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17 March 2019

Auctions for Renewables in Ukraine: What do Investors Expect from the New Stimulation Scheme

Source: UJBL

Over the last few years the importance of renewable energy sources (“RES”) has grown sufficiently due to climate change and problems with energy security. In order to decrease the negative impact on the climate, many countries are introducing policies to support renewable deployment. According to IRENA research by the end of 2016, at least 176 countries had targets for renewable energy. By 2017, 126 countries had implemented special policies and regulations.

Countries use different supportive schemes for renewable energy deployment and to increase investment in renewables. In previous years, one of the main drivers for investments in RES was feed-in tariff (“FiT”). Pursuant to surveys and the opinions of experts, FiT look like the most efficient regulatory measure for the development of RES. At the same time, many experts predict a decrease in the application of FiTs in next few years and development of other forms of support for RES producers.

Moreover, recent research confirms the increased application of auctions for RES around the globe. For instance, in 2017 48 countries had adopted auction-based approaches to stimulate RES and 27 countries are seriously considering this idea. EU countries will also rely on auctions as a cost-effective mechanism for deployment of RES till 2030.

Taking into account global tendencies, Ukraine is also on the path towards implementing the auction scheme instead of FiT. On 20 December 2018, the Verkhovna Rada of Ukraine passed in the first reading the Law On Amendments to Some Laws of Ukraine on Ensuring Competitive Conditions for the Production of Electricity from Alternative Energy Sources No. 8449-д (Law on Auctions) for holding an auction scheme for renewable energy producers.

The Law On Auctions aims to introduce an auction scheme for the implementation of future projects based on RES in Ukraine. The main conditions for the Law were drafted and revised within the last 6 months based on the results of numerous meetings and round tables about a potential auction scheme with investors, developers, renewable producers, renewables associations and other stakeholders.

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