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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