The future of green tariffs in Ukraine

The Parliament Energy Committee in Ukraine approves draft law on restructuring of “green”​ tariff and improvement of auctions regulation. Read  an article written by Yaroslav Petrov, about what it means for the renewable energy sector in Ukraine.

On 15 June 2020 the Parliament of Ukraine registered the governmental draft law No.3658 “On Amendments to Certain Laws of Ukraine on Improving the Conditions for Supporting the Production of Electricity from Alternative Energy Sources” (the “Draft Law“). The President of Ukraine has declared this law as an urgent and it should follow the “fast-track” procedure. On 26 June 2020 the Parliament Energy Committee supported the Draft Law. It is aiming to implement the “Memorandum of Understanding on the settlement of problematic issues in the field of renewable energy” (the “Memorandum“), which was signed by the Government on 10 June 2020 with investors, and improve regulation for renewable energy auctions. On 23 June 2020 the alternative draft law No.3659-1 has been registered by Andrey Gerus, head of the Parliament Energy Committee, which is more favorable for solar projects and less for wind projects compared to the Draft Law.

The Memorandum implementation

The Draft Law provides for the following changes to the “green” tariff:

·       for wind power plants (WPP) commissioned from 1 July 2015 to 31 December 2019 – reduction of the “green” tariff by 7.5%;

·       for WPP commissioned from 1 January 2020 – reduction of the “green” tariff by 2.5%;

·       for solar power plants (SPP) commissioned from 1 July 2015 to 31 December 2019 (capacity 1 MW and more) – reduction of the “green” tariff by 15%;

·       for SPP commissioned from 1 July 2015 to 31 December 2019 (capacity up to 1 MW) – reduction of the “green” tariff by 10%;

·       for SPP commissioned from 1 January 2020 to 31 July 2020 (capacity 1 MW and more) – reduction of the “green” tariff by 2.5%;

·       for SPP commissioned from 1 January 2020 (capacity up to 1 MW) – reduction of the “green” tariff by 2.5%;

·       for SPP commissioned from 1 August 2020 (capacity 1 MW and more) – reduction of “green” tariff by 60%;

·       tariff cap for projects commissioned before 1 July 2015 – 22 EUR cent.

According to this Draft Law the companies are provided with the stabilization provisions, i.e. state guarantees that “green” tariffs will not be changed or canceled from 1 July 2020 – till 31 December 2029.

Moreover, the Draft Law provides for the gradual introduction of liability for imbalances of electricity producers paid to the “Guaranteed Buyer”. Thus, for facilities with an installed capacity of less than 1 MW, from 1 January 2021 there will be an annual increase of 10% to reach 100% compensation for imbalances in 2030. For facilities with a capacity exceeding 1 MW, the introduction of liability for imbalances in the amount of – 0% until 31 December 2020, 50% from 2021, and 100% from 2022.

The cut-off date is introduced the same as provided in the Memorandum:

·       31 July 2020 for PV projects;

·       Wind projects will not be subject to the cut-off day and they can be finished based on existing pre-PPA.

Сhanges to the auctions regime

In addition to the Memorandum related changes, the Draft Law introduce some changes to the auction regime.

The Draft Law sets the maximum caps for tariffs that producers from renewable sources can receive during green auctions. Until 31 December 2024, the owners of SPP and WPP will be able to receive at auctions no more than 9 eurocents per 1 kWh. From 1 January 2025 the maximum cap at auctions will be – 8 eurocents per 1 kWh. For other producers of electricity from RES other than SPP and WPP – the maximum cap at auctions will be – 12 eurocents per 1 kWh.

One ultimate beneficiary owner of companies participating in the auctions may receive no more than 35% of the annual quotas to be auctioned. The current legislation sets this limit at 25%.

The government plans to identify oblasts (regions) for the installation of new generating capacity within the annual auction quotas. The Government may offer land plots for the construction of facilities that produce electricity from RES, as well as roofs or facades of buildings on which it will be possible to install alternative generation.

The Cabinet of Ministers of Ukraine to be responsible for setting a schedule for the auctions for the next year.

The Draft Law cancels the earlier introduced exclusion for power plants with three wind turbines, regardless of installed capacity, regarding non participation at auctions. Thus, after the adoption of the Draft Law, all wind power plants with a capacity of more than 5 MW will have to participate in auctions. Although the projects holding prePPAs may implement the project under the “green” tariff.

Partner at Asters, co-head of Energy, Natural Resources and Construction practice group

Yaroslav Petrov