Russia hits power generation, tariffs hit our pockets: how much does electricity really cost?
26 February 17:40
The Cabinet of Ministers has calculated that Ukraine needs $90.6 billion to restore its energy sector. In turn, the DTEK group has estimated the cost of restoring its own power generation facilities damaged by Russia at €300 million (over UAH 15 billion) and stated that it has half of this amount, but needs an additional €150 million in external financing to carry out preparatory work for next winter. What do these amounts mean and how will this affect consumers—will there be another round of tariff increases? Komersant Ukrainian looked into it.
First Deputy Prime Minister and Minister of Energy Denys Shmyhal recently announced that more than $90 billion will be needed to restore and modernize Ukraine’s energy sector if the work is spread over 10 years. Almost 80% of the total amount needed—$71 billion—is required for the restoration and modernization of generating capacities.
The rest of the needs are distributed as follows:
Heating system – $6.4 billion.
Gas transportation infrastructure – $5.2 billion.
Oil industry (including refining) – $4.6 billion.
A rapid recovery in 2026 will require $4.9 billion.
On the sidelines of the 62nd Munich Security Conference (MSC), Maxim Timchenko, CEO of energy holding DTEK, said that the company will need €300 million by next year to rebuild what has been destroyed.
“We have already secured half of this amount from our own resources. Now we are asking our colleagues and partners to cover the rest – approximately €150 million – to restore 4,000 MW of capacity,” he said.
According to Tymchenko, restoring thermal power plants (TPPs) and combined heat and power plants (CHP) is the fastest and cheapest way to prepare for next winter, requiring less investment.
“But by May, we must have a complete understanding at the government level: here is the list of equipment we need, here is the source of funding, and we are placing orders for production (…) May is the deadline for the restoration of destroyed substations and power generation,” he stressed.
300 million euros: a realistic estimate or the “maximum”?
In 2023, after massive shelling of energy facilities, DTEK invested more than UAH 7 billion in the restoration of the destroyed facilities, plus UAH 3.5 billion in scheduled repairs of its thermal power plants. Today, this amount has doubled. According to Yuriy Korolchuk, an energy expert and co-founder of the Institute for Energy Strategies, the company has announced the maximum amount.
“Yes, this season there have been many more attacks on energy facilities belonging to Akhmetov’s company, they are more systematic, there is a lot of damage, but the fact is that, fortunately, it will not be possible to completely destroy such facilities. The most catastrophic situation is at the Darnytsia Thermal Power Plant, which does not belong to DTEK, but it is also subject to repair. DTEK has already begun to restore its facilities. And the fact that they are short of €150 million is understandable, because they are including all the necessary materials at maximum cost in their calculations, according to the principle of “buying a Mercedes part for a Zaporozhets.” But I would say that this is still not a catastrophic amount for restoration work,” notes Yuriy Korolchuk.
The phantom threat of nationalization
According to the expert, DTEK’s very existence is at stake today. This is a very important point: if DTEK cannot find the money, it will have to say that it can no longer produce energy. The state will have to respond — if DTEK cannot find the funds, then the state can nationalize everything that belongs to DTEK.
“Dmitry Firtash had his regional gas companies taken away, even though the situation there is not so dire. Igor Kolomoisky had the Kremenchug oil refinery taken away, and Ukrnafta was taken away, even though the situation at DTEK is very difficult today. In the current situation, they must declare technical default. But here it is even technical default, because they do not know how to get out of the situation. In this case, even temporary, partial nationalization or some other form is possible,” the expert emphasizes.
Tariff increases: inevitability or excuse?
According to Yuriy Korolchuk, this scheme cannot work without raising tariffs for the population.
“Remember when Andriy Gerus, the head of the energy committee, came out and said, ‘We need to raise the tariff because then we will collect 40 billion hryvnias and spend it on repairing the power system. The tariff for the population ended up being 4.32 hryvnia per kWh. And today it is already clear that it will be raised to 5–5.50 hryvnia per kWh, again under the guise of repair work. Every time there is talk of raising tariffs, the repair of damaged property is immediately shifted onto the population. You will see that very soon Gerus or someone else will come out and say that tariffs need to be raised to restore the power system,” notes Yuriy Korolchuk.
However, Oleg Popenko, head of the Union of Utility Consumers, believes that the fact that DTEK does not have enough money for repairs has nothing to do with the tariff increase. It is a private company, and they have to find money themselves, wherever they can. However, energy tariffs will be increased; the decision has already been made at the level of the Verkhovna Rada and the Cabinet of Ministers.
“Electricity will rise to around 5.5 hryvnia per kWh, and gas will rise to 10 hryvnia. The amount announced by Shmygal still needs to be found somewhere. We have affected facilities belonging to Ukrenergo and Naftogaz, state-owned companies that need money for restoration. Plus, there are state-owned regional energy companies. And the government justifies the tariff increase by saying that money needs to be raised for their repair,” said Oleg Popenko, head of the Union of Utility Consumers.
“Insane amounts” without public control
MP Oleksiy Kucherenko believes that Ukrainian society should be extremely cautious about the “insane sums” announced by officials. There is no such thing as free aid on this scale — everything will have to be paid for either with loans or state assets (subsoil, gas transmission systems, nuclear power plants). He noted that the amount of necessary investments suddenly increased by a third without professional justification, and it is unclear why the state should finance the renewal of private companies’ equipment.
“I understand the desire of certain individuals — they are already mentally allocating these sums for repairs, purchasing equipment at double the price, and work at inflated estimates,” explained the deputy head of the relevant committee.
Kucherenko stressed that the sources of funding remain opaque, and without public control, this is “a road to nowhere,” because we and our children will have to pay for it. At the same time, the real need for quick repairs, in his opinion, is about $5 billion.
Author: Alla Dunina
