Ukraine launches 1.3 GW tender for construction of new flexible generation capacity
Ukraine has formally launched a large‑scale tender for the construction of 1,322 MW of new flexible generating capacity, marking the most significant state‑backed capacity mechanism since the start of the full‑scale war. The Cabinet of Ministers’ Order No. 488‑r (22 May 2026) sets out the binding terms for the tender and introduces a five‑year guaranteed payment regime designed to attract private capital into fast‑start, flexible generation.
- Guaranteed Revenue Stream: 27.92 euro cents/kWh for 5 Years
The tender establishes a Market Premium–type support mechanism ("Service for Ensuring the Development of Generating Capacity"). The government sets a maximum purchase price of 27.92 euro cents/kWh (incl. VAT), payable for five years from generating capacity commissioning.
How the payment guarantee works:
- If the market price during eligible hours is below the bid price, Ukrenergo pays the difference.
- Payments are funded through the transmission tariff, which will increase from 1 July 2026, improving liquidity for capacity payments.
- The mechanism is structurally similar to EU market‑premium schemes.
Investor takeaway:
This is the first time Ukraine offers a bankable, tariff‑backed revenue floor for new gas‑fired capacity. The five‑year horizon is short by EU standards but attractive given wartime system needs and high peak‑hour prices.
- Operating Regime: Fast‑Start, High‑Flexibility Shunting Generation
The tender is explicitly designed for maneuverable (shunting) generation to support system balancing, frequency restoration, and peak‑load coverage.
Key operational requirements:
- Start/stop cycles: ≥2 per day
- Cold start to full load: ≤30 minutes
- FRR ramping: full regulation range in ≤5 minutes
- Regulation range: ≥50% of rated capacity
- Black start capability: mandatory
- 16‑hour minimum continuous operation
Eligible support hours
Support is only paid during defined peak intervals, varying by season:
- January, February, November, December, March – 08:00–11:00 and 16:00–20:00
- April, May, September, October – 08:00–10:00 and 18:00–21:00
- June, July, August – 07:00–09:00 and 19:00–22:00
Investor takeaway:
The scheme rewards flexibility, not baseload operation. OEMs offering aeroderivative turbines, reciprocating engines, or hybrid gas‑engine + BESS configurations are well‑positioned.
- Gas Price and Fuel Availability: Market‑Based, No Fixed Tariff
The tender does not guarantee a fixed gas price for the five‑year support period. Investors must procure gas at market rates, typically via the Ukrainian Energy Exchange.
Regulatory context:
- Recent May 2026 reforms aim to ensure "more realistic" price caps on the electricity market, improving the economics of gas‑fired generation.
- At the same time, pursuant to the Law of Ukraine No. 4834-IX (market coupling), price caps are set to be abolished as of 1 May 2027, except in emergency situations in the IPS of Ukraine, where temporary restrictions may be imposed.
- No physical gas reserves are allocated for individual power plants.
- Dual‑fuel capability (gas + LPG/diesel) is strongly recommended and often required by lenders.
Investor takeaway:
Fuel price risk remains with the investor, but the premium mechanism partially mitigates it during peak hours. Projects should model gas price volatility, UEX liquidity, and dual‑fuel CAPEX.
- Gas Infrastructure and Pressure Requirements: Investor‑Borne Risk
The government provides the connection point but does not guarantee 30‑bar pressure at all sites.
Practical implications:
- Many regional gas networks operate at 6–12 bar, insufficient for most modern turbines.
- Investors must finance gas booster compressors where required.
- Site‑specific gas availability and pressure must be assessed early in due diligence.
Investor takeaway:
Gas infrastructure upgrades can materially affect CAPEX. Early coordination with GTSOU and regional gas DSOs is essential.
- Investor Scope: Full EPC Responsibility Including Transformers and Protection Systems
The tender follows a turnkey model: the investor must deliver a fully functional generating facility.
Mandatory investor‑supplied components:
- Step‑up transformers
- Switchgear and protection systems
- SCADA integration
- Second‑level physical protection (blast‑resistant shelters, reinforced housings)
- Internal “last‑mile” infrastructure to the grid connection point
Investor takeaway:
Physical protection requirements significantly increase EPC complexity. International EPCs with Ukrainian partners will have a competitive advantage.
- Tender Structure and Timeline
Capacity by region (four lots):
- Lot 1: Kyiv, Kyiv region, Chernihiv region – 250 MW
- Lot 2: Sumy region, Kharkiv region, Poltava region – 872 MW
- Lot 3: Dnipropetrovsk region – 100 MW
- Lot 4: Odesa region – 100 MW
Key deadlines:
- Bid submission window: up to 3 months from tender documentation publication
- Commissioning deadline: 20 months from signing contract
- Minimum power facility size: 10 MW
- Equipment lifetime: ≥20 years or 100,000 operating hours
Investor takeaway:
The 20‑month commissioning requirement is aggressive but achievable for modular gas‑engine or aeroderivative turbine solutions.
- Financial requirements for tender participants and winners
Procedure for conducting tenders for generation capacity construction and demand-side management was updated 1 April 2026 by CMU Resolution No. 436 to provide for the lower guarantee security:
- For participation in the tender – hryvnia equivalent of EUR 5 000 per 1 MW of capacity (instead of the previous EUR 100 000 + EUR 1 000 per 1 MW)
- For the fulfilment of contractual obligations – hryvnia equivalent of EUR 15 000 per 1 MW of capacity (instead of EUR 30 000 per 1 MW)
Investor takeaway:
Simplified eligibility and financial requirements for participants, which should increase competition and attract more investors.
Conclusion: A Bankable, Time‑Limited Opportunity for Flexible Gas Generation
Ukraine’s new tender creates a rare, tariff‑backed, government‑supported revenue mechanism for dispatchable generation. While fuel price and infrastructure risks remain with the investor, the combination of:
- a 27.92 euro cent/kWh guaranteed premium,
- five‑year payment certainty,
- clear technical requirements, and
- urgent system need
makes this one of the most commercially attractive opportunities for flexible generation in the region.
Investors should now focus on site selection, gas infrastructure due diligence, OEM/EPC alignment, and financial modelling ahead of the tender documentation release.
For additional information, please contact Asters' Partner Yaroslav Petrov and Senior Associate Tetiana Piskun.
