18.11.2025
Vyacheslav Babich, Deputy Director of the Department for Commerce at PJSC “Ukrhydroenergo,” will serve as an expert at the Energy Club forum “Energy of Freedom: Resilience and New Opportunities for the Energy Storage Systems Market in Ukraine,” taking place in Kyiv on November 20.
PJSC “Ukrhydroenergo” is a key player in the ancillary services market and the balancing market. The emergence of new, fast-response electrical installations in this market, such as Battery Energy Storage Systems (BESS), not only opens new opportunities but also creates new challenges.
It is on market models and the future of power system balancing that the Deputy Director of the Department for Commerce at PJSC “Ukrhydroenergo” will focus his presentation at the forum: the role and place of BESS and hydroelectric power plants in the ancillary services market and the balancing market, as well as “Ukrhydroenergo’s” perspective on the development of storage systems and their impact on grid stability.
In an interview with the Energy Club media department, Vyacheslav Babich shared his vision of how energy storage systems (BESS) can influence the ancillary services market, the balancing market, and the future of the Ukrainian energy system. He discussed the strengths and weaknesses of pumped storage power plants (PSPP) and BESS, the potential of hybrid solutions, and the key messages “Ukrhydroenergo” addresses to investors and the regulator at the forum.
— Mr. Babich, “Ukrhydroenergo” is a key player in the ancillary services market and the balancing market. Today we are talking about ESS (energy storage systems) as a new tool for flexibility. In your view, are batteries a competitor to hydro units (in the struggle to provide services to “Ukrenergo”), or is this a synergy where hybrid systems (PSPP + ESS) will give the market a new, faster, and higher-quality product?
— Products in all segments are defined by the Law of Ukraine “On the Electricity Market” and secondary regulatory acts. The emergence of a new type of electrical installation, BESS, does not influence the appearance of a new product. PSPPs and BESS can work independently in all segments of the electricity market, regardless of each other. Each has its strengths and weaknesses. Specifically, the strengths of PSPPs are an operational life of over 50 years and a larger reserve of electrical energy; weaknesses include a smaller regulation range and slower power delivery speed.
Strengths of BESS: a larger regulation range and faster power delivery speed; weaknesses include degradation, a short operational life, reduction of power and capacity during degradation, and a smaller capacity reserve compared to PSPPs.
Parallel operation of HPPs and BESS is possible from a technical point of view, but from an economic point of view, it is inexpedient.
— “Ukrhydroenergo” is already implementing pilot projects for installing storage systems. What is the main goal of these projects? Is it more of a technical task (improving regulation quality for “Ukrenergo”) or is it a commercial business model (e.g., arbitrage on market price fluctuations)?
— We see that BESS can be involved in all segments of the electricity market: the ancillary services market for frequency and active power regulation, specifically providing NEC “Ukrenergo” with FCR (Frequency Containment Reserve), aFRR (automatic Frequency Restoration Reserve), as well as using price arbitrage in the electricity market.
— One of the main topics of our forum is how to make energy storage profitable. From your point of view, which business model for large ESS (from 10 MW and above) in Ukraine today is the most realistic: operating in the balancing market, the ancillary services market, or price arbitrage (DAM/IDM)?
— In our opinion, it is most expedient to use BESS in the electricity market, particularly in the ancillary services market for frequency and active power regulation (aFRR_up, FCR, aFRR_down), as well as price arbitrage.
— To what extent does the current regulatory environment (market rules, tariffs for ancillary services) economically stimulate the construction of new storage facilities?
— Today, on the part of the Regulator and NEC “Ukrenergo,” maximally comfortable conditions have been created for investors to invest funds in BESS.
— Are current projects currently more about strategic investments in future stability rather than quick payback?
— Quick payback is a subjective factor; every investor has their own. In any case, an investor invests funds with the aim of returning them, as well as receiving additional income.
— Which technologies, in your opinion, are optimal for Ukrainian realities? Are these exclusively lithium-ion batteries, or do you also consider other solutions (e.g., storage based on other chemical elements or even “green” hydrogen projects) for long-term storage?
— In our realities, we need to adopt the experience of Germany and Austria and use our potential of small rivers to build small HPPs/PSPPs. I want to draw attention to the fact that a PSPP is a mechanical energy storage unit, and electrical energy from an HPP is considered to be produced from alternative energy sources.
— You will be one of the speakers at our forum on November 20. What is the main message from the largest state generating company that you want to convey to investors, regulators, and industrial consumers?
— Investors who have invested or plan to invest money in BESS should remember that the electricity market is not just trading a commodity; it is a market where the laws of physics come first, and they lie at the core of its functioning model. Therefore, the experience gained in the electricity market will convert either into income, or into lost profit, forgone income, or even a loss.
And the message for the regulator: considering the special auctions held in the ancillary services market, as well as the gradual increase in participants in this market, we propose considering the possibility of removing the price cap on the ancillary services market.
