BRUSSELS — When Volodymyr Kudrytskyi severed Ukraine’s power grid from Russia and Belarus on Feb. 24, 2022, it was just supposed to be for a three-day stress test.
Two hours later, Russia invaded. The test became the country’s new reality.
For Kudrytskyi, the 38-year-old head of Ukraine’s power network, the decoupling led to a sustained, frantic sprint to overhaul a Soviet-built system under a hailstorm of bombs.
But for foreign investors, the Ukrenergo boss told POLITICO, the new reality presents great business opportunities.
Here’s Kudrytskyi’s pitch to Western companies: Boost your revenues, slash your labor costs, and get government approval virtually overnight, all without pesky EU red tape. That means lots of money, fast, he and other top officials insist. But the deal, they note, won’t last forever.
“You can build on this laissez-faire regime that is currently in Ukraine — until it’s changed,” Kudrytskyi said during an interview in Brussels, where he was meeting with the heads of other European power systems.
Indeed, Russia’s war has forced Ukraine to slash bureaucracy and give swift sign-off to major new infrastructure projects. It’s a strategy Kyiv hopes will attract billions in private investment to restore Ukraine’s aging power networks and bring them into the 21st century.
Kudrytskyi cautioned, though, that after the war Kyiv will have to adopt EU bureaucracy as it works to join the 27-country bloc, meaning such economic incentives will inevitably disappear. “Investors should get in now,” he said. “The risks are high, but the rewards are high as well.”
Appetite for risk?
Financiers eyeing projects in the war-torn nation understand that their assets could wind up in the line of fire.
Russia’s invasion has already caused billions in damage to Ukrainian infrastructure and property. Just last week, International Atomic Energy Agency head Rafael Grossi flew to Russia to speak with President Vladimir Putin about fears his occupation of Ukraine’s Zaporizhzhia nuclear power plant, Europe’s largest, could lead to an environmental and human catastrophe.
And yet, compared to elsewhere, the offer of faster permitting, lower costs and the chance to shape Ukraine’s emerging energy market helps compensate for the uncertainty. Delays in getting new energy projects going have long been a bugbear for companies in Western Europe. Kudrytskyi said a new wind or solar project could take just weeks to get approval, whereas in Italy it routinely takes nine years.
As a result, he said, Ukraine is speeding through construction projects.
“For example, we are now building a 100-kilometer high voltage line that will be ready in one or two years,” Kudrytskyi said. “In Eastern Europe, a project like that often takes five or 10 years. In Western Europe, it may never even happen.”
Combine that with higher margins on sales and lower costs on the ground, and companies have fertile ground in Ukraine. “The Ukrainian power sector offers very, very profitable options,” Kudrytskyi argued.
He noted that Ukraine pays twice as much as many other European countries for services that help link up the grid, “so your revenues as an investor will be twice as much.” Meanwhile, Kudrytskyi added, “your costs, in terms of labor and land, could be five, seven, 10 times lower.”
At the top of Kyiv’s investor wishlist are renewable energy, battery and other critical infrastructure projects. The aim is to prepare a post-war Ukraine for climate change and supplement its national budget through clean power exports to Europe.
At present, Ukraine is exporting roughly €1 million worth of electricity a day — a figure Kyiv wants to multiply at least sevenfold. That would turn Ukraine from a country that needs energy help into one that fuels Europe’s energy networks, a can’t-miss investment prospect for the private sector, Kudrytskyi believes.
Clean power promise
That message mirrors one from Oleksiy Chernyshov, CEO of Ukraine’s state oil and gas producer Naftogaz, who in November told POLITICO that Ukraine could help replace Russia as an exporter of fossil fuels to the EU, harnessing its own sizable reserves.
“Ukraine should be rebuilt not out of mercy but out of practical business interest,” he said at the time.
Doing the same with green energy will require significant funds from abroad, but analysts are optimistic.
“Ukraine is a huge country, with a comparatively smaller population — that means a lot of space, and they have relatively good solar spots, pretty good winds, and land is generally abundant,” said Georg Zachmann, scientific lead at the GreenDealUkraina think tank.
Zachmann ticked off Ukraine’s other benefits — for starters, a “huge agriculture sector” that can turn its waste into biogas, a more sustainable fuel. He also pointed to the gas pipelines and “electricity interconnectors” that link Ukraine to the EU. “At some point, that may not even be a border anymore,” he noted.
That said, the EU’s incoming carbon tax — which will tax certain imports based on carbon emissions starting in 2026 — could hamper Ukraine’s export revenues as the country still depends on carbon-heavy coal, Zachmann cautioned.
But “that’s a solvable problem,” he added, while speedy permitting should attract green investors who can boost renewable and clean energy generation.
Ukraine’s plan has another secondary effect: Exporting electricity to the EU will enable countries to avoid using Russian gas, stripping the Kremlin of funds for the drones, bombs and missiles destroying Ukraine.
On the morning Russia invaded, the lights in Kudrytskyi’s control room may have been blinking red, but now they’re starting to turn green.