On 22 May 2026, the Cabinet of Ministers of Ukraine (CMU) adopted Order No. 488-r “Certain Issues Related to Conducting the Competition for the Construction of Generating Capacity and Implementation of Demand Response Measures” (Order), which launched a long-awaited competitive support mechanism for the construction and development of new generating capacity.
The Order was adopted in response to ongoing energy security challenges, including Russia’s full-scale invasion of Ukraine and the resulting damage to critical energy infrastructure, and is part of Ukraine’s broader efforts to restore and strengthen its electricity system through the deployment of new flexible generation assets.
The Order is available at the link in Ukrainian.
Key takeaways
- Ukraine intends to procure 1,322 MW in new flexible generation capacity across four regional lots.
- The support mechanism operates similarly to a contract-for-difference model. Successful bidders can receive support payments for a period of five years, but only when market prices fall below the awarded bid price (capped at EUR 0.2792/kWh of generated and sold electricity).
- Support will be available only during designated seasonal peak-demand periods.
- Projects must satisfy extensive technical and operational requirements, including minimum 10 MW capacity, black-start capability, and rapid dispatch response.
- New facilities must be commissioned within 20 months following execution of the relevant agreement.
- The framework is likely to favour projects with advanced development readiness and proven technological capabilities.
Overview
Total capacity to be procured
The competition is aimed at procuring 1,322 MW of flexible (i.e. maneuvering) generation capacity to support the efficient balancing of the Ukrainian power system and ensure the availability of guaranteed reserves.
The required capacity will be allocated across four regional lots with the greatest capacity deficit and grid-balancing needs:
- Lot 1 (Kyiv city, Kyiv and Chernihiv regions): 250 MW;
- Lot 2 (Sumy, Kharkiv and Poltava regions): 872 MW;
- Lot 3 (Dnipropetrovsk region): 100 MW; and
- Lot 4 (Odesa region): 100 MW.
The Ministry of Energy of Ukraine is expected to launch the respective tenders in due course. No specific timeline has been announced.
Participants will have three months to submit bids following publication of the tender documentation.
Financial support mechanism
Successful bidders will receive support payments for generation capacity development with the maximum procurement price capped at EUR 0.2792/kWh (including VAT). During the tender, qualified bidders must submit price offers within this cap with the most competitive offers securing support under the scheme.
In practice, the mechanism operates similarly to a contract-for-difference (CfD) model. The generator receives support payments only when market prices fall below its awarded bid price.
When market prices exceed the bid price, no payment is made. The actual support amount for each eligible hour is calculated based on the volume of electricity sold on the bilateral, day-ahead and intraday markets multiplied by the difference between the winning bid price and a reference market price.
The eligible volume cannot exceed the amount of electricity that can be generated by the relevant facility based on the available generating capacity specified in the generation capacity development services agreement.
Importantly, electricity discharged from an energy storage system will not qualify for support unless the competition documentation expressly permits or requires the installation of storage.
The support period will last five years, starting the month the relevant generation facilities are commissioned.
Designated peak hours for support
Successful bidders will be entitled to support only during specified time intervals. These intervals vary by season and are intended to cover peak demand periods in the Ukrainian power system. Because support is only available during designated hours, investors will need to assess project economics against both the seasonal support windows and the expected dispatch profile of the facility.
The designated support periods are summarised below.
Table. Designated support periods
Project economics will depend not only on support payments but also on the facility’s ability to optimise generation during the eligible support periods.
Eligibility requirements
The competition is designed for projects with:
- a minimum installed capacity of 10 MW; and
- a maximum installed capacity limited to the capacity allocated to the respective lot.
Operational and technical requirements
Detailed technical and operational requirements regarding generating units include:
- compliance with the Ukrainian Transmission System Code requirements (for Type C or D generation units, depending on capacity);
- compliance with environmental emissions standards;
- ability to perform at least two start-stop cycles per day with a maximum allowable idle time between two consecutive cycles not exceeding two hours (including command processing time);
- a regulating range amounting to at least 50% of the installed capacity;
- ramp-up to full capacity within 30 minutes from a dispatch instruction;
- guaranteed continuous operation of at least 16 hours;
- capability to provide frequency restoration reserves with activation within five minutes following a dispatch instruction;
- black-start capability allowing operation without external grid voltage; and
- mandatory implementation of second-level engineering protection measures for critical infrastructure in line with CMU Resolution No. 471 dated 26 April 2024 “Certain Issues of Engineering Protection of Critical Infrastructure”.
The competition is designed for highly flexible and dispatchable generation technologies capable of supporting system balancing and reserve provision.
Commissioning timeline
Successful bidders must commission the relevant generating facilities within 20 months following execution of the generation capacity development agreement with the transmission system operator.
Practical implications for investors
Investors considering participation in the upcoming tenders should assess the following factors:
- Technology compliance: evaluate whether the proposed generation technology meets the stringent technical requirements, including start-stop cycling capability, ramp-up speed, black-start capability and frequency restoration reserves provision.
- Revenue profile analysis: support payments are limited to designated peak hours, which vary seasonally. Financial modelling should account for the restricted support windows and assess supplementary revenue streams from market participation outside supported hours.
- Support mechanism dynamics: the support operates similarly to a contract-for-difference model, meaning no payments are made when market prices exceed the awarded bid price. Investors should factor in market price forecasts and the hourly reference price methodology when assessing expected support revenues.
- Project readiness: given the 20-month commissioning deadline, projects at advanced stages of development with secured equipment supply chains are better positioned to compete.
- Permitting and regulatory approvals: early engagement with relevant authorities is recommended to address environmental compliance, construction permits, and critical infrastructure protection requirements.
- Regional lot selection: the allocation of capacity across four regional lots may require strategic decisions regarding project siting, giving consideration to local grid constraints and competitive dynamics within each lot.
Conclusion
This tender framework represents a significant milestone in Ukraine’s efforts to rebuild and modernise its electricity system while creating a structured investment framework for new flexible generation assets. The competition introduces a structured remuneration mechanism and accelerated implementation timelines aimed at attracting investment in flexible generation assets.
At the same time, the relatively demanding technical specifications, regional allocation model, and short implementation period are likely to limit the pool of eligible projects to those investors with advanced project readiness and proven technological capabilities.
For prospective investors and developers, early assessment of technology compliance, project readiness, permitting status, grid connection arrangements and financing strategy will be critical for success in the upcoming tenders.
For more information on these tenders, contact your CMS client partner or the CMS experts who contributed to this article.
