On 25 April 2019, the Verkhovna Rada of Ukraine passed in the second reading the Law on Amendments to Some Laws of Ukraine on Ensuring Competitive Conditions for the Production of Electricity from Alternative Energy Sources (the “Law about auctions”), which amends the Laws of Ukraine On Alternative Energy, On the Electricity Market, On the Regulation of Urban Development Activities.
The need to pass the Law about auctions resulted from high feed-in tariff, which does not promote competition in the renewable energy sources (the “RES”) sector. Moreover, recent research identifies increased application of auctions for RES around the world. For instance, according to IRENA data, 80 countries have already introduced auctions for renewable energy. European Union countries also rely on auctions as an economically profitable mechanism for RES development until 2030.
Therefore, a state support to electricity producers from renewable energy sources on a competitive basis, namely through the introduction of auctions, provides optimal support for electricity generation from renewable energy sources.
The Law about auctions contains the following key provisions before the second reading:
The auctions will be introduced from 1 July 2019.
The participation in auctions will be mandatory:
The auction participants should be able to rely on price by auction results (auction price) converted into EUR equivalent with a 20-year term of validity. In order to participate in auctions, participants shall submit closed offers that contain a technical proposal (amount of capacity subject to support) and a price offer (price per 1 kilowatt hour of electricity). Only the price will be taken into account for determining the winner of the auction.
Auctions shall be held twice a year, but no later than 1 April and 1 October. The auctions will be conducted until 31 December 2029.
The Cabinet of Ministers of Ukraine no later than 1 December shall approve the annual support quotas for the next 5 years.
According to the Transitional Provisions of the Law about auctions, during the transition period from 2020 till 2022, the annual support quota shall be allocated for separate RES type as the following:
After the transition period, the annual support quota shall be allocated for separate RES type with the minimum level as the following:
Introduction of the auctions limits applicability of the feed-in tariff, but does not cancel it. The existing feed-in tariff scheme is guaranteed until 1 January 2030 and applied to:
The Law about auctions decreases the feed-in tariff:
The feed-in tariff for biomass/biogas will be leaved without changes.
5. Ensuring competition.
To ensure competition in auctions:
To participate in auction and subsequently enter into an off-take agreement, a bidder have to, inter alia, submit the following bank guarantee:
Full balancing responsibility will apply to RES projects that:
Previously issued technical conditions for grid connection will be valid for:
In process of the second reading members of Parliament has made some changes, therefore the final version of the Law about auctions will be available later.
The advantages of the new support system over the existing feed-in tariff system are the following:
Sayenko Kharenko provides for legal support at all stages of realization of the RES projects. Do not hesitate to contact with us for resolving any issue related to the adopted amendments to legislation, including: