Crisis as an opportunity: How small businesses find options for their own energy independence

Alternative energy sources, such as solar panels and gas-piston power plants, are becoming a lifeline for businesses, giving them autonomy and protection from sudden outages.

Not so long ago, Oschadbank, with the support of the USAID Competitive Economy of Ukraine program, held a conference that provided specific advice to businesses on how to increase their export potential. At one of the panels, I remember a sad speech by one of our clients representing medium-sized businesses. He spoke about his usual working day, which he regularly spends communicating with various institutions on the topic of preventing power outages. We talked to this client about how the bank could help in this situation. As a result, this company became the first borrower of Ukrainian banks to receive a loan to purchase a gas-piston power plant on preferential terms under the government program “Affordable Loans 5-7-9%”.

This company produces an ingredient for one of the most popular consumer products. The production process takes 8 hours, and if the power goes out during this cycle, all the raw materials have to be thrown away, and the equipment is damaged. In addition, every hour of downtime entails losses. In order to ensure efficiency, it is necessary to obtain reliable forecasts of the energy situation in advance, which is often impossible in the current environment.

This example is a good confirmation that even in the midst of the energy crisis, entrepreneurs can work together with the help of a bank to seek a way out of a difficult situation and find the right solutions. Moreover, the state, represented by the Ministry of Economy, is actively helping all process owners to find them.

Our latest survey among small and medium-sized businesses shows that 74% of companies estimate their electricity needs at 3 MW, and 68% consider the situation with energy supply to be problematic. In addition, 25% of businesses need financing to address energy supply issues, and most of them (80%) are ready to invest in energy projects in the second half of 2024.

The energy crisis is hitting the ability of businesses to operate efficiently, pushing companies to find new solutions. Alternative energy sources, such as solar panels and gas-piston power plants, are becoming a lifeline for businesses, providing them with autonomy and protection from sudden outages. There is even a certain positive side to this - after the war is over, Ukrainian business will become more energy modern.

This is also stated in the government's recently adopted Strategy for the Recovery, Sustainable Development and Digital Transformation of Small and Medium-Sized Enterprises for the Period up to 2027. The document notes that energy instability and related costs remain a concern. Therefore, the strategy envisages assisting businesses in the “green transition,” which, among other things, includes the wider use of alternative energy.

To make this transition happen, the strategy envisages the development and establishment of preferential lending for enterprises, as well as the introduction of a program for professional energy audits and subsidies for energy efficiency for entrepreneurs. These changes should contribute to reducing greenhouse gas emissions and increasing the share of renewable energy sources in the structure of final energy consumption.

Sustainable development in times of war has a deeper meaning than just business decisions. It is noticeable that the world is indeed paying more attention to alternative energy sources, and this is not just a matter of economic benefit. In Europe, many companies choose suppliers that have sustainable manufacturing and provide themselves with green energy. This has become a new standard: without it, not everyone is ready to even start negotiations. Sustainability now means more than just the cost of production - it is becoming an integral part of a business's reputation and competitiveness. And here is a logical dilemma: if you are planning to enter the European market, are you ready to meet the new requirements? In Europe, sustainable development is not just a buzzword, but a real necessity. If your production does not use green energy or implement energy-efficient technologies, your chances of finding partners may be significantly reduced.

The destruction of the energy infrastructure is a major challenge for Ukrainian businesses, forcing them to adapt to new conditions. After three years of a full-scale war, businesses are adapting to new realities, and it is becoming Business as Usual for entrepreneurs. However, it is in these conditions that new opportunities are opening up to implement their own energy independence solutions, which can make companies more sustainable in the future.

It is interesting how some Ukrainian entrepreneurs creatively solve the problem of energy supply. For example, furniture production in the Lviv region created a small power generation from wood scraps. They burn these residues and partially provide energy for production. This approach helps them maintain stable work during power outages. And this is not an isolated example.

We are observing the growth of financing of green business projects. Solar plants, gas-piston power plants, hydro-, bio-, and wind plants are becoming especially popular. Zakarpattia, Ivano-Frankivsk, Zhytomyr and Poltava regions are the leaders in attracting financing. The state together with banks make such investment projects more accessible. Another way to increase the availability of loans is partnership programs with manufacturers/dealers of energy equipment, which significantly improve the terms of loans for entrepreneurs. Rates for such loans can be completely interest-free.

Another encouraging fact. While such capital investments in energy independence lead to rising operating costs, especially compared to traditional, much cheaper sources of electricity, there is a bright side. Investments in renewable energy sources can quickly pay off and bring net savings in the long term, because the period of operation of a solar plant can reach 30 years.

Let's consider a specific example: the installation of a 1 MW solar power plant costing 800 thousand dollars makes it possible to reduce the cost of electricity from the network by an impressive 9.3 million UAH per year. Although these investments may seem huge, the return on investment under such conditions will occur in about 3.6 years. This is provided that the company's electricity consumption is 1,500,000 kWh per year, and the solar plant will provide about 1,350,000 kWh.

So, there are many facts that indicate that Ukrainian business will not be lost in the dark. Financing of energy projects has become one of the key areas of development of the Ukrainian economy, especially in the context of the energy crisis and the need to diversify energy sources. Such investments are attractive to businesses because they not only reduce dependence on the national power grid, but also help reduce electricity costs, increase supply stability and protect against outages caused by hostilities. In addition, the transition to ecological energy sources helps to reduce carbon dioxide emissions and preserve the environment — and this is a very positive factor for strengthening the reputation of Ukrainian business.