, in particular compressor stations. This risks complicating gas withdrawal and its transportation to consumers. An additional risk factor is the weather - prolonged low temperatures create conditions for an increase in gas consumption by 5-6%.

Despite the difficult situation, a number of positive trends are observed in the gas sector: domestic gas production is increasing, Ukraine retains access to imports from the EU market, and has the opportunity to participate in joint gas purchases implemented by the European Commission.

Moreover, Ukraine, in the conditions of a full-scale war, has become a leader in drilling new gas wells on the European continent. According to Baker Hughes, in general, in Europe, on average, during 10 months, there were 119 rigs in Europe, of which almost 40% (i.e. 46 units) were working in Ukraine.

Such statistics were given by the president of the Association of Gas Extracting Companies Artem Petrenko.

He noted that this year Ukraine is able to get through the heating season due to its own gas production. "In 2024, we predict a record volume of 19 billion cubic meters," he specified.

An additional factor in optimizing gas consumption in Ukraine was its lower use for electricity generation. This is due to damage to generating equipment at large power plants, decentralization of energy supply and the development of renewable energy sources.

But ahead in Ukraine, a recovery and even an increase in demand for gas is expected. “Enterprises are increasingly concerned about their own energy and are installing power sources, in particular gas generators. An additional gigawatt of gas generation will affect consumption, and the trend for its increase is already obvious. Although not all the planned capacities have been put into operation yet, this trend will become more noticeable in 6 months or a little later,” predicts Olena Lapenko, General Manager of Security and Resilience at DiXi Group.

European Energy Trends

As Ukraine prepares to enter the winter season, which risks being the most difficult since the start of a large-scale war, Europe is preparing to face another energy crisis.

“After the first cold snap, gas storage facilities are depleting faster than usual. Gas supplies from Russia via Ukraine are about to stop. Gas prices have jumped, evoking memories of the extreme shock of 2022,” says an article published by Bloomberg at the end of last week.

Its authors point out that the escalation of tensions in Ukraine has already led to a 45% increase in gas prices in the EU this year. In recent days, they have crossed the $500 per thousand cubic meters mark at European hubs. While this is well below the record highs of $3,000-3,500 per thousand cubic meters in 2022, prices remain high enough to exacerbate the cost of living crisis for households and increase pressure on energy-intensive industries from competitors in the United States and the Gulf.

The tense situation in the European market reflects the difficulties the continent faces in trying to get rid of its painful dependence on Russian fossil fuels. “If we really want to abandon Russian gas, we need to have more import capacity,” said Markus Krebber, head of the German company RWE AG, pointing to the lack of infrastructure for liquefied natural gas.

On the other hand, the market is being pressured by the loss of one of the last routes that provides Europe with relatively cheap Russian blue fuel. Analysts believe that the current high gas prices in Europe take into account the suspension of its transit through Ukraine. This is provided for by the current contract between Gazprom and Naftogaz, concluded in 2019, which expires at the end of next month.

By all indications, Europe is facing a difficult winter, which will be another stage in the development of a market free from the toxic influence of Russian energy imports. This to some extent limits the EU's support for the Ukrainian energy sector, which has been under constant attack from hostile attacks since the beginning of Russia's full-scale invasion. The confidence that the extremely difficult winter will be successfully overcome is added by the created internal reserves (gas reserves in storage, distributed generation built). So, Ukraine is generally ready for the challenges of the upcoming cold season. And the further development of events in the energy sector will depend on weather conditions and the intensity of Russian strikes.

Svitlana Dolinchuk, specially for "Ukrainian Energy"

Tags:DiXi Group