25.09.2026
When assessing a BESS project, it is not enough to compare the cost of the battery with the difference between daytime and evening electricity prices. Investors must consider grid capabilities, the capacity available for charging, emergency control systems, energy management, telecommunications equipment and the risk of dispatch restrictions. Dmytro Olefir, Deputy Director for Prospective Development at the Energo-Plus Research and Production Enterprise, discussed these factors during the Energy Club forum “Energy Freedom: Resilience and New Opportunities in Ukraine’s Energy Storage Market,” held in Kyiv on 17 September.
At the beginning of his presentation, Dmytro Olefir recalled that approximately 15 years ago, while working at NPC Ukrenergo, he had already raised the issue of the unbalanced structure of Ukraine’s generation fleet. The power system had excess baseload capacity while experiencing a shortage of flexible generation.
At that time, energy storage technologies were only beginning to develop, and the cost of the equipment was extremely high. “Fifteen years ago, I was already speaking about the excess of baseload capacity and the shortage of flexible capacity in Ukraine’s Integrated Power System. Energy storage systems effectively did not exist at the time, the technologies were at an early stage of development, and their cost was extremely high. However, even then it was clear that the power system needed such facilities,” Dmytro Olefir said.
Since then, the technologies have become considerably less expensive, while the war has added another critically important function to the market applications of energy storage: providing backup power to consumers.
At the same time, changes in electricity market prices have created opportunities to use storage for arbitrage, balancing and ancillary services.
Citing publicly available data, Dmytro Olefir said that approximately 700 MW of energy storage systems installed across 33 facilities were already operating in Ukraine. These systems are used for arbitrage and participate in the balancing and ancillary services markets. Separately, small household and non-household consumers have, according to his estimate, installed approximately 1.5–2 GW of storage, used primarily for backup power. “This capacity is comparable to approximately one and a half or two nuclear power units,” the speaker emphasised.
At the same time, Dmytro Olefir warned against allowing BESS development to follow the same uncontrolled path as the previous rapid expansion of solar power.
According to him, Ukraine had approximately 6.5 GW of installed solar generation before the beginning of the full-scale war. This increased the system’s dependence on weather conditions and daily fluctuations in output: the system could have surplus electricity during summer daytime hours while experiencing shortages in winter and during the evening peak.
Dispatch restrictions on solar power plants also created additional costs because producers could receive compensation for electricity they were prevented from generating. “I am concerned that energy storage systems could follow the same path as solar generation. Storage must be built in volumes that the power system genuinely needs,” Dmytro Olefir said.
An excessive number of storage facilities could also create new problems. During certain hours, the system may not have sufficient conventional generation to charge all the batteries simultaneously so that they can discharge during the evening peak.
There are also physical limitations within the distribution and transmission networks, particularly given the damage caused by the war. “As more energy storage systems are connected, we may face overloading on distribution system operators’ lines. This will require additional investment in reconstructing the networks and emergency control systems,” the speaker explained.
He identified the lack of accessible information about the actual needs of Ukraine’s power system as one of the principal challenges facing prospective investors.
Ukraine prepares a generation adequacy assessment report intended to show the future structure of the power system. However, owing to martial law, the current version of the document is not accessible to most market participants. “We do not understand where we are heading. How much energy storage does the power system need – 6 GW, 7 GW or perhaps 10 GW? This information is not publicly available,” Dmytro Olefir said.
Market participants also lack sufficient information on how much storage capacity has already been constructed, how the distribution and transmission networks will be restored and whether any transition to different voltage levels is planned.
The broader scenario for the country’s economic development will also influence the economics of BESS projects. Ukraine’s electricity consumption profile will vary depending on whether it develops primarily as an agricultural, industrial or high-technology economy. “The country’s chosen development model will shape its daily electricity consumption profile. Energy storage systems and other types of generation must be built around that profile,” he explained.
According to the speaker, energy storage planning must be coordinated with an understanding of the future development of nuclear, thermal and hydropower generation, hydrogen technologies and other energy sources.
Among the financial risks, Dmytro Olefir identified a potential increase in connection charges caused by separately accounting for the storage system’s electricity withdrawal and output capacities.
The withdrawal of incentives for manufacturers in China could also affect equipment prices. Even a relatively small increase in battery costs changes a project’s estimated payback period.
Investors must also consider public service obligation mechanisms, price restrictions and potential changes to price caps. “Ukraine’s electricity market is subject to manual regulatory intervention: price caps may be changed in either direction. This also affects the predictability of investment projects,” Dmytro Olefir said.
He described the low liquidity of the balancing market and delays in settlement as a separate problem. “Energy storage systems are, by their nature, well suited to the balancing market. However, after supplying balancing energy today, a company may receive payment from the transmission system operator a year later. Money has a time value, and one year later it is no longer the same money,” the speaker stressed.
Dmytro Olefir devoted a significant part of his presentation to common mistakes made by investors when preparing BESS projects.
One example involved an active consumer with a permitted connection capacity of 500 kW and its own consumption of approximately 300 kW. This left only 200 kW available for charging the storage system.
With a battery capacity of 2 MWh, the system could discharge for approximately four hours, but charging it fully using the available 200 kW would require nine to ten hours. “The investment model did not match the project’s practical feasibility. The investor calculated how the storage system would discharge but did not verify whether sufficient capacity was available to charge it,” Dmytro Olefir explained.
Another project envisaged a 1 MW/2 MWh system operating in long-term ancillary services auctions for 24 hours.
According to the speaker, the investor had not considered the operating principles of this market segment or the need to maintain part of the battery’s charge. To extend the storage system’s service life, it should not be discharged below approximately 15% state of charge, making continuous operation throughout the entire day impossible in the proposed configuration.
The location of the facility is equally important. If storage is installed in an energy-deficient region, the distribution or transmission system operator may not permit it to charge even during hours when the business model assumes that electricity will be inexpensive. “If the dispatcher does not allow the facility to charge during the day, the question is how it will meet its already contracted evening peak discharge schedule. The operator will either have to buy electricity on the intraday market, provided that an offer is available, or incur imbalances and additional costs,” Dmytro Olefir said.
He also warned against building a financial model solely around a typical summer day-ahead market profile, with electricity prices close to zero during the day and at their maximum in the evening.
This profile may not exist in winter or on cloudy days. In addition, as the number of storage systems increases, the daily price curve will gradually flatten, reducing the spread on which arbitrage models rely.
Another common mistake is comparing projects based only on the quoted cost per megawatt-hour of battery capacity. A commercial offer may include only battery modules, an inverter and a battery management system, without accounting for all the infrastructure required to operate the facility. “A supplier may offer you a ‘bare’ energy storage system consisting of an inverter, BMS and battery modules. However, it must also be integrated with SCADA for monitoring and control, an EMS for operating in the electricity market, and telecommunications equipment for interacting with the distribution or transmission system operator,” Dmytro Olefir explained.
Cybersecurity and dependence on external cloud services are separate concerns for critical infrastructure facilities. “For critical infrastructure, it is extremely important that the inverter does not depend on external cloud technologies and that there is no possibility of external interference in its operation,” he stressed.
According to Dmytro Olefir, Energo-Plus is preparing to supply Ukraine with inverters manufactured by its consortium that do not require a connection to external cloud platforms or additional technical measures to restrict third-party access.
The further development of the market requires continuous cooperation between prospective investors and public authorities. The state should provide clear signals regarding the required volume of energy storage, the prospects for different types of generation and the amount of storage capacity already commissioned. “The state must provide investors with guidance: how much storage capacity is needed, which types of generation are planned for development in the short and long term, and how many energy storage systems have already been built,” the speaker said.
The balancing market also requires further regulation. In the ancillary services market, a significant share of the volumes for the coming years has already been allocated through long-term auctions. “There is almost no unallocated reserve capacity available for sale in the ancillary services market. Expecting to sell one or two megawatts of capacity in a daily auction is an illusion, and no bank will finance a project built solely on that assumption,” Dmytro Olefir warned.
Investors, in turn, need to define the purpose of the project in advance: whether it will operate exclusively in the market, supply the company’s own consumption, sell surplus electricity or combine storage with solar or gas-engine generation.
The use of energy storage should not be limited to the electricity market. Storage systems can also be applied in electric transport, housing and municipal infrastructure, and other sectors of the economy.
Dmytro Olefir identified the localisation of equipment manufacturing as a separate strategic priority. “Initially, foreign photovoltaic panels were imported into Ukraine, but domestic production was subsequently established. Energy storage systems should likewise be manufactured in Ukraine. All the necessary prerequisites exist, and this can be achieved through the joint efforts of the state and investors,” Dmytro Olefir concluded.
