Renewable power sector growth in Ukraine
In the new edition of the annual Ukrainian legal market guide "Ukrainian Law Firms. A Handbook for Foreign Clients 2019" Andriy Olenyuk, partner at EVERLEGAL, shared about Renewable power sector growth in Ukraine.
You can read the article below or see the press coverage of this article here.
* Publication is available in English only.
2018 saw unprecedented growth in terms of renewable power sector growth in Ukraine
According to the National Energy and Utilities Regulatory Commission, 742.5 MW of renewable power generating capacity were installed, which is 2.8 times more than the renewable power generating capacity installed in 2017. The overall renewable power generating capacity installed in Ukraine is 2.117 GW.
Notably, solar power plants and wind power plants represent approximately 96% of the renewable power generating capacity installed. At the same time, the share of renewable power in the overall electricity output in Ukraine comes to 1.9%. while the share of renewable power in the overall cost of electricity is 8.7%. Reportedly, up to 1 GM of new renewable power generating capacity will be installed in Ukraine in 2019 which may significantly impact grid capacity and cause major grid balancing issues.
Given the pace of growth and potential issues involved, the Government opted to change the renewable power support scheme. On 25 April 2019, the Parliament adopted a law aimed at the gradual substitution of the current feed-in tariff support scheme with the auction-based support scheme for investors in renewable power.
The following are the key provisions of the new law:
First, in relation to new projects, the new auction-based support scheme will be introduced as of 1 July 2019 and will run in parallel with the current feed-in tariff support scheme until 2019.
Second, wind power plants with an installed capacity of less than 5MW (or three wind turbines irrespective of the installed capacity) and solar power plants with an installed capacity of less than 1 MW will be exempt from the mandatory auction-based support scheme and may qualify for the voluntary auction-based scheme or the reduced feed-in tariff scheme.
Third, the action-based support scheme would entitle the bidder to a 20-year-long power purchase agreement at an action determined the price for electricity produced.
Forth, in order to qualify for a new support scheme, a renewable power developer would need to confirm that it has met 5 participation requirements: (i) formalise land use rights for a project, (ii) apply for and approve interconnection terms with the distribution system operator, (iii) provide the required KYC information, (iv) be a company registered in Ukraine, (v) make a security deposit of EUR 5,000 per 1 MW of proposed capacity in order to participate in the auction and EUR 15,000 per 1 MW – in order to confirm the maturity of the intention to proceed with the project implementation once the winner is known.
It is expected the new auction-based support scheme will cool off the growth in the sector and will bring new strategic investors into play. Overall, 2019 will be a busy year for both renewable power investors and their consultants.