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Ukraine > Legal Developments > Law firm and leading lawyer rankings

Editorial

Renewable energy in Ukraine: green auctions launched

In the first half of 2019 alone, renewable energy facilities with a capacity of more than 1.5 GW were connected to the Ukrainian grid, with about 96% of those being solar and wind energy facilities. In the whole of 2018, which has been a record-breaking year so far, numbers were almost half as high. The Ukrainian market also remains very attractive to foreign investors, not least because of the lucrative feed-in tariff rates, which are paid out regularly. Now, after the adoption of the so-called law on green auctions, significant changes can be expected.

Now, after the adoption of the so-called law on green auctions, significant changes can be expected.

The Law, which came into force on 22 May 2019, provides for the introduction of the so-called ‘green’ auctions and public procurements. The auctions shall be held twice a year and shall be conducted via an electronic trading system. The new support system advantage over the existing feed-in tariff system lies, inter alia, in a longer support period (20 years after the renewable energy facility commissioning), as well as in the guaranteed off-take of the ‘green’ electricity generated by the electricity producers at a price that depends on the auction results (auction price).

With effect from 1 January 2020, the promotion of companies intending to generate electricity from wind or solar energy will only be possible subject to their participation in auctions for the quotas allocation and winning the auction. The capacity requirements for renewable energy facilities to participate in auctions are as follows:

·         wind energy facilities with a capacity of more than 5 MW. In this case, the limitation does not apply to facilities with one wind turbine, regardless of the installed capacity of such a wind turbine;

·         solar energy facilities (solar power plants) with a capacity of more than 1 MW.

A yearly quota shall be allocated through auctions. Every year, on 1 December at the latest, the Cabinet of Ministers of Ukraine shall establish yearly quotas for the next 5 years, which should provide market players predictability in planning and implementing renewable energy projects.

A yearly quota shall be split into 3 categories: solar power plants, wind energy facilities and facilities generating electricity from other renewable energy sources. The yearly quota will be allocated for the first time for 2020. The yearly quota will be split as follows:

·         solar – not less than 15% (for 2020-2022 – 30%);

·         wind – not less than 15% (for 2020-2022 – 30%);

·         other renewable energy sources – not less than 15%.

Competition protection:

An auction participant, individually or jointly with other participants with whom they have the same ultimate beneficial owner, may be awarded with no more than 25% of the yearly quota. Moreover, the capacity for which the auction participants are granted support may not exceed 80% of the total capacity proposed by all the auction participants for the quotas allocation with regard to the relevant type of renewable energy technologies.

To ensure a fair competition among bidders, the Law prescribes that bidders have to submit an irrevocable bank guarantee (EUR 5 per 1 KW of the facility capacity) to participate in the auction and an additional bank guarantee (EUR 15 per 1 KW of the facility capacity) on top in the case of winning the action as a performance bond to secure the obligations under the contract concluded with the guaranteed buyer.

The auction winner and timeframes for the winner to commission a renewable energy facility

The auction winner is a bidder who has bid the lowest price for electricity at which this bidder is ready to generate the electricity from renewable energy sources and to feed it into the electricity grid (auction price). The auction price shall be converted into EUR as of the auction date at the official exchange rate of the National Bank of Ukraine on the given date.

The auction winner undertakes to construct and commission the renewable energy facility within 2 years (for solar power plants) or 3 years (for facilities generating electricity from other renewable energy sources) after signing the contract concluded on the basis of the auction results. The Law also provides for the possibility of extending the term of commissioning renewable energy facilities by up to 1 year, subject to providing an additional irrevocable bank guarantee in the amount of EUR 30 per kW.

Validity of technical conditions

The technical conditions for new renewable energy facilities shall have the following validity periods:

·         for solar power plants – not more than two years after the date of issue, regardless of the change of the principal;

·         for facilities generating electricity from other renewable energy sources – not more than three years after the date of issue, regardless of the change of the principal.

The technical conditions for renewable energy facilities issued before the entry into force of the Law shall remain valid: for solar power plants – not more than two years after the Law entry into force; for facilities generating electricity from other renewable energy sources – not more than three years after the Law entry into force.

Feed-in tariff

You can find the table of the current feed-in tariff rates at our website. 

The existing feed-in tariff scheme is guaranteed until 2030 and applied to:

·         electricity producers, already receiving the feed-in tariff, as well as electricity producers that will construct and commission renewable energy facilities before 1 January 2020 (regardless of the installed capacity and a renewable energy source);

·         electricity producers which will sign a preliminary power purchase agreement under a feed-in tariff with the guaranteed buyer before 31 December 2019 and will construct and commission the respective facilities within 2 years (for solar power plants) or 3 years (for facilities generating electricity from other renewable energy sources);

·         electricity producers that will construct renewable energy facilities after 1 January 2020, where the installed capacity is less than the capacity for which auctions are mandatory;

·         electricity consumers, including energy cooperatives, having installed energy-generating installations with a capacity of up to 150 KW and selling surplus electricity at a feed-in tariff rate once they use the energy for their own needs. In this case, the feed-in tariff for installations generating electricity from solar energy (except for combined systems) may be established only subject to installing them on buildings and roofs and/or facades structures. 

 

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