New scheme of support and new electricity market (for renewable projects in Ukraine)

For more detailed information, please see our Guide prepared together with the Ukrainian Wind Energy Association

Ukraine is currently implementing a system of RES support in the form of auctions instead of feed-in tariffs, and is liberalizing the country’s electricity market. In connection with these fundamental changes in the energy sector, including the renewables sector, the Sayenko Kharenko team together with the Ukrainian Wind Energy Association has prepared this Guide to renewable projects. The Guide outlines, in particular, the data of renewables development, conditions of application and rates of feed-in tariff, as well as the features of conducting auctions for renewable energy sources (“RES”) and the features of selling electricity under feed-in tariff or at auction price on the new electricity market.

Ukraine demonstrates significant RES capacity growth during 2019. According to official data, the general capacity of commissioned RES projects as of 1 October 2019 is almost 4.6 GW. Data on commissioned RES projects (by separate RES types) as of 1 October 2019 is as follows:

  • wind – 931.8 MW;
  • biomass – 55.9 MW;
  • biogas – 70.3 MW;
  • solar – 3421.5 MW;
  • small hydro – 111.7 MW.

Continuation of this RES growth dynamic is extremely important in order for Ukraine meet its international obligations and achieve the targets set in the country’s Energy Strategy until 2035 and in the National Renewable Energy Action Plan. For instance, the Energy Strategy of Ukraine until 2035 provides for an increase in the share of RES to 25 per cent .

We specify in the Guide certain provisions of the normative legal acts adopted for the introduction of auctions in Ukraine and within the framework of the launch of the new electricity market, in particular:

  • the Law of Ukraine No. 2712-VIII “On Amendments to Some Laws of Ukraine on Ensuring Competitive Conditions for the Production of Electricity from Alternative Energy Sources” dated 25 April 2019;
  • Resolution of the National Energy and Utility Regulatory Commission (the “NEURC“) No. 641 “On Approval of Legal Acts Governing the Activities of the Guaranteed Buyer and Purchase of Electricity Under the Feed-in Tariff”, which contains Order of Purchase of Electricity Under the Feed-in Tariff and Template of Power Purchase Agreement.

Issues relating to state support for RES producers are described in detail in the Guide. RES auctions and the feed-in tariff support system will work in parallel until 2030. Already operating RES objects will continue to work under feed-in tariff until 2030. Besides, the Guide specifies the projects for which feed-in tariff will be available until 2030:

  • projects of any capacity and type of RES technology that have been commissioned before 2020;
  • projects of any capacity and type of RES technology that have signed a preliminary Power Purchase Agreement (the “Pre-PPA”) by 31 December 2019;
  • projects which will be constructed after 1 January 2020, where installed capacity is less than the capacity for which auctions are mandatory.

Special attention is paid to feed-in tariff rates. It should be noted that the feed-in tariff rate is fixed in EUR and shall be paid in UAH. The document also contains details of provisions regarding decrease in feed-in tariff by separate type of RES technology.

Taking into account that Ukraine is introducing a new support scheme for RES projects, a separate section of our document is devoted to the features of RES auctions, which include:

  • time frames for conducting auctions;
  • procedure of approval of annual support quotas and their allocation by separate RES type;
  • projects for which participation in auction will be mandatory and the required documents for participation;
  • auction scheme;
  • auction price;
  • bank guarantees, including procedure of their return.

The auction scheme covers the conditions for participation in auctions, procedures of determining the auction winner, conclusion of a Power Purchase Agreement (the “PPA”), including cases when the SE “Guaranteed Buyer” may refuse to conclude a PPA, and other important issues.

With regard to bank guarantees, the Guide indicates cases when the auction participants shall submit bank guarantees, their amount, as well as the detailed procedure of their return.

Besides, the Guide outlines the conditions for selling electricity by RES producers on the new electricity market, in particular:

  • list of actions that must be taken by RES producers to obtain the right to sell electricity on the new electricity market via feed-in tariff or at auction price;
  • procedure in order to become a participant of the new electricity market;
  • features of sale of electricity under feed-in tariff (conditions for obtaining the right to sell electricity under the feed-in tariff, features of a Pre-PPA conclusion, procedure for a PPA conclusion and other important issues);
  • features of sale of electricity at auction price.

The document also contains other important information within the framework of the new scheme of state support and the new electricity market.

We hope that our Guide will help to identify new opportunities for renewable projects in Ukraine.

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