A multi-million-euro fund launched by Ukraine’s European allies to help the war-ravaged energy sector is running low on cash as power providers struggle to keep the lights on this winter.

The Ukraine Energy Support Fund has spent more than 80% of the €900mn ($945mn) committed to repair energy infrastructure targeted in Russian drone and missile attacks. The fund is managed by the Vienna-based European Energy Community and backed by the EU and bilateral donors, including the US and UK.

“We entered the winter season without any spare money for additional purchases,” Artur Lorkowski, the Energy Community’s director, told Newsbase. With Ukraine experiencing stepped-up attacks on power plants, transmission lines and gas assets, Lorkowski said the fund is currently facing “requests that are higher than the money which is available.”

The fund is expecting a new injection of donor money in the coming days, and possibly other support initiatives, following the first face-to-face meeting between German Galushchenko, Ukraine’s energy minister, and Dan Jørgensen, the new European Energy Commissioner, on December 13 in Vienna. “The continued cooperation and support for Ukraine was confirmed during that meeting,” Lorkowski said.

The EU has committed more than €2bn for energy security in Ukraine, including financing set aside for the Energy Support Fund, according to the European Commission. But with the country entering its third, and possibly toughest, winter since the war began in February 2022, the energy outlook remains precarious. Just hours before Galushchenko and Jørgensen met at the Energy Community’s offices, Russia unleashed a major attack aimed at crippling Ukrainian energy infrastructure.

 

High-voltage transmission hit 

“It is really hard to say exactly how much of the capacity was damaged over the recent attacks,” Igor Piddubnyi, an energy analyst at the Kyiv School of Economics (KES), told Newsbase. He noted that “flexible, manoeuvrable generation capacities” – including hydro and pump storage stations and coal-fired thermal power plants (TPPs) – have been affected.

Also targeted were high-voltage transmission substations that forced Ukraine’s three operating nuclear power plants (NPPs) to slash output, prompting warnings from the International Atomic Energy Agency (IAEA) about “persistent risks to nuclear safety.” Ukraine’s nine operating reactors supply at least half of current daily demand, which ranges from 15 to 18 GW.

KES, which tallies energy infrastructure losses from the war, last summer estimated the overall damage to the sector at more than $56bn and the cost to rebuild will exceed $50bn. Piddubnyi told Newsbase that while these figures continue to grow, notable improvements in Ukraine’s air defence capability have helped to protect energy assets. Last spring, Ukraine lost half its 18 GW of capacity in a wave of attacks on infrastructure, prodding allies to accelerate delivery of air defence systems and munitions. The losses also prompted the European Energy Community and other international donors to ramp up financial and logistical support for Ukraine before the start of the winter heating season.

Most of Ukraine is currently experiencing daily electricity outages, sometimes lasting several hours. “Russia is using any leverage they have to destroy and harm Ukraine as much as possible,” Piddubnyi said. “They are destroying our power system and our energy sector as a whole, including the gas sector, because it harms our economic potential and the Ukrainian citizens psychologically.”

 

Moldova’s energy security outlook

The European Energy Community was founded in 2005 to support aspiring EU countries in liberalising their energy markets and adopting the bloc’s energy laws. But its mandate has changed dramatically since the war in Ukraine started, overseeing the fund and logistical support for Ukraine, its largest member, and coordinating with Moldova to improve its energy stability. The organisation’s other so-called contracting parties are Albania, Bosnia and Herzegovina, Kosovo, North Macedonia, Georgia, Montenegro and Serbia.

Like Ukraine, Moldova is bracing itself for possible energy disruptions this winter. The country’s parliament declared a two-month energy emergency, starting from 16 December, in the event that Russia cuts gas supplies to the Kuciurgan power plant, which supplies both Moldova and the Russian-backed Transnistria region. Kuciurgan is located in the Transnistrian enclave.

Asked by Newsbase about the emergency declaration, Lorkowski said Moldova’s energy security is improving thanks to progress on overhauling its energy market and diversifying electricity and gas supplies through interconnections with its EU neighbours. “That itself gives Moldova a lot of security,” Lorkowski said. “Moldova is not isolated anymore and not exposed to be blackmailed by the non-European suppliers of energy.”

Nonetheless, the Energy Community sees a need to speed up upgrades to the Trans-Balkan gas pipeline. Last week, ministers from the organisation's member countries called for removing “regulatory bottlenecks” that have slowed efforts to expand capacity. Analysts say investments in new compressor stations and pumping units are needed to boost existing capacity and improve two-way flow along a corridor stretching from Turkey to Ukraine across Bulgaria, Romania and Moldova.

 

Georgia in the spotlight

Georgia, the newest Energy Community member, is due to take over the group’s presidency in 2025. Lorkowski dismissed concerns that political discord in the Caucasus country, and the government’s decision in late November to temporarily halt accession talks with the EU, would affect its leadership of an EU-backed organisation.  

“We are closely following the recent developments in Georgia,” Lorkowski told journalists, noting that the country has taken steps to open its market in compliance with the Energy Community and EU requirements. “We believe that the policy and politics happening in Georgia will not impact [on] the Energy Community process, and Georgia will be able to perform its duties as the presidency throughout the year,” he said.

This article is from bne IntelliNews’ sister publication NewsBase that covers global energy issues. Sign up for a two-week trial here.