19.06.2026
Part I. Energy cells, decentralized generation – new political metaphors or an impetus for deep reforms?
“Ukraine is forming a new architecture of energy security, the basis of which is a network of “energy cells”. This was stated by the First Deputy Prime Minister and Minister of Energy of Ukraine Denys Shmyhal in April 2026.
The more our energy system degrades and collapses, the more efforts are made not only to restore the balance of consumption and production, but also to try to model a new modern and sustainable model.
What could the energy system be like, for example, with the architecture of a network of “energy cells”? It must be said that the expert community has begun to actively discuss the proposed novella, which may either remain another beautiful metaphor or really become one of the foundations of the new architecture of energy security of Ukraine.
Why is it so important to analyze this issue? It is no longer just “let’s put a lot of gas-piston cogeneration units”. As Leonid Unihovsky rightly noted, there is indeed an academic concept of cellular energy systems/energy cells, mainly in the European and German research school. But the Ukrainian public concept of “energy cells” has not yet demonstrated compliance with this model at the level of architecture, regulation, market organization, standards and operational management.
First, let’s consider what the general situation in the energy sector looks like now in order to understand under what boundary conditions the country will implement the new concept.
The destruction of energy facilities and critical infrastructure as a result of war crimes by the Russian Federation in the period 2022-2026 not only deprived the country of a sufficient balance of generating capacities, but also highlighted all the accumulated problems and mistakes of previous periods.
In 2019, Ukraine changed the model of the wholesale electricity market and implemented the so-called Third EU Energy Package – the European Union legislation on the liberalization of the gas and electricity markets. In addition to ensuring a reliable and safe supply of electricity to consumers, the new model was to ensure the development of market relations, minimize the costs of electricity supply and minimize the negative impact on the environment, ensure a balance between the demand and supply of electricity, fair competition, promote the production of electricity from alternative energy sources and the development of distributed generation and energy storage equipment, create conditions for attracting investments in the electricity industry and many other progressive and necessary areas for the development of the energy sector.
But the negative trend, which began long before the Russian attack, almost completely nullified the advantages of the new model due to imperfect state regulation, interference in tariff policy, the absence of any incentives for modernization and development, manipulation and abuse in the market, growing imbalances and – as a result – the accumulation of debts. This sad and depressing picture was for a long time covered by a double excess of capacities, primarily – cheap nuclear and hydroelectric power plants, which, unfortunately, became a source of social populism of the government and corruption, and not the foundation for a modern restructuring of the energy sector. Restoring the physical balance of energy capacities without solving the accumulated systemic problems cannot be a realistic task.
I will not emphasize separately that the centralized Soviet model has finally exhausted itself, but I will list the main differences between the old and new models.
The existing ones are large generation nodes, unidirectional flows, passive consumers, “blind” distribution networks, and vulnerability to attacks.
It is quite obvious that the basis of the transformation is the development of smart active distribution systems (smart grids), microgrids, distributed energy resources (DERs), prosumers, energy storage systems (BESS), electric vehicle integration (V2G), distributed balancing capabilities at all levels, virtual power plants (VPPs), software platforms for intelligent management of electric networks (ADMS/DERMS), and an integrated control system from the TSO (SCADA) to end consumers (grid edge), which ensures the transition from a traditional one-way system to a decentralized one.
It should be noted that all of the above elements of the future architecture of the Ukrainian UPS are being actively discussed to some extent in each direction. International standards are being adapted. Many examples of successfully implemented DER, BESS, and microgrid projects can already be cited. But this process is slow, unsystematic and uncoordinated, which leads to the inhibition of the development of some technologies due to the absence of others.
I will give the following example: in 2022-2023, after the first destruction, measures were developed and approved by the National Security and Defense Council for the simultaneous implementation of distributed generation (DER) and smart grids. After analyzing the efficiency of using the distributed generation put into operation on one cold day in February this year at an average air temperature of -15 degrees Celsius in the country, and consumers were disconnected for 12-16 hours, it turned out that the average utilization rate of the installed DER capacity was only 28% on that day!!! One of the main reasons is the lack of smart grids and telemechanics at substations to which DERs are connected. And it is obvious that with the growth of DER volumes, this problem will increase.
An even greater problem arises with the efficiency of using solar power plants and wind farms, the stochasticity of their operation causes more and more economic losses.
We can conclude that for Ukraine, the problem of restoring the energy sector lies not only in the generation deficit, but also in the network controllability deficit. Every hryvnia invested in digitalization and automation of networks can give a greater effect of using existing distributed generation than the hryvnia invested in the construction of additional generation. A simple example: if the utilization rate of distributed generation were at 60%, this would actually equal 250-300 million euros in savings in the construction of each gigawatt of capacity. If we add other components of the cumulative effect of network modernization, which, for example, CIGRE calls in its studies, it becomes not only technically, but also economically unalternative. I will give a few figures: reduction of losses in networks – up to 20%, while simultaneously increasing throughput by 25-40% without mass construction. Reduction of the duration of accidents by up to 40% and the main effect – 100% integration of DER!
At the beginning of the year, the head of Ukrenergo announced the need to build 9 and a half GW of new generation in the Ukrainian power system, which will be needed in the near future. These include highly maneuverable gas generation, biofuel thermal power plants, energy storage facilities and “green” generation. The estimated investment required for this program could exceed EUR 8 billion. It is easy enough to calculate the losses if the modernization of networks continues to lag behind the development of distributed and, accordingly, resilient sources of heat and electricity.
Ukraine is already investing billions in distributed energy resources. The main question for the next stage is whether the power system will be able to use them effectively.
