Establishing Solar Energy Cooperatives in Ukraine: Regional Considerations and a Practical Guide

Abstract

The energy system of Ukraine needs to be decentralized, which aligns entirely with its intention to join the EU. The study focuses on regional peculiarities in establishing solar energy cooperatives and provides practical guidance on developing an energy cooperative in Ukraine. The article studies the different elements of electricity tariff composition for households, compares the existing support schemes (feed-in tariff and net metering), and defines which regions are the most suitable for establishing energy cooperatives (using solar installation). The primary methods employed are descriptive analysis, net present value analysis, and the integral assessment method, which collectively provide a comprehensive framework for evaluating both the economic viability and regional suitability of solar energy cooperatives. The findings indicate that the most suitable regions for solar energy cooperatives in Ukraine are located in the northeast and southwest of the country. The study highlights the importance of tailoring regional programs for energy cooperatives to enhance energy security and support the country’s low-carbon energy transition. The findings may be of interest and applicable in Ukraine and beyond.

1. Introduction

After the Soviet era, Ukraine inherited a fully centralized, electricity-abundant energy system. The unfortunate geopolitical events in Ukraine underscore the pressing need for decentralizing the energy system. One means of achieving this is the establishment of energy cooperatives, as well as other forms of energy communities. This is entirely in line with the EU’s directives, many of which are binding for Ukraine, given the country’s aspirations to join the EU. Approximating the EU acquis may expedite the EU accession process.

Nowadays, not only Ukraine, but the EU as a whole is facing a significant shortage of energy resources [1,2]. The energy crisis also exacerbates this issue, resulting in structural impacts on the market [3,4]. Because technological advancements require more energy, which in turn raises global temperatures, and because the “safe working space for mankind” is shrinking, human activity is a significant contributor to the increasing demand for energy.

The political and public ramifications of insufficient energy availability, which jeopardizes the welfare of people and society, are becoming increasingly recognized throughout Europe and other Western countries. In Ukraine and the EU, the concept of “energy poverty” is becoming increasingly relevant as a topic for intervention. There are four leading causes of energy poverty: low energy efficiency of buildings and appliances (or unsatisfactory technical condition of the buildings), low income, energy deficit, and high energy prices [5,6].

Households either cannot get the energy they require or spend a sizable amount of their disposable income on energy. To afford heat and electricity, people often sacrifice other essential needs, such as food, clothing, or medicine. A growing number of factors, including household composition and specific energy needs, as well as contextual factors, such as local climate (e.g., excessive heat in summer or cold in winter), influence vulnerability to energy poverty over time. Identifying cases of energy poverty and understanding how they manifest themselves in a particular society can be challenging. Interventions, therefore, require meticulous planning.

This article examines the regional peculiarities of energy cooperative formation in Ukraine based on the net cost of electricity in different regions, then provides a step-by-step guide to establishing an energy cooperative in the country. The study focuses on the economics of energy cooperatives based on two existing support schemes: feed-in tariffs or net metering. This experience may be of interest to various regions in Ukraine and other countries that aim to develop their policies and establish energy cooperatives. This article seeks to bridge the knowledge gap regarding energy cooperatives for households. We contribute by identifying the most suitable regions for cooperative development, comparing policy incentives, and providing a replicable assessment framework.

2. Literature Review

In a broad sense, a cooperative is a special form of business entity that combines the joint economic activities of its members to achieve common goals. Its main features distinguish it from other types of businesses, such as limited liability companies or joint stock companies. The main features of the cooperative form of economic entity are also its main advantages [7], as follows:

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An association of persons, not capital: Members of a cooperative are individuals or legal entities that actively participate in its activities.

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Democratic governance principle: Each cooperative member has one vote, regardless of the size of their contribution.

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Openness to new members: The cooperative can expand without legal difficulties.

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Sharing of resources: Profits are distributed not according to the size of the investment but according to each member’s level of participation.

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Non-profit purpose: The main goal of a cooperative is not to maximize profits, but to provide members with quality services or goods.

Currently, in the energy sector, a cooperative as a business entity is an effective model of economic interaction that enables the joint use of resources, reduces costs, and fosters the creation of sustainable business models.

Renewable electricity for sale to the grid is one of the most promising end-use options for an energy cooperative. In some cases, energy cooperatives may offer a lower electricity price compared to the grid [8]. Zeng et al. studied the dynamics of renewable energy diffusion and demonstrated that the adoption of renewable energy technologies is significantly influenced by lower energy prices and shifting consumer preferences. Therefore, support policies are needed to enhance the adoption of renewable energy, including those implemented by energy cooperatives [9].

Many countries worldwide have introduced support schemes to stimulate investment in renewable energy, ensuring a reliable return on investment. The government sets a predetermined price that producers will receive from utilities or other bodies when their energy is sold to the grid. This often takes the form of feed-in tariffs (FITs) or feed-in premiums (FIPs) [10,11,12]. The availability of support schemes typically enables energy cooperatives to develop effective business models. This strategy has successfully expanded the share of renewable energy in energy systems [13]. However, it has become clear over time that setting fixed prices for renewable energy has drawbacks, especially in liberalized electricity markets where prices often fluctuate. Such schemes are more expensive when there is a significant discrepancy between market and regulated prices, as the government is obligated to compensate renewable energy suppliers for the difference [14,15]. Real-world experience in France recommends using premiums to finance the implementation of innovative business practices to address this problem [16]. These premiums, which are proportional to the amount of energy produced, are determined by subtracting the reference market price from the reference tariff (compared to the current feed-in tariff). Similar to the feed-in tariff, these premiums aim to compensate producers sufficiently to cover the capital expenditures and ensure a decent return on their investment. Introducing such premiums enables the revision of contract eligibility criteria based on the type of action, contract type, duration, and total amount, thereby determining the available human and financial resources. This simplifies operational management, provides quantitative and qualitative monitoring, and changes the communication policy.

Energy legislation is being increasingly modified to replace renewable energy support schemes based on competitive bidding, including auctions, with fixed compensation schemes. Unfortunately, energy cooperatives face significant difficulties in accessing such support schemes. Competing with large commercial companies is challenging due to complex procurement rules and the emphasis on delivering the most attractive value at the lowest price. Energy produced by energy cooperatives can also be sold to an external supplier who resells it on the wholesale market. In some EU countries, suppliers and producers agree on a price, but in other circumstances, suppliers determine the price they are willing to pay for production [17]. To promote investment in renewable energy, several EU Member States have introduced support schemes that guarantee a stable return on investment, allowing energy cooperatives to participate in the scheme.

The Belgian example offers energy consumers the option to install energy equipment, which will be subsequently leased to those consumers who have agreed to host production equipment on their premises. In this case, their energy consumption during the lease period has a fixed cost. After 15–20 years of operation and lease payment, consumers receive the equipment as their property [18]. Implementing this practice at the national level would facilitate the revision of current national regulations governing peer-to-peer trade, virtual network metering, virtual network invoicing, and self- and communal consumption activities. The ability to autonomously utilize the cooperatively generated energy without requiring a supply license represents a fundamental shift in the energy supply potential. The administrative load and related expenses are significantly reduced.

The Greek company Hyperion serves as an example of how energy cooperatives might create self-consumption plans that benefit individual families and disadvantaged populations. By prioritizing social and environmental objectives over financial gain, Hyperion contributes to shifting the economy toward social solidarity. A 500 kW solar park is their first completed renewable energy project, and all the energy generated there is used for in-house consumption rather than being sold to the grid. The expected lifetime of a plant is 25 years. Energy produced on-site is distributed and metered for each participant under the virtual net metering scheme, and the amount is subtracted from their bills over three years. The regulatory framework also allows for a portion of this energy to be delivered free of charge to homes that are energy-deficient [19].

However, a wide range of challenges currently confront energy cooperatives. Among the primary challenges are: (a) a lack of knowledge and awareness of energy sharing; and (b) a conceptual misunderstanding between energy sharing as an activity and energy cooperative as an organizational idea. On the technical side, the main obstacles include (but are not limited to): the inability to connect to the grid, the unclear and untransparent roles and responsibilities of grid operators, the lack of IT infrastructure required to process data, and the ongoing need to coordinate energy exchanges with suppliers.

Ensuring a level playing field for energy communities wishing to engage in both self-consumption and energy exchanges is a key responsibility of the European Commission [20].

By obtaining an independent license, energy cooperatives can supply their members with renewable electricity instead of selling it to the grid, distributing it through energy exchanges, or using it for their consumption. An energy cooperative can protect its members from price fluctuations in the broader market by providing a dedicated electricity supply service. This is especially the case when the power plant’s generation capacity is balanced with the energy needs of its members or customers.

2.1. Energy Cooperatives and Energy Communities as Instruments for Collective Action in Renewable Energy

European countries have various forms of energy sharing and energy communities, including renewable energy [21] and citizen energy communities [22]. An energy community can comprise legal entities establishing projects and conscious citizens sharing common cooperative values to promote the transition to sustainable energy systems. These communities perceive energy systems as more sustainable, efficient, and socially just economic entities. The choice of the appropriate form of business entity depends on the factors that determine the efficiency of operations, legal and financial risks, and development opportunities [23]. Energy cooperatives are associations of citizens or enterprises that jointly invest in producing renewable energy (solar, wind, bioenergy, etc.) for their own needs or the sale of excess electricity [24]. Many types of communities are formed for energy purposes; however, numerous barriers towards energy communities and community energy (market, institutional, organizational, and behavioral obstacles) exist [25,26]. Since the definitions and roles of energy communities vary significantly, it remains undeniable that utilities, industry, and policymakers will need to adapt to the changes and impacts that energy communities will bring, paving the way towards decarbonization of the country’s energy system [27,28].

With the EU’s intention to become the first climate-neutral continent by 2050 and the necessity of decarbonizing its energy system, the EU Green Deal prioritizes ensuring an affordable energy supply, including through the application of Industry 4.0 technologies [29]. In this context, energy cooperatives are expected to play much broader roles than simply providing energy; they may also create additional jobs and serve as key actors and participants in the energy transition, ensuring that the transition is just and inclusive.

According to the European Renewable Energy Directive, there are two types of self-consumption: final consumers who consume energy from renewable sources, and those who produce their electricity from renewable sources and have the option to store or sell any surplus [8]. Electricity output, sale, or storage should not be the primary commercial or professional purpose of non-household consumers.

A group of two or more people who work together to produce renewable electricity and live in the same building or apartment complex is known as a jointly operating renewable self-consumer. As different EU Member States have varying laws on self-consumption, they have developed a range of business models categorized according to local or national circumstances [30].

To promote self-consumption, energy communities can harness alternative energy sources, taking into account the individual energy needs of consumers. In this case, energy cooperatives assume the role of investing in and implementing renewable energy. Energy cooperatives reduce the risk of volatile electricity market prices affecting their customers. Many energy community members have gained protection from price fluctuations associated with the current energy crisis.

Several recent studies underscore the importance of tailored financial instruments and regulatory frameworks in facilitating this transition. In particular, using a cluster-based analysis of feed-in tariffs and power purchase agreements, the authors of [31] highlight how region-specific financial tools can stimulate decentralized energy initiatives, such as cooperatives. Similarly, the role of financial and fiscal incentives in fostering grassroots renewable energy projects is stressed in [32,33]. The bibliometric analyses conducted in these studies map the growing research landscape surrounding green finance and highlight the increasing relevance of localized financial models for energy community formation. Meanwhile, significant regulatory barriers hinder entrepreneurship in the renewable energy sector, emphasizing the need for institutional reforms to unlock the potential of energy cooperatives, especially in post-conflict and rural areas [34].

Beyond finance and regulation, broader socio-environmental and organizational factors also shape the viability of energy cooperatives in Ukraine. In particular, a connection between green development, waste management, and energy balance transformations offers insights into how circular economy models can complement cooperative energy systems [35]. Health-related studies [36,37] demonstrate how renewable energy projects, including those run by local cooperatives, can reduce air pollution and improve public health outcomes, particularly in vulnerable regions. Potentially, energy cooperatives could benefit from digital tools and inclusive leadership models to enhance their organizational efficiency and societal impact, leveraging competent leadership and IT-driven innovations in communities [38,39].

2.2. Energy Cooperatives in Ukraine

Ukraine’s energy sector is crucial to the country’s economic and social development. As of January 2022, 100% of the population had access to electricity, and 94.9% had access to energy for cooking. About half of the population (47%) had access to central heating, especially in large cities, and 74% of the population had access to a gas distribution network [40]. As of early 2022, Ukraine’s power system had a capacity of 56.298 GW [41].

One of the long-term problems of Ukraine’s energy sector is the obsolescence of power equipment: 80% of the existing nuclear power plant capacity was commissioned in the 1980s, and Ukraine is currently on a path to extend the operating life of existing plants. NJSC Energoatom is considering scenarios for extending the operational life of nuclear power plants by 20–30 years [42].

The limited investment in fixed assets remains a significant problem [42]. The existing tariffs do not allow for the necessary investments in fixed assets. Even the increase in electricity tariffs for households in 2023 did not fully cover the costs of electricity production, transportation, and distribution.

As of 2025, Ukraine’s electricity system remains vulnerable. It is currently unknown which of the destroyed capacities can be restored (and whether it is economically feasible to do so), and it is also unknown in what condition the power-generating capacities will remain after the de-occupation of territories. As of early 2025, overall installed generation capacity available for use decreased to 15 GW, which is lower than the winter peak demand for electricity (up to 19 GW). As of early 2025, the World Bank estimated that the losses to Ukraine’s energy sector totalled USD 20.51 billion, with the share of damage in the power sector estimated at USD 14.8 billion [43].

The Energy Strategy of Ukraine until 2050 outlines specific trends in future energy development; however, it is currently classified due to martial law. The feasibility of energy forecasts and scenarios remains uncertain, as the situation can change drastically overnight.

Despite the energy statistics being classified due to martial law, key stakeholders in the energy sector are currently seeing the following trends in the energy system:

• The energy system has a deficit of installed capacity.
• Households now consume more energy than industry (as opposed to before February 2022).
• There is a significant imbalance between the regions with extensive power output and regions that are power-deficient. Regions in the centre and east of Ukraine are the most energy-deficient due to the presence of energy-intensive industries there.
• Distributed energy generation is now considered a key direction in energy system development. It does not overload the existing transmission infrastructure and diminishes the losses.

In such conditions, the development of energy cooperatives by households and businesses has good prospects in Ukraine. Additionally, the establishment of energy cooperatives in Ukraine is emerging as a promising pathway to accelerate the transition to renewable energy, especially in light of evolving regional dynamics and local development priorities. Ukrainian legislation includes a definition of an energy cooperative; however, there is no definition of energy communities. Therefore, in this article, we utilize the term as it is defined the legislation: An energy cooperative is “a legal entity established… to carry out economic activities related to the production, procurement, or transportation of fuel and energy resources, as well as energy storage, and to provide other services aimed at meeting the needs of its members or the local community, as well as to generate profit following the law” [44].

There are two primary support schemes for energy cooperatives in Ukraine. The first is the FIT and net-metering through the mechanism of active consumption (i.e., prosumption). According to Ukrainian legislation, an energy cooperative is permitted to have a cumulative installed capacity of up to 150 kW. The FIT in Ukraine is valid until 2030. The FIT applies for energy cooperatives with installations up to 150 kW if the cooperative includes at least 10 individuals (whose contributions make up at least 75% of the share fund) or a municipal enterprise (with a contribution of at least 25%). Energy cooperatives that are granted FIT sell electricity to the offtaker (the Guaranteed Buyer) [45]. The offtaker purchases electricity against the FIT in amounts that do not exceed the monthly consumption of an energy cooperative [45].

The second possible support mechanism is net metering, which is available for prosumers. Prosumers sell surplus electricity under the self-consumption mechanism to a universal service supplier or another electricity supplier [45]. Net metering is more beneficial for prosumers than net billing [46]. This conclusion is confirmed by (Kurbatova et al.) [47], who analyzed the policy of introducing fixed tariffs for Ukrainian households.

According to recommendations, business entities should generate electricity from renewable energy sources, and prosumers should install energy storage systems and hybrid generation units capable of operating both in synchronization with the power grid and autonomously [46].

To date, there are not many energy cooperatives in Ukraine. However, several initiatives have properties similar to those of energy cooperatives under different names, and they are relatively close to energy communities in their understanding of pan-European legislation. In particular, there is an energy cooperative called Solar Town, located in the Kyiv region. It utilizes solar photovoltaic (PV) technology, has an installed capacity of 200 kW, and operates under the Feed-in-Tariff (FIT) scheme. In total, 5% of the net income is allocated to the needs of the town where the panels are located. Technically, it is not a renewable energy community in the sense of European legislation because the people who invested in the solar panels may live anywhere in Ukraine, not just in the town of Slavutych.

Inzhur Energy [48] is an investment fund that has developed a project to build an 18 MW gas-piston (reciprocating engine) peaking power plant. Investors from all over Ukraine contributed their funds to this project. To date, the funds have been accumulated, but the developer has faced difficulties with changeable construction permits due to reasons beyond the scope of the legislation.

Some of the energy cooperatives are formed based on agriculture and its residues, as follows.

Berry Land is an energy cooperative in the Ternopil region. The company’s primary focus is on producing raspberries and strawberries. It utilizes raspberry residues, including stems and branches, to make briquettes for heating purposes.

Oberig-Agro is a cooperative in the Mykolaiv region that utilizes agricultural residues to produce fuel briquettes, a source of energy for greenhouses where fruits and vegetables are grown. With the financial assistance of USAID, the cooperative’s primary objective is to create employment opportunities for veterans.

The biodiesel cooperative was formed in the Kharkiv region by 12 rapeseed farmers. They formed an energy cooperative to jointly purchase the necessary equipment for producing biodiesel.

Nowadays, thousands of quasi-cooperatives of people living in multi-apartment buildings have installed rooftop photovoltaic (PV) systems. Typically, the energy produced is sufficient to meet the demand for electricity to power the lighting of common areas within the building and to operate water pumps.

People’s awareness of energy cooperatives in Ukraine remains low (

Table 1. Barriers and drivers for establishing energy cooperatives in Ukraine.

Barriers	Drivers
Low awareness about energy cooperatives	The necessity to decentralize the energy system
Unfeasible support schemes	Possibility to (partially) meet energy demand at a lower cost (compared to the individual solutions)
Difficulty in reaching an agreement within the group of people due to the general mistrust of cooperative models	The need to ensure one’s own independent energy supply
High upfront costs	Help to mobilize private capital [49]
	Possibility of not worsening air quality [49]

). The findings of the 2024 interviews regarding people’s familiarity with the concept of energy communities in Ukraine revealed that only 7% possess sufficient knowledge to inform others about energy communities. The remaining 93% divided the responses between “never heard of it” and “know something but not sure” [49]. This topic is cross-sectoral, straddling the edges of energy, law, and social policy.

The low awareness rate may lead to the fact that “bottom-up” approaches result in low replicability of energy cooperatives. Nonetheless, the “bottom-up” approach is fully aligned with the state policy. Ultimately, a combined approach, with local initiatives grounded in nationwide information and educational campaigns, is required. Nationwide information campaigns coupled with educational programs for communities and positive demonstration cases are essential.

3. Materials and Methods

We consider the potential regional specifics of solar energy cooperatives’ placement. In addition to the apparent difference in the level of solar insolation, there is a disparity in the capabilities of energy companies to purchase electricity on the market. In our opinion, the lower the ability of energy companies to buy electricity in various markets (such as the Day-Ahead Market), the more appropriate it is to locate an energy cooperative in that area. Accordingly, government policy should promote the placement of energy cooperatives in regions where electricity suppliers have the least market purchasing power.

In Ukraine, the electricity tariff for households can be expressed with Formula (1) [50]:

$$T=NC+VAT+DSOt+TSOt+USPt$$

(1)

where NC—the net cost of electricity (in Ukraine’s case, it does not equal the LCOE due to market distortions and manual regulation of the sector); VAT—value added tax; DSOt—the tariff for the services of the Distribution System Operator (DSO); TSOt—the tariff for electricity transmission by NPC “Ukrenergo” (TSO); USPt—the tariff for the Universal Service Provider’s service. The electricity tariff for residential consumers in the second voltage class is 4.32 UAH per kWh. Different regions of Ukraine have different electricity distribution tariffs.

To calculate the feasibility of solar energy cooperatives for households under the FIT and net-metering schemes, we calculate the net present value [51] (Formula (2)):

$$\mathrm{N}\mathrm{P}\mathrm{V}=\sum _{t=0}^i{\displaystyle \frac{ACFlow}{{(1+r)}^t}}$$

(2)

where NPV—net present value, ACFlow—annual cash flow, r—discount rate, and i—number of periods. We conducted a purely financial analysis that ignores the potential positive CO₂ emissions reductions.

Additionally, the following assumptions were used:

• In this study, we employed a discount rate (r) of 15.5%, which aligns with the rate established by the National Bank of Ukraine as of July 2025 [52].
• The analysis was conducted over 25 years, which corresponds to the lifetime of a solar PV installation [53].
• The solar energy cooperative comprises 12 households, each with a 12 kW solar photovoltaic (PV) system. There is a legislative requirement that the cumulative installed capacity of energy-generating equipment of an energy cooperative should be less than 150 kW. Therefore, there can be several combinations of the number of households and their respective installed capacities. The installed capacity of 12 households, each with 12 kW of solar PV, equals 144 kW, which does not exceed the legislatively permitted 150 kW. We chose to proceed with solar PV because the equipment is relatively simple to install, readily available on the market (unlike small hydro or wind turbines), and does not require extensive permitting systems.
• For calculation purposes, each house has an area of 110 m² (the rooftop surface affects the installed capacity of solar PV). An assumption of a household of 110 m² was made, based on recent construction trends in Ukraine, where new family homes are generally within the range of 100–120 m² for households of 3–4 people [54,55]. There is no official average for single-family home size; however, Ukrainian developers recommend a range that is most similar to the new housing market and falls within the same range as new homes built in the previous period. A 12 kW PV system was chosen as the most likely estimate for a Ukrainian house in this size category, considering the available roof area and feasible installation restrictions. As of 2023, in Ukraine, 74.4% of solar PV in households had an installed capacity of 30–31 kW; 2.6% had an installed capacity of above 31 kW; 7.6% had an installed capacity of 20–30 kW; 12.3% had an installed capacity of 10–20 kW; and only 3.1% had capacity below 10 kW [56]. This occurred because the FIT conditions have been very favourable (in the past), and solar PV has been used not only for self-consumption but also as a business investment. Our assumptions are intended to reflect typical homes and practical PV installation constraints rather than the official statistical average of housing stock per person (which was 24.5 m² per capita in 2020). Additionally, the area of housing stock has changed since 2020, along with the number of people.
• The average electricity consumption is 3 kWh/m². This is an assumption based on observations rather than official statistics because these statistics are not readily available.
• Under the net metering scheme, a cooperative is not allowed to sell more than half of the electricity generated (based on its installed capacity of RES equipment) to the grid [57].
• We utilized the PVWatts Calculator [58], created by the US National Renewable Energy Laboratory (NREL), to account for regional variations in solar potential across Ukraine. This resource calculates the energy output of solar PV installations based on average local weather and solar radiation information. To determine a region-specific capacity factor, we selected the regional centers in the PVWatts database for each region. These customized figures enabled us to estimate the annual electricity generation more precisely, rather than using an average capacity factor for the entire country.
• The FIT for solar PV Rooftop and façade in Ukraine as of 2025 is EUR-cent 12.38/kWh [44]. The FIT rates are uniform and do not differentiate across various regions of Ukraine. As of 2024, the highest number of solar PV installations was located in Ivano-Frankivsk, Dnipro, Vinnytsia, and Khmelnytsky regions [59].

The study applied a multi-criteria assessment approach to identify priority regions in Ukraine for the development of solar power generation in energy cooperatives. We calculate the integral index to define the regions with the lowest net electricity price coupled with the highest electricity output. First, we normalize the data obtained. To ensure comparability of the indicators, they were normalized to the [0; 1] interval. The normalized net cost of electricity is calculated using Formula (3):

$$NCNorm={\displaystyle \frac{\mathit{max}\left(NC\right)-{NC}_i}{max\left(NC\right)-min\left(NC\right)}}$$

(3)

where NC_i is the net cost of electricity in period i, and NCNorm is the net cost of electricity normalized.

The normalized electricity output is calculated using Formula (4):

$$EONorm={\displaystyle \frac{{\mathit{EO}}_i-\mathit{min}\left(EO\right)}{max\left(EO\right)-min\left(EO\right)}}$$

(4)

where EOi is the electricity output in period i, and EONorm is the electricity output normalized.

The normalized distance from the front line, representing security concerns, is calculated using Formula (5):

$$DNorm={\displaystyle \frac{Di-min\left(D\right)}{\mathit{max}\left(D\right)-\mathit{min}\left(D\right)}}$$

(5)

where Di—distance from the frontline in period i, and DNorm is the distance from the front line. Then, we assign weights to three criteria—0.4 for the lowest net cost of electricity, 0.3 for electricity output, and 0.3 for proximity to the frontline, representing security concerns. A higher weight (0.4) on net cost emphasizes the lowest economic viability of placing new generation in the region, as the electricity producer will have the lowest amount of funds remaining after paying all tariffs (transmission, distribution, etc.), which is crucial given budget constraints. The weight on electricity output (0.3) ensures that regions with higher generation potential remain attractive for investments. The weight on proximity to the frontline (0.3) explicitly accounts for security risks related to hostilities.

These weights were assigned based on the expert opinion of the authors to reflect the current priorities, including the lowest payback time and the lowest net cost of electricity, while also considering security concerns.

Further aggregation was performed using a weighted sum (Formula (6)):

$$II=w_{NCi}\ast \mathrm{N}\mathrm{C}\mathrm{N}\mathrm{o}\mathrm{r}\mathrm{m}+w_{{PBT}_i}\ast EONorm+w_{Di}\ast DNorm$$

(6)

where II—the integral index; w_NCi—weight of the lowest net cost of electricity in the region; w_EOi—weight of the electricity output; and w_Di—weight of distance from the frontline.

To increase transparency,

Table 2. Summary of variables and their meaning.

Symbol	Description
T	Electricity tariff for households
NC	Net cost of electricity
VAT	Value Added Tax
DSOt	Tariff for the services of the DSO
TSOt	Tariff for electricity transmission by TSO
USPt	Tariff for the Universal Service Provider’s service
NPV	Net present value
ACFlow	Annual cash flow
r	Discount rate
i	Number of periods
NCi	Net cost of electricity in the i period
NCNorm	Net cost of electricity normalized
EO	Electricity output
EONorm	Electricity output normalized
D	Distance from the frontline (proxy for security)
DNorm	Distance from the front line normalized
II	Integral index
wNCi	Weight of the lowest net cost of electricity in the region
wEOi	Weight of the electricity output
wDi	Weight of distance from the frontline

below summarizes all variables and their meaning.

Later, a sensitivity analysis was conducted, assigning new weights based on policy priorities (

Table 3. Criteria weights for sensitivity analysis.

Policy Priority	Criterion Weights
	Net Cost	Electricity Output	Security
The highest electricity output	0.5	0.25	0.25
The highest possible security	0.2	0.3	0.5

). Table 3 presents the weights used in a sensitivity analysis conducted to assess the robustness of our results to different policy priorities. The idea is that policymakers might reasonably emphasize different aspects:

• In some scenarios, they might prioritize the highest electricity output;
• In others, they might prioritize the highest possible security, meaning they would prefer sites located furthest from the frontline to reduce security risks.

By adjusting the weights accordingly, we can see whether the final ranking of options (based on the integral index) changes significantly. This approach helps demonstrate that our method is not biased toward one particular policy objective, and it shows how the choice of priorities can influence the recommended locations.

4. Results

Region Selection

Figure 1 below presents the results of calculating the cost of electricity that remains with electricity supply companies after paying for all related services, broken down by region. The lighter the color, the fewer funds stay with the electricity supply companies to purchase electricity on the market.

As shown in the figure above, electricity supply companies in many regions of Ukraine are left with less than 1 UAH per kWh to purchase electricity on the market. For comparison, in March 2025, the Day-Ahead Market (DAM) price in Ukraine’s Integrated Power System (IPS) was 5473.83 UAH/MWh, equivalent to 5.47 UAH/kWh. This is approximately five times higher than the amount available to electricity supply companies from household consumer payments at the current tariff, as shown in Figure 1.

This gap is covered for electricity suppliers through the Public Service Obligations, which are imposed on the state-owned enterprise NNEGC “Energoatom”. In 2024, the company paid 128.303 billion UAH, compared to 17.53 billion UAH in 2023. As of June 2025, no increase in electricity tariffs for household consumers is expected, as this remains a politically sensitive issue in Ukraine.

An energy cooperative is not required to pay for the distribution and transmission of electricity that flows directly from solar panels and batteries to its members’ electrical installations, which is a reasonable way to reduce electricity expenses [60].

Since the electricity tariff for household consumers in the second voltage class is uniform nationwide while distribution and universal service provider tariffs vary significantly by region, we believe it is reasonable to encourage the establishment of energy cooperatives in areas with the highest distribution tariffs. These include, first and foremost, Sumy, Chernihiv, Zakarpattia, Mykolaiv, Ivano-Frankivsk, and Ternopil regions. Locating energy cooperatives in these areas could reduce or eliminate transmission costs for self-generated and self-consumed electricity, thereby easing pressure on state-owned companies and end-users.

Figure 2a shows the net present value under the existing FIT scheme, and Figure 2b shows the net present value under the net-metering scheme. Figure 2a shows that the net present value for all regions under FIT is negative, which means that it is unreasonable to choose FIT as a support scheme (as it ends by 2030).

Figure 2b shows that the net present value for solar energy cooperatives in all regions under the net metering scheme is also negative. The rationale for establishing a solar energy cooperative in this case is to ensure a reliable energy supply in instances where energy from the grid is unavailable. This is an illustrative example. In the real world, the DAM price may grow, improving the feasibility of the solar energy cooperatives in Ukraine.

The results of the integrated index are shown in Figure 3. The darker the region on the map, the more suitable it is for establishing a solar energy cooperative.

Figure 4a,b below presents the findings of the sensitivity analysis, where a significantly higher weight was assigned to the lowest net cost of electricity (Figure 4a) or security (Figure 4b). One can see that the results significantly depend on the assumptions and particular targets that policymakers wish to achieve. In this article, the aim is to consider the regions that are most suitable for the location of solar energy cooperatives, taking into account the lowest net cost of electricity and a reasonable distance from the frontline. Other weights can be assigned when the priorities change.

In Figure 4a, prioritizing the lowest net cost of electricity shifts the preferred locations toward regions with higher solar radiation, primarily in the southern and central parts of Ukraine. In Figure 4b, assigning the highest weight to security concerns shifts the preference toward western regions, which are the farthest from the frontline and therefore offer higher safety for investments.

Knowing that different regions have different feasibility of energy cooperatives, we suggest promoting the creation of energy cooperatives using additional instruments, such as:

• Capital grants aimed at decreasing upfront costs;
• Tax exemptions (such as VAT);
• Increase awareness about energy cooperatives;
• Provision of assistance with the preparation of project applications.

In the condition of decentralization reform, local administrations may want to develop such programs at their level.

5. Discussion

5.1. General Considerations and Key Findings

The study indicates significant disparities in the net cost of electricity that remains at the disposal of electricity-generating companies. The lower the remaining net cost, the more difficult it is to build new energy-generating facilities. The necessity and feasibility of new large-scale facilities are beyond the focus of this study. However, we suggest prioritizing the regions with the smallest net cost for establishing the energy cooperatives.

The integral index presented in this study does not cover all the possible regional factors, such as grid access limitations or policy volatility. However, due to the potential upcoming EU accession, Ukraine is in the process of aligning its legislation with pan-European legislation. Therefore, policy volatility is inevitable, but it may ultimately bring overall improvements and benefits to electricity market participants. The integral index was developed as a comparative analytical tool to identify relatively “not suitable” regions for energy cooperatives, taking into consideration the remaining net cost of electricity as a commodity and proximity to the front line. The grid access and limitation factors should be taken into consideration when planning the development of real-life energy cooperatives. Further studies may consider additional local factors, such as the impact of energy cooperatives on the energy availability of a community (there is no concept of energy poverty in Ukrainian legislation), and many others.

5.2. Policy Implications

Despite the growing public discourse on the development of energy communities in Ukraine, particularly at the local community level, a significant gap remains between regulatory and legislative initiatives and the practical preconditions for their implementation. Therefore, the following measures are to be undertaken:

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A precise mechanism for establishing energy communities needs to be introduced.

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Empirical data on consumer demand, including resource capacity, financial interest, and willingness to participate in energy projects, should be collected. Furthermore, the bibliometric analysis [47] reveals a fragmented scientific picture of renewable energy development in the residential sector in Ukraine, which correlates with the observed gaps in practical implementation and policy coherence.

It is important to note that the mechanisms of active consumers and aggregators, despite their potential to contribute to the decentralization of the energy system, remain underdeveloped in practice. Claims of positive dynamics in this segment are not supported by systematic analysis, particularly concerning sectoral distribution (residential, commercial, municipal) and assessments of the effectiveness of implemented models. The absence of statistical data (due to martial law) further complicates the objective evaluation of current achievements and the formulation of well-grounded projections.

At the same time, representatives of local governments acknowledge the persistence of urgent challenges, including a shortage of qualified personnel, limited financial resources, low levels of project management capacity, and insufficient skills for developing trading strategies to engage in the electricity market. Although there are isolated cases of successful energy initiatives, their lack of systematization and replication indicates a need for a comprehensive approach to developing energy cooperatives and communities.

Energy cooperatives have the potential to become an effective tool for implementing local, sustainable energy development strategies. However, this requires a clear understanding of the relationships between communities, energy network operators, and regulatory frameworks incorporating renewable energy sources and cogeneration solutions.

5.3. Future Research

Energy cooperatives in Ukraine are in the very early stages of formation. Given the recent technological advancements, numerous future studies are needed. They may include the following aspects:

• Digital technologies. Smart meters, blockchain, and electronic trade platforms can enhance energy management within energy cooperatives and simplify interaction with the grid.
• Energy intensity and energy efficiency may change at different stages and during the business cycles or economic growth [61]. Further studies are needed to understand how resilient energy cooperatives are against external shocks.
• Carbon markets. Ukraine has an emerging carbon market; however, such a market is a necessary element of the industry in the EU. Further studies are needed to investigate how carbon markets can encourage the establishment of energy cooperatives, particularly in regions with high carbon emissions.
• Understanding renewable energy diffusion dynamics, including those in energy cooperatives.

These aspects will improve the understanding of the dynamics of energy cooperative development and how to improve their integration into Ukraine’s energy system. Currently, numerous practical barriers remain, particularly due to limited trust in collaborative models. Overcoming these limitations requires policy changes, as well as a practical guide on how to create an energy cooperative, which will be described in detail in the subsection below.

5.4. Practical Guide to Create an Energy Cooperative (Based on the Example of Ukraine)

The step-by-step procedure for the formation of a typical energy cooperative in Ukraine can be described as follows:

Stage 1: Analysis of the community’s energy problems and needs.

Stage 2: Selection of the cooperative model following the current legal framework.

Stage 3: Legal formalization (Registration of the cooperative; Definition of the financial model; Obtaining necessary permits).

Stage 4: Technical implementation (Design of the energy system, procurement and installation of equipment, testing and commissioning of the station).

Stage 5: Operational activity and development (Cooperative management; Monitoring and maintenance; Interaction with the electricity market and opportunities for business expansion).

The first stage aims to analyze the community’s energy needs by determining the current level of energy consumption and identifying opportunities for energy production, as well as assessing the local renewable energy potential, including solar, wind, and biomass sources. Following the main current provisions of the legislation on cooperatives and the electricity market, a cooperative model is selected, and the possibility of using it for the following purposes is assessed:

• own consumption (cooperative members receive energy at self-cost),
• energy sales (sale of excess electricity to the grid. In Ukraine, this is a basis for the feed-in tariff, and, to some extent, for net metering in case of prosumers),
• mixed model (the cooperative uses part, and part is sold),
• identify opportunities to attract government support or grant programs.

In Ukraine, at this stage, one should consider the high level of energy poverty in certain regions, which is caused by numerous factors, as well as the lack of trust in cooperative approaches. To overcome this drawback, preliminary information campaigns and social consultations are necessary to enhance the support of cooperatives among the people. Sharing the experience of the existing cooperatives would be beneficial.

At the second stage, in addition to registering the cooperative, it is essential to identify sources of initial capital, such as membership fees, share contributions, loans, and grants, to determine the level of profitability of the business entity, the payback period for the purchased equipment, and the costs of organizing the operation of the cooperative’s production facilities.

At this stage, one should utilize existing legislation, such as the Law of Ukraine “On Cooperation” [62], as well as other relevant laws. Given Ukraine’s aspirations to join the EU, it is highly recommended that the term “energy communities” be defined in the legislation to make sure that new entities correspond to the requirements of the pan-European legislation. It is also advisable to expand the list of technologies that could qualify for energy cooperatives to include cogeneration.

The third stage is critical because, depending on the chosen energy supply technology, further operation will involve ensuring the safe operation of equipment in accordance with its technical specifications. Essential elements include the involvement of equipment suppliers, the availability of warranty service, and the integration of equipment into the grid or internal distribution system.

This stage would benefit from consultations with judicial companies and other cooperatives.

At the fourth stage of operational activities, it is crucial to assess the level of efficiency achieved and the terms of interaction with the electricity market, specifically regarding the sale of excess energy to the general grid and the recruitment of new cooperative members. This will provide an opportunity to expand operations, attract investment in additional capacity, and introduce innovations, such as storage systems and the Smart Grid.

Given that an energy cooperative might not have an extensive team of technical personnel, it could be beneficial to develop a partnership with local technical experts who could offer a wide range of services (turnkey modular solutions).

At the fifth stage, it is advisable to develop simplified instructions on the mechanisms and different segments of energy markets, as well as guidance on interacting with the Distribution System Operators and utilizing digital management platforms.

Energy cooperatives may carry out three interrelated activities:

• Sell renewable energy to households and businesses;
• Install and operate local renewable energy infrastructure;
• Contribute to the alleviation of energy poverty.
• The main conditions for achieving the efficiency of energy cooperatives are as follows:
• Understanding of the causes of energy deficit following the main functions performed by energy in the life of a citizen, community, and society;
• Acquiring skills to overcome the energy deficit, including knowledge of the possibilities of using alternative energy sources;
• Identifying the importance of cooperation to overcome the energy deficit;
• Awareness of the need to interact with local energy networks in terms of energy supply and sales;
• Identifying the benefits that members of the energy cooperative will receive in the event of stakeholder engagement.

Several technical measures may be incorporated into actions to mitigate the energy deficit. But before such measures can be implemented, cooperation with future members of the energy cooperative is necessary. It can be problematic to rely solely on technically qualified workers to perform this function without offering them additional training or opportunities for skill development.

In this case, energy cooperative members should become experts in technical aspects, which can be supported by the “soft skills” necessary to interact effectively with individual households.

When engaging cooperative members, it is advisable to consider certain types of risks that may be encountered at the stage of analyzing energy problems, namely [17]:

• The risk of harm to participants, which can include both voluntary participation and awareness of technical and safety issues;
• The risk of disclosing information about the personal needs of a cooperative member;
• Direct operational and subjective risks.

Assessing the potential of energy-saving projects begins with developing a pilot project to demonstrate the ability to cover material costs and optimize human resources. The pilot projects highlight the differences between energy solidarity practice and streamlined operation. In particular, energy solidarity involves new types of work and interaction with an unfamiliar group of participants and/or customers. Putting energy solidarity into practice means learning how to support individuals with limited knowledge and face challenging life experiences and situations, including economic hardship and social exclusion.

To develop an effective model of energy cooperative operation, the following organizational tools should be considered and applied:

• cloud applications for data management and security;
• appropriate software for equipment operation and control;
• databases of potential partners and employees;
• access protocols by levels of services consumed or information required.

When establishing an energy cooperative, it is advisable to carefully analyze the number of entities expected to be served and the financial resources required. It is also necessary to understand the current administrative needs of the cooperative. An energy cooperative should develop methodologies for capacity building to assess the ease or difficulty of implementing each measure regarding material costs, human resources, and overall replicability. Very few communities have previously implemented energy solidarity systems, which may necessitate the development of new business models, funding sources, and skills. Demonstrating a measurable impact is essential. Ultimately, rigorous evaluation methods can support the continuous development and improvement of processes and projects.

Evaluation is becoming an increasingly vital tool to support decision-making in almost every area of society, including the transition to a fair and sustainable energy source. Many stakeholders can utilize the information, data, and knowledge gained from evaluations if they are planned from the outset. These evaluations include:

• Continuously improving procedures and impact to ensure that the initiatives’ objectives are achieved;
• Establishing and strengthening trust with potential participants and/or target groups;
• Helping other energy cooperatives to implement initiatives that more successfully and efficiently achieve their objectives;
• Supporting subsequent funding proposals by demonstrating the organization’s capacity for continuous learning, development, and adaptation in addition to its evident impact;
• Have strong evidence to support claims in reports and communication materials.

The stage of involvement and identification in an energy cooperative organization involves implementing these processes at two levels: within the cooperative’s members and among stakeholders.

The mechanism’s processes involve assessing elements such as communications, particularly the nature of their setup and the quality of interaction with different parties. It is advisable to formulate several alternative development strategies to determine which processes should be further developed. Assessment of the impact or effectiveness of the mechanism involves determining the number of stakeholders covered for participation in the cooperative and conducting a qualitative evaluation of this audience in terms of comparing participants in terms of consumption and investment opportunities, as well as the share of profit distribution in the future. All this will allow a break-even point for the implemented project and its prospects for development to be determined, including the potential to attract additional participants and external investors. For example, the predominance of participants with social benefits in the cooperative will create high attractiveness for grant funding, while commercial participants can expect significant external investment.

At the financing stage, it is advisable to consider crowdfunding [7]. In the private consumption energy sector, crowdfunding serves as a mechanism for collectively financing projects related to renewable energy, energy efficiency, and autonomous energy solutions for households. It enables individuals, small businesses, and communities to finance the installation of solar panels, wind turbines, energy storage systems, and other renewable energy technologies, thereby reducing their dependence on traditional sources of electricity. Crowdfunding in the energy sector enables collective investment, where individuals invest in projects such as solar power plants, heat pumps, and micro-hydroelectric power plants. Investors can profit through a share of the generated electricity or savings on their bills. Crowdfunding involves creating or utilizing fundraising platforms that provide funding, such as GoFundMe, Kickstarter, Indiegogo, and specialized energy platforms (e.g., Trine, SunFunder, Energy4Impact).

Alternative forms of crowdfunding in the energy sector are also possible, such as the donor model, in which people invest in renewable energy without expecting financial gain; the loan model, in which participants receive income through interest on their investments; or the investment model, in which investors become co-owners of the project and receive income from the sale of electricity. The primary challenges of crowdfunding in the energy sector in general, and renewable energy in particular, are high investment costs, legislative limitations in many countries, and the long-term nature of investment returns [7]. Despite that, crowdfunding is a promising way to finance renewable energy, especially for small-scale projects (in the case of Ukraine, it is up to 20 MW of installed capacity).

During the implementation phase of an energy cooperative, profit is a crucial component. Energy systems usually distribute any profit generated from the sale of commodities to the grid among their owners, who can then decide to reinvest in the expansion of the project or start a new one. The increase in income after the initial investment is recouped can provide opportunities to convince cooperative members to direct funds to further energy initiatives.

The choice of a financial model, regardless of the source of funding, such as membership fees (start-up share), grants and subsidies, bank loans, green bonds, and energy partnership programs, determines the financial profitability based on the volume of electricity sold to the grid, the number of services provided (energy service, electric vehicle charging, etc.), and the level of reduction in members’ energy costs.

The technical aspects of setting up the infrastructure focus on energy generation sources, such as solar power plants, wind farms, biogas plants, and cogeneration plants, as well as determining how energy is stored through battery systems to balance demand. Smart Grid systems are of great importance here, allowing for consumption monitoring, automated metering, and load forecasting. Identifying opportunities for integration into the local or national grid will provide financial benefits.

Legal and regulatory aspects focus on obtaining a license to produce and/or supply electricity (depending on the volume), entering into an agreement with the Distribution System Operator (DSO), outlining the conditions, and ensuring compliance with environmental regulations, as well as determining the feasibility of working through the Net Metering mechanism [63].

The social and environmental component of the energy cooperative’s operation model involves educational activities through community engagement and training, the involvement of residents through transparent management, public reporting, and sustainable development by minimizing the carbon footprint and utilizing renewable resources. The result is a social effect that is used through energy security and the creation of new jobs.

The final element of the energy cooperative model is a digital management platform that enables each member to have a personal account, provides real-time generation and consumption data, facilitates automatic billing, and offers online voting and polls.

Table 4. KPIs of the energy cooperative’s functioning model.

Indicator	Description
Level of energy self-sufficiency	% coverage of the needs of cooperative members
Cost per kWh for a member	Comparison to the market price
Investment payback period	Years
Attracting new members	Annual growth
Environmental effect	Reduced CO2 emissions
Reliability of supply	Number of failures/outages per year

presents the key performance indicators (KPIs) of the energy cooperative model.

6. Conclusions and Policy Recommendations

When considering the subject of energy cooperatives, aside from the factors examined in this study (the net cost of electricity, electricity output, and security), factors related to the supply and demand sides should be taken into consideration; this is a subject for further study. The supply side should consider the availability of other energy-generating capacities in each particular region, whereas major energy-consuming companies, large cities, and other relevant entities represent the demand. However, as of 2025, this information is classified due to the state of martial law, and thus, cannot be taken into consideration.

The study has the following limitations:

• The reliance on data on electricity consumption based on expert observation and typical profiles, rather than official statistics. This is because in Ukraine, there are currently no open, detailed data on average electricity consumption in households that are united in energy cooperatives.
• The use of only one scenario, i.e., 12 households with PV systems with a capacity of 12 kW each. This approach was chosen to ensure comparability of the results across regions and to make sure that the cumulative installed capacity of 12 households fits the existing legislative requirements (does not exceed 150 kW). Modelling a cooperative as 12 identical households oversimplifies real-world diversity in income, energy consumption, and investment willingness.

The authors acknowledge that these assumptions may affect the accuracy of the quantitative results. Therefore, the results should be considered indicative and suitable mainly for comparative analysis between regions, and not as precise assessments of the effectiveness of a particular cooperative. The novelty of the study lies in acknowledging the differences that exist between regions, whereas the existing policy framework employs the “one size fits all” approach.

Establishing energy cooperatives is a complex process that involves organizational, legal, technical, and financial aspects. In Ukraine, such initiatives have great potential, particularly in decentralization, energy independence, and the development of a green economy. A cooperative’s success depends on the community’s joint efforts, competent management, and investment attraction. In Ukraine, the experience with energy cooperatives is currently limited; however, there are successful cases of crowdfunding initiatives.

The geographical location of the energy cooperative proved to be an essential factor. In Ukraine, establishing such cooperatives may be especially beneficial in the Mykolaiv, Chernihiv, Zakarpattia, Vinnytsia, and Ternopil regions, as they offer the best balance between the payback time and the cost of electricity that remains at the disposal of energy-generating companies. The government’s policy towards energy cooperatives should consider regional factors, such as promoting the establishment of special “energy zones” in the respective regions.

Ukraine should extend its legislation regarding energy cooperatives to align with European legislation on energy communities [64].

As of 2025, only major renewable energy technologies (e.g., wind, solar, bio-, and hydro) qualify for state support. For Ukraine, thus, it would be feasible to add cogeneration to the list.