UKR: How winter blackouts affect Ukraine's defense industry

BLUF: Ukrainian defense companies are losing millions of dollars from power and heat outages caused by Russian attacks. To avoid deadline delays, broken agreements, disrupted business processes, and price increases, they’re turning to generators and wood-powered boiler systems. 

Ukraine is preparing 2026 defense procurement reforms that aim to move beyond lowest-price purchasing toward a more standardized system designed to ensure stronger oversight, unified pricing, quality guarantees, and timely delivery.

Russia is developing a ground platform designed to launch FPV drones, which could simplify and scale drone attacks.

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Manufacturers who didn’t prepare for outages in recent years experienced halted or slowed production, said Oleksiy Kolesnyk, director of Reactive Drone. 

The company would have also stopped operating if it hadn’t been installing backup energy sources since 2023, he said.

If a company misses a deadline for a government contract, it’s required to pay a penalty of 20 percent of the order value plus an additional fine of 5–7 percent. A lack of electricity does not exempt companies from fulfilling defense contracts in Ukraine, and it does not allow for additional time, even if generation sources were destroyed in enemy attacks. 

Critically important enterprises can receive dedicated power lines to avoid blackouts, but this carries other risks. If Russians gain access to a list of such enterprises and their addresses, for instance, they could target them specifically. To avoid this, Reactive Drone split its production across several facilities in different locations and declined special energy privileges.

Defense enterprises must be provided with alternative energy sources in case of blackouts. Generators, energy storages, solar panels, and heating furnaces are expensive, but the cost of production downtime is much higher — broken machines, missed deadlines, fines, and losses on the battlefield.

When signing defense contracts, it is worth taking into account delays associated with power outages due to enemy attacks. It is also worth introducing insurance against damage to industrial power plants so that the company can quickly replace them. 

The first blackouts in Ukraine began in 2022, and customs duties on the import of generators, batteries, and other energy equipment were only abolished in 2024. By that time, the defense industry had lost $2,000-3,000 per large generator. Europe must learn from this lesson and adjust customs duties to a possible wartime environment. 

Power outages destabilize production, said Taras Ostapchuk, founder of Ratel Robotics, a manufacturer of ground-based robotic systems, which reduced profits and lost approximately $1 million due to the energy crisis.

Many of Ratel Robotics’ processes require continuous power: welding, laser cutting, platform programming. The company is forced to work night shifts or on weekends, when the energy grid is less loaded, in order to meet deadlines. 

This complicates logistics and requires more resources to fulfill obligations to customers, Ostapchuk said. Additionally, employees must be paid overtime. 

Due to electricity problems, the costs to make Ratel Robotics products have risen significantly, but the company can’t compensate by raising its own prices because they are fixed from contracts signed in 2025. 

The reduced revenue means Ratel Robotics does not have sufficient funds for R&D and production scaling, so its technologies are developing much more slowly than before.

To make matters worse, voltage fluctuations damage equipment and machines, said Roman Tkachuk, regional director of Teletactica — a company that manufactures communication systems for military equipment. The damages may lead to costly repairs or full replacements.

Power fluctuations also negatively affect equipment accuracy and technological cycles, leading to material spoilage, defects, and the need for re-production. 

"In such conditions, it is extremely difficult to plan long-term projects and build a stable development strategy in Ukraine, because the fundamental prerequisite of any production — predictability — is at constant risk," said Tkachuk.

Most contractors have also raised their prices in light of the unstable situation. 

Diesel generators effectively support machine operations, but they’re expensive to run, according to Ostapchuk. Inverter systems and energy storage systems instantly activate backup power for computers and precision electronics, saving data and preventing printed circuit board defects.

Ratel Robotics was able to become 80–90 percent independent of the power grid thanks to generators with a total output of 1 MW, batteries with an output of 1.5 MW, and solar panels, but the company invested a lot of money in them — funds that were meant for production expansion.

Teletactica uses a powerful generator worth $11,500, which adequately covers basic needs, but requires constant fuel, service, and repair costs, making it expensive in the long term. The company spends approximately $1,500 per month on fuel, and an additional $1,500 on maintenance and repairs.

Each Reactive Drone facility is equipped with large, powerful industrial diesel generators — both primary and backup. The company purchased approximately 20 generators of various capacities at auctions in Germany and Italy for a total of approximately $347,000.

Diesel fuel in Ukraine costs an average of $1.40 per liter, compared to $1.66 in next door Poland. A 56 kW generator can consume approximately 8 liters of diesel per hour — costing $11.20. During an 8-hour workday, the generator will use 64 liters worth $89.60.

An industrial-class 100 kW diesel generator produces energy at nearly the same cost as buying electricity from the grid due to high efficiency. However, operating small and cheaper 5–6 kW generators is more expensive, as they consume more fuel per unit of output.

Most Reactive Drone facilities are equipped with solar power stations with panels totaling 700 kW capacity, energy storage systems of 500 kWh, and inverters. The company purchased this equipment in China for approximately $2 million.

Companies are increasingly finding that measures they take to protect production carry over to helping employees, as well.

The absence of electricity, heating, and hot water at home are factors that directly affect people's psychological state, concentration, productivity, and overall morale, Tkachuk said. 

For example, Teletactica installed a backup heating system in its office and has allowed employees and their families to warm up there if the temperature at home is too low.

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The decentralized model of defense procurement in Ukraine will be shifting; procurement centralization will be a key change, with the aim of strengthening control, standardizing pricing, and ensuring the quality and timeliness of deliveries.

Currently, there is a practice of purchasing the cheapest available options without sufficient consideration of quality or a company’s track record. Changes in this area are planned for 2026, according to Yurii Hudymenko, Head of the Public Anti-Corruption Council of the MoD.

During the Defence Procurement Under Oversight conference, it was also noted that the majority of funds are allocated to already proven solutions, while a separate percentage is reserved for testing and piloting new developments through special procedures. The Brave1 marketplace model is being actively implemented. 

Unit-driven orders through the Brave1 marketplace have already reached approximately UAH 17 billion (about $447 million), and the results of these purchases are taken into account in broader procurement decisions.

Russians have been working for over a year on the development of an unmanned ground vehicle (UGV) designed to carry and launch FPV drones. At the current stage, small batches have already been produced and sent to active Russian units for testing.

The deployment of this technology could provide several advantages: reducing the workload on FPV pilots, extending the operational range of the drones, and allowing faster responses to movement and quicker target engagement, Den, a UGV engineer with Ukraine’s Khartiia Brigade, told The Arsenal.

The technology can be useful in honing Russia’s so-called ‘waiter drones’ tactic, when a drone goes into ambush mode and waits for the target vehicle to pass before attacking. Sometimes the drone fails to strike because of the time it takes to identify the vehicle and deploy the drone, Den said.

MaXon Systems, a Ukrainian defense-tech company developing anti-drone solutions, has secured investment from the U.S. venture capital firm Green Flag Ventures. The amount of investment and time of investment round have not been disclosed. The due diligence process began in fall 2025, Deborah Fairlamb, founding partner at Green Flag Ventures, told The Arsenal.

The company’s autonomous air defense system will include high-speed interceptors, long-range detection and tracking tools, and software for targeting and guidance to counter swarms of enemy drones.

With the advancement of Russian technologies, demand is shifting toward counter-drones. With that in mind, any startup that has the opportunity to develop its product and test it in Ukraine has an advantage, according to Fairlamb.

Ukraine and the Netherlands signed an agreement establishing a €2.5 million ($2.95 million) cybersecurity innovation fund. The fund will support up to 10 joint Ukrainian-Dutch projects, with each eligible for $295,000.

According to Jurriën Norder, head of the Netherlands Cybersecurity Center, the Netherlands wants to shift the focus from simply financing hardware or endpoint tools to supporting the development of cybersecurity products.

“We are not going to monitor companies on a daily basis… we give the consortia room to define their own ambitions,” Norder told The Arsenal. The six-month program will run from June to December 2026. The call for applications opens March 6 and closes April 29, with matchmaking and mentoring sessions scheduled for March 10–12.

By: Oksana Zabolotna

Amendments on Transferring Control of Military Fortification Structures

Resolution of the Cabinet of Ministers of Ukraine №183 dated February 11, 2026

Why it’s important: The amendments introduce a clear legal mechanism to authorize the Defense Ministry to take over and complete unfinished fortification structures that state customers have been unable to complete. 

This speeds up the completion of unfinished projects in critical areas, prevents the loss of already allocated budget funds, centralizes the management of such facilities, and ensures their  commissioning in the interests of national defense.

Proposals:

Stage: Entered into force on February 11.  

Initiator: The Cabinet of Ministers of Ukraine 

What’s next: Implementation of the resolution. 

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