On the morning of 26 August 2024, Russia fired more than 200 missiles and drones in one of its largest aerial attacks on Ukraine; the main targets were the country’s energy infrastructure. Around 8 million households lost power without warning; the capital, Kyiv, experienced its first unscheduled blackout since November 2022. Ukraine’s air defences provided some protection, but the scale of the attack and the resulting disruption highlighted once again the vital strategic importance of Ukraine’s energy sector, as well as the ever-present risks to the country’s energy supply.

Ukraine’s energy system1 has been regularly targeted by Russia since its full-scale invasion in 2022, with attacks intensifying since the spring of 2024. The targeting of energy infrastructure has had wide-ranging consequences for the provision of energy to Ukrainian households and other consumers. Over the course of 2022-23, about half of Ukraine’s power generation capacity was either occupied by Russian forces, destroyed or damaged, and approximately half of the large network substations were damaged by missiles and drones. The occupation of the Zaporizhzhia nuclear power plant, on its own, reduced available Ukrainian power generation capacity by 6 gigawatts (GW). In the wave of attacks between March and May 2024, Ukraine lost another 9 GW of generation capacity; this was mainly thermal and hydro assets, although some smaller solar PV units also came under attack, as well as numerous substations. This left Ukraine with only around one-third of its pre-war capacity, even before the most recent round of summer attacks. Ukraine's district heating and natural gas infrastructure has also been targeted. Since 2022, 18 large combined heat and power (CHP) plants have been damaged or completely destroyed, along with more than 800 boiler houses. Some above-ground natural gas storage infrastructure has been damaged, although underground inventories remain unaffected.

Ukraine experienced an acute power deficit over the summer months of 2024, when its generation capacity fell 2.3 GW below its peak demand of 12 GW, despite electricity imports from Ukraine’s western neighbours. The deficit has been managed by Ukraine’s state-owned electricity transmission system operator, Ukrenergo, through rolling cuts to supply, limiting electricity provision in the worst-affected regions to a few hours per day. While Ukrainians have shown immense solidarity, ingenuity and resilience, and support from Ukraine’s partners, including equipment and spare parts, have been instrumental in maintaining a functioning system, the possibility of an even deeper shortfall in energy supply during the upcoming cold winter months presents profound risks.

This report describes the urgent challenges facing Ukraine’s energy sector and outlines tangible actions that can be taken by Ukraine and its partners to address its immediate energy security vulnerabilities ahead of the winter, while bolstering long-term resilience. The central focus is on Ukraine, but the report also incorporates analysis of the situation in Moldova, whose energy system is closely interlinked with that of Ukraine. The remainder of this section of the report provides background on the status of electricity, heat and gas supply in Ukraine, the second section examines the risks facing the energy sector during the upcoming winter. The final section identifies 10 key energy actions to address these risks.

Since 2022, Russian targeting of Ukraine's power infrastructure has sought to destabilise the electricity system by disabling large coal and gas-fired generation units and key parts of the transmission network. Prior to Russia’s full-scale invasion in 2022, nuclear power generated half of the country’s electricity, followed by coal-fired plants at 23% and gas-fired plants at 9%. As of the end of May 20242, about 70% of Ukraine's thermal generation capacity was either occupied or damaged, and the Zaporizhzhia nuclear power plant (whose 6 GW of capacity generated around one-quarter of Ukraine’s electricity supply prior to 2022) remained under Russian control. Additionally, approximately half of Ukrenergo’s very high voltage substations had been damaged, as well as many distribution substations, leading to intermittent unavailability of parts of the electricity network despite ongoing repairs. Recent attacks underscored the risks to supply from Ukraine’s other nuclear plants, as damage to nearby substations can prevent these plants feeding the grid or endanger the backup supply that keeps the reactors safe. The electric power industry is the part of the energy sector that has suffered the greatest damage since the Russian invasion in 2022, estimated in June to top USD 11.4 billion, with three-quarters of the losses in generation facilities and the remainder in networks. Full like-for-like restoration of all the lost generation capacities is not aligned with Ukraine's vision for the future, but early estimates for the cost of building back are around USD 30 billion.

Industrial power consumption has halved since the 2022 invasion, and even though household electricity use is down 20%, it now constitutes the largest share of overall demand. The composition and level of Ukrainian electricity consumption has shifted significantly. Industrial demand has plummeted. The 20% fall in residential demand is largely due to the effect of 6.5 million Ukrainian refugees leaving the country, although some policies and initiatives have helped save electricity. For example, an EU-funded program that replaced incandescent bulbs with LED bulbs reduced demand by as much as 1 GW. Many utilities are now facing extreme financial difficulties due to lost assets, lower revenues due to reduced economic activity and additional expenses such as clearing debris or the cost of repairing or demolishing damaged facilities. While donors have been providing much-needed equipment and assistance to restore damaged infrastructure, including standalone generators for critical infrastructure such as hospitals, water systems and district heating companies, the scale of the challenge remains huge.

Despite the high investment risks, the construction of a more decentralised system has begun, increasing resilience to attack and laying the groundwork for a distinctive longer-term transition pathway. In contrast with other countries, where decentralisation has been driven by sustainability concerns, the clear driver in Ukraine is energy security. Large-scale generating units are easier targets for missiles and drone attacks, so the Ukrainian government gave guidance early on to deploy decentralised generation, mainly small modular gas turbines in the range of 5 to 40 megawatts (MW), and to speed up the deployment of rooftop solar with storage in administrative buildings, hospitals, schools, households and businesses. Almost 1 500 MW of consumer-installed solar PV was in place by the beginning of 2024, with deployment continuing at a regular pace in recent years.3

Interconnection with the main European system4 has made a crucial contribution to Ukraine’s electricity security, with the limit on cross-border trade5 increasing to 1.7 GW in November 2023.  Before the 2022 invasion, Ukraine's power system was interconnected with the Russian and Belarussian grids. Plans had been in place since 2017 to synchronize with the continental Europe system in 2023. On the day of the invasion, Ukraine had just disconnected from the Russian and Belarusian system, performing a planned test of “isolated mode” operation. Soon after the invasion, Ukraine (along with Moldova) requested an emergency synchronisation, which was achieved in record time: an initial timeline of months was brought down to a matter of weeks thanks to an extraordinary effort from the involved European transmission system operators (TSOs) and Ukrenergo, coordinated by the European Network of Transmission System Operators for Electricity (ENTSO-E), with the strong support of the European Commission. Since then, integration with the European system has been a priority. Trade started in June 2022 with trade limits gradually increasing. Currently, the trade limit from continental Europe to Ukraine and Moldova stands at 1.7 GW, complemented with a non-firm emergency inter-TSO agreement that can provide a few hundred megawatts of support for a few hours if network conditions permit. In June 2024, Ukraine’s total imports were close to 2 GW for a few hours every day, and joint efforts with neighbouring system operators are continuing to increase the trade limit further.

Even so, the summer electricity deficit has resulted in daily power cuts, disrupting lives and businesses and heightening social and humanitarian risks. During the months of June and July, even with power imports, the estimated supply-demand gap ranged from 0.8 GW to 2.3 GW – the latter equivalent to Slovenia's peak demand. This has led to rolling blackouts across the country. Most citizens have faced these daily power cuts with solidarity, but the limited availability of electricity-dependent facilities such as elevators and water has made daily life difficult. The end of the scheduled maintenance to nuclear power plants eased the situation in August, but this was before the recent intensification of attacks. Many households and businesses have purchased small-scale diesel generators and power banks as back-up options to maintain supply during the blackouts. 

Ukraine’s extensive district heating network, which provides most of the hot water and space heating in large cities, has been repeatedly targeted by Russian forces since the 2022 invasion. In 2022, more than one-third of Ukrainian households were connected to the district heating network, according to the State Statistics Service. Most of the heat production (about 70%) is fuelled by natural gas, and about a third of Ukraine’s heat supply is generated by combined heat and power (CHP) plants, while the remainder comes from conventional heat plants and other sources. Between February 2022 and May 2024, a total of 18 large-scale CHP plants were damaged or destroyed, as well as 815 boiler houses, 152 central heating points, and 354 kilometres of district heating pipes, according to the Kyiv School of Economics. The direct damage resulting from these attacks (excluding social and economic costs) is estimated at USD 2.4 billion, with more than half attributable to attacks on CHP plants6.

As with the attacks on electricity infrastructure, damage to heat supply is highly disruptive to the population. Ukraine was spared catastrophic losses to its heat supply during the 2022-23 and 2023-24 winters, when attacks were more limited and the winters relatively mild. With the escalation of attacks against Ukraine’s energy infrastructure in 2024, the risks are significantly higher this winter. Temperatures can routinely drop below -10 °C between December and March, posing a serious humanitarian risk if heating is not available.

Heavily subsidised residential heat tariffs have led to significant fiscal strains and a build-up of debt. Large subsidies to district heat producers had previously been reduced thanks to price reforms between 2014 and 2016 (which led to a five-fold increase in residential tariffs). By 2021, the public service obligation (PSO) requiring Naftogaz, Ukraine’s national oil and natural gas company, to supply discounted gas to district heating companies was phased out. It was re-introduced shortly after the 2022 invasion, fixing gas prices for residential heat producers at less than half the market rate, and has been extended until at least 30 April 2025. The current PSO scheme has contributed to significant financial challenges and large arrears to Naftogaz. The company was forced to restructure its foreign currency-denominated debt in 2023, and by October 2023, it estimated its accumulated debt from district heating companies stood at UAH 95 billion (USD 2.6 billion). No provision for Naftogaz’s losses was included in Ukraine’s 2024 budget.

Russia’s 2022 invasion was followed by a one-third decline in Ukraine’s natural gas demand: consumption in 2022 fell below 20 billion cubic metres (bcm), the lowest level since independence in 1991. This was largely driven by the decline in demand from district heating companies, industry and households. Ukraine’s natural gas demand increased by 2.5% (or 0.5 bcm) in 2023, with growth primarily driven by a partial recovery in industrial and commercial activity. First indications are that gas demand in 2024 is similar to 2023, with natural gas use in power generation limited to peak hours. The PSO scheme that was re-introduced in 2022 extends to nearly all segments of the market, regulating prices at levels below market rates. This offers protection to consumers but, as noted above, comes at significant cost and disincentivises efficiency improvements, as well as new investments.

Ukraine’s natural gas production has been more resilient than its demand, but it still fell by 6% in 2022 to 18.5 bcm – its lowest level since 1999. Production rose slightly in 2023 and there are some tentative signs of higher output in 2024: Production numbers for the first seven months of 2024 for Naftogaz, Ukraine’s largest producer, rose by 7% year-on-year, supported by a concerted effort to develop new wells and increase productivity rates at old wells. The company is targeting 15 bcm of natural gas production in 2024, up from 14 bcm in 2023.

The steep decline in natural gas demand has brought Ukraine close to self-sufficiency in gas, and the need for imports has decreased significantly. A similar pattern of reduced import demand is visible in Ukraine’s coal sector7. According to Naftogaz, Ukraine did not import natural gas during the 2023-24 heating season, with all demand met through domestic production and storage withdrawals. Naftogaz expects that Ukraine will not need gas imports through the 2024-25 winter. Ukraine has the capacity to import around 60 million cubic metres (mcm) of gas per day from the European Union and Moldova; however, not all of this capacity can be considered firm8 on a long-term basis (i.e. longer than a quarter), which can pose risks in a security of supply crisis.

Russian gas transit volumes via Ukraine continued to decline in 2023. Russian transit flows dropped by 65% from more than 40 bcm in 2021 to less than 15 bcm in 2023. This is less than half of the capacities booked by Gazprom under its long-term contract. The main countries that still receive Russian gas via Ukraine are Austria and Slovakia, although Czechia and Hungary also receive limited volumes. Gas also transits Ukraine to the Transnistria region of Moldova.

The transit and interconnector agreements between Ukraine and Gazprom expire at the end of 2024. Ukraine’s gas TSO has explicitly stated that it will not renew the interconnector agreement, although it would not hinder other parties’ direct discussions. It is not excluded that some sort of continued arrangement for transit flows might yet be found, but the base case assumption is that Russian transit flows via Ukraine will be discontinued from January 2025.

Russia has been targeting some natural gas infrastructure in Ukraine, including production sites and transmission and distribution networks, as well as gas storage facilities. While gas storage in deep underground facilities is unaffected, above-ground facilities are more easily targeted and have sustained some damage. Production sites in the east of the country have been most vulnerable, although the sharp decline in output seen in the first months of the invasion was reversed as Ukraine regained territory in the Kharkiv region in late 2022. Parts of Ukraine’s transmission and distribution system were also damaged, again primarily in the eastern part of the country.

Several gas storage facilities in the east have faced operational limitations or been damaged by Russia’s invasion, but the bulk of gas storage is in western Ukraine. The Krasnopopivske (0.42 bcm) and Verhunske (0.4 bcm) underground storage sites are located under territory occupied by Russia, and there have been reports of damage to surface facilities at other sites. Gas storage facilities were also damaged in Russia’s major missile and drone attack in late August, although the storage operator remains able to fulfil nominations to customers. Ukraine can offer the bulk of its large storage sites (30 bcm, mainly in Western Ukraine) for use by European companies, but security risks mean that European traders have so far made limited use of this option9. Lower storage utilisation weighs on the revenue and profitability of Ukraine’s system operator.  

Gas metering facilities on the border between Russia and Ukraine have been in the spotlight. In May 2022, the Gas TSO of Ukraine declared force majeure at the Sokhranivka gas metering station, claiming illegal actions and unauthorised gas offtakes by Russian forces. According to the Gas TSO of Ukraine, flows could have been temporarily rerouted through the Sudzha gas entry point, although Gazprom declined to accommodate this option. This led to a significant decline in transit volumes. More recently, as part of a Ukrainian cross-border offensive into Russia’s Kursk region in August 2024, Ukrainian forces reportedly took control of the Sudzha gas metering station – the only remaining entry point for Russian gas into Ukraine. For the moment, this has not resulted in any further decline in gas transit flows, which have remained steady at around 40 mcm per day.