Ukraine continues to face a shortage of electricity and generation capacity. To secure a reliable backup power source amid ongoing outages, communities and businesses are actively installing gas piston units. However, maintaining this equipment is financially challenging due to high gas prices and operational costs. So how can self-generation not only avoid relying on budget subsidies but actually generate millions?
Step 1: Choosing the Connection Approach
Communities and enterprises usually install gas generation solely for their own consumption, connecting energy units only to internal networks. The reasons are obvious: connecting to the distribution system operator’s grid involves additional costs, bureaucracy, and – most importantly – a lack of understanding about the potential benefits beyond emergency backup power.
The answer is straightforward: economically viable operation of a gas unit is only possible when it runs synchronously with the Unified Energy System. Only then can equipment owners access a variety of market opportunities that reduce production and consumption costs and allow earning income by selling surplus electricity.
Moreover, integrated into the energy system, the unit becomes part of the distributed generation network that the government relies on to replace damaged capacities from large thermal power plants.
Without connecting to the energy system, owners use their equipment merely to prevent emergency outages. Unfortunately, such outages will only increase as the electricity deficit worsens due to slow development of distributed generation, creating a vicious cycle that needs to be broken for everyone’s benefit.
Step 2: Developing a Financial and Economic Model
A financial and economic model provides clarity and confidence in the economic viability of the energy unit. Specialists develop this model by analyzing consumption schedules, forecasting hourly electricity market prices, gas costs, and operational expenses.
In simple terms, experts process extensive data to give the client a complete picture: required investment, expected annual expenses, and projected financial returns. Having these figures and understanding risks makes it easier to decide whether to participate in the project. For communities, this also serves as a justification for using budget funds.
This model is critical when seeking financing for equipment purchase and installation. Donors and lenders are more likely to provide funds if they see calculations demonstrating effective use, economic sustainability, and a clear understanding of steps and risks.
Step 3: Securing Financing
Few communities or enterprises can finance energy capacity construction solely from their own resources – and often, it’s unnecessary. Governmental or municipal bodies can participate in international aid programs, where equipment can sometimes be obtained free of charge or financed at low-interest rates.
However, a key caveat is that such programs typically cover only equipment purchase, leaving design and installation responsibilities to the initiator. This partly explains the slow deployment of some gas units that communities struggled to commission after receiving donor support in previous years.
Banks can help, too. Within government programs, some are ready to provide targeted loans. Our company partners with the state Oschadbank to assist communities in preparing energy projects, simplifying and accelerating financing, grid connection, and commissioning.
Step 4: Managing Energy Unit Loads
Once an energy unit starts operating within the energy system, a crucial question is how to manage its operating modes, as financial results largely depend on this.
Many gas piston unit owners we’ve worked with operate their equipment in base-load mode, focusing mainly on meeting their own consumption. While this allows selling surplus electricity, it rarely leads to significant additional income because surpluses tend to occur during times of energy oversupply when prices are low.
A far more effective strategy is for owners to manage their unit’s operation based not only on their technological needs but also on market conditions and hourly electricity prices. Prices on the day-ahead market (DAM) can fluctuate several times throughout the day, reflecting supply and demand balance.
For example, in spring during sunny hours, electricity supply often exceeds demand, prompting Ukrenergo dispatchers to impose operational restrictions to maintain system balance. During these times, it makes sense to reduce generation, avoid burning expensive gas, and instead buy cheaper electricity from the market.
Conversely, in the evening, when demand and prices spike, running the gas unit to generate electricity can yield high margins and benefit the national energy system. Our specialists have calculated the economic gains achievable through such optimized generation management.
For each megawatt of capacity, this effect can reach 5-8 million UAH excluding additional savings on transmission and distribution costs earned by generation owners. This bonus enables communities or enterprises to lower electricity or heating tariffs or invest further in energy independence.
Step 5: Choosing Market Tools
To maximize efficiency, owners should utilize various market instruments designed to improve the economics of operating their equipment.
The self-generation or “active consumer” mechanism is the simplest market entry option for communities and businesses with small capacities. The energy unit owner only needs to sign an additional agreement with the energy supplier providing this service. This allows selling surplus electricity – ideal for businesses with solar power plants, whose technology depends on weather and cannot easily manage output. For more advanced management, an aggregated group allows owners to earn optimal income without spending excessive time or money managing fluctuating market loads.
An aggregator (an energy supplier managing the aggregated group) handles commercial dispatch and coordinates equipment operation modes based on market conditions and technical needs. They also optimize electricity imbalances – the difference between forecast and actual production and consumption. The only limitation is that unit capacity cannot exceed 20 MW.
Balancing groups offer another tool for professional producers with regulated schedules, licenses, and specialized staff. Participating in balancing groups significantly optimizes imbalances, translating into substantial additional profits for large capacities.
The electricity market is complex and dynamic, requiring constant attention, deep analysis, rapid decisions, and skillful use of market trading tools to maximize benefits. With a professional partner, your own energy capacities can ensure reliable power supply and generate steady income for communities and enterprises.
Oleksandr Kisilov, Advisor to the CEO, Head of Distributed Generation Division at JSC "Energy Company of Ukraine" (ECU)
Maksym Asauliak, Department Head, Project Coordinator at JSC "Energy Company of Ukraine" (ECU)
The column was first published on the website Economichna Pravda.
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