Introduction
On 13 December 2019, the National Energy and Utility Regulatory Commission (“NEURC”) adopted a number of regulatory acts regarding the sale of electricity produced from renewable energy sources (“RES”), namely:
The above-mentioned regulatory acts have been adopted by the NEURC in line with the requirements of the Laws of Ukraine “On the Electricity Market” and “On Alternative Energy Sources”.
In connection with the introduction of auctions in Ukraine, the amended Order for RES Producers regulates the sale of electricity under feed-in tariff and at auction price. Ukraine’s Cabinet of Ministers must approve the Procedure for conducting auctions on allocation of support quota which will contain the order for the conclusion of PPA on sale of electricity at auction price. The template PPA on sale of electricity at auction price is subject to approval by the NEURC. State support for RES Producers that have obtained the right for state support through auction is based on the concluded PPA on sale of electricity at auction price.
I. Order for RES Producers and PPA on sale of electricity under feed-in tariff
What are the major amendments?
The NEURC approved the new versions of:
– Order for RES Producers;
– PPA on sale of electricity under feed-in tariff.
We draw your attention to the fact that all RES Producers operating under feed-in tariff must sign an additional agreement within 15 business days after receiving it from the SE “Guaranteed Buyer” concerning bringing previously concluded PPAs into line with the new version of PPA. In case of non-provision by the RES Producer under feed-in tariff of a signed additional agreement to the SE “Guaranteed Buyer” within one month, the PPA shall be terminated.
Main amendments in the Order for RES Producers:
1. Addition of obligation of the SE “Guaranteed Buyer” to form and maintain registers of RES Producers under feed-in tariff and at auction price. These registers must include information about RES Producers under feed-in tariff and at auction price, as well as information about RES objects.
2. Supplemented list of documents for conclusion of PPA on sale of electricity under feed-in tariff:
a) for RES Producers with approved feed-in tariff:
b) for the pre-PPA conclusion:
3. Reduced period for conclusion of PPA on sale of electricity under feed-in tariff. The SE ”Guaranteed Buyer” must provide the candidate for RES Producers under feed-in tariff with a signed PPA within 10 business days after receipt of all required documents, instead of 15 business days as previously stipulated.
4. Amended conditions concerning the right of RES Producers to resolve disputes in arbitration under the Arbitration Rules of the International Chamber of Commerce (ICC) with the place of arbitration in Paris (France), and introduced contributions to cover arbitration fees of the SE “Guaranteed Buyer”. In order to resolve disputes in international arbitration, the RES Producer shall:
If choosing dispute resolution procedure in arbitration, RES Producer shall pay contributions to cover arbitration fees of the SE “Guaranteed Buyer”. The payment of contributions is not required if the RES Producer does not choose arbitration.
The conditions regarding contributions to cover arbitration fees of the SE “Guaranteed Buyer” are the following:
Main amendments in the PPA on sale of electricity under feed-in tariff:
1. Supplemented PPA on sale of electricity under feed-in tariff with the obligation of the RES Producer under feed-in tariff to notify the SE “Guaranteed Buyer” concerning changes in documents for the PPA conclusion within one day following the occurrence of such changes.
2. Revised conditions concerning the opportunity to assign rights and obligations under the PPA. As before, the rights and obligations under the PPA may be transferred to third parties after obtaining written consent. The PPA has been supplemented by the following list of conditions under which, including, but not exclusively, the SE “Guaranteed Buyer” gives such consent:
It should be noted that the above-mentioned conditions are not exclusive and other conditions may also be applied.
3. Revised conditions concerning entry into force of the pre-PPA that are supplemented by the following additional documents:
II. The PPA on sale of electricity at auction price
General information
The PPA on sale of electricity at auction price is subject to conclusion with the auction winner under the Procedure for conducting auctions on allocation of support quota that will be adopted by the Cabinet of Ministers of Ukraine.
In general, this PPA is identical to the main provisions of the PPA on the sale of electricity under feed-in tariff.
What are the features of the PPA on the sale of electricity at auction price?
1. Fixed in the text of the PPA the auction price in EUR and its UAH equivalent, as well as RES object capacity and RES type.
2. Included condition as to extend period of RES object construction for one year. This requires the relevant amendments to the PPA and the auction winner must provide an additional irrevocable bank guarantee.
3. Revised conditions concerning entry into force of the PPA. The entire PPA on sale of electricity at auction price shall enter into force after fulfillment of the following conditions:
III. The Order for Consumers
General information
Prior to approval of this Order, the issue of the activities of Consumers has not been regulated. As well as RES Producers under feed-in tariff, Consumers will sell electricity under feed-in tariff to the SE “Guaranteed Buyer”.
What are the features regarding the sale of electricity by Consumers?
1. Consumer – a consumer, including energy cooperative, whose generating units have installed capacity not exceeding 150 kW, intended for the generation of electricity from solar energy and / or wind energy, from biomass, biogas, from hydropower, geothermal energy.
Consumers sell electricity in the amount exceeding their monthly consumption under feed-in tariff. In order to receive payments for electricity under feed-in tariff, Consumers as well as RES Producers under feed-in tariff must become participants of the electricity market, enter into the balancing group of the SE “Guaranteed Buyer”, and sell electricity only to the SE “Guaranteed Buyer”. However, Consumers operate without license for electricity generation.
2. The list of documents for conclusion of PPA on the sale of electricity under feed-in tariff contains additional documents in comparison with the procedure for RES Producers under feed-in tariff. This list differs with reference to the following documents:
Additionally, in case the PPA on the sale of electricity under feed-in tariff is concluded with an energy cooperative, the charter of the energy cooperative shall also be provided.
Unlike RES Producers under feed-in tariff, the SE “Guaranteed Buyer” must provide the Consumer with a signed PPA within 15 business days after receipt of all required documents.
3. Consumers have obligations regarding forecasting and imbalance liability similar to those of RES Producers under feed-in tariff.
Conclusions
The adoption of the above-mentioned regulatory acts improves the legal position of RES Producers and regulates the activities of Consumers. These improvements include, in particular, the following:
Thus, the NEURC has updated normative acts and has fulfilled requirements stipulated by current legislation, in particular, concerning the introduction of auctions in Ukraine.
If you would like to discuss the issues raised in this paper in more detail, please contact the SK Energy practice team.
Information contained in this legal alert is for general information purposes only, does not constitute legal or other professional advice, and should not be relied upon as a substitute for specific professional advice tailored to particular circumstances.