The aim of the article is to clarify the methodological basis for further research concerning analysis of the existing practices and development of proposals on using financial instruments for the modernization of the Ukrainian electric power sector, in particular, to clarify the definition of “financial instruments” and justify their classification, taking into account the defining characteristics. Based on the critical evaluation of various scientific approaches to interpretation of the essence of financial instruments, the author’s definition is proposed. Thus, it is advisable to consider them as means, techniques and methods of attracting financial resources (capital) from other entities and as absolutely liquid assets. The generalization and rethinking of the criteria for classification of financial instruments allowed the authors to divide them into financial assets (cash, bank metals, currency), financial obligations (equity and debt instruments), and instruments of irrevocable financial aid (charitable contributions, grants, crowdfunding, fundraising). The received methodological conclusions quite fully characterize the essence and variety of types of financial instruments, taking into account their principal properties, which will allow to make a well-considered justification for choosing the optimal instruments for the modernization of the electric power sector.