Ukraine: New rules of the game for renewables in Ukraine

In brief

On 31 July 2020, the President of Ukraine has signed the long-awaited law of Ukraine No. 810 "On Amendments to Certain Laws of Ukraine related to Improvements of the Terms of Support for Production of Electricity from Renewables Energy Sources" ("Law"). 

Effective from 1 August 2020, the adjusted Feed-in-Tariff rates will apply to the renewable energy projects ("REP") in Ukraine. To see the Feed-in-Tariff ("FiT") rates please follow the link here.

For the REPs commissioned before 30 June 2015, the FiT cap of EUR 24.56 KW/h will apply.

WPPs with up to three wind turbines (irrespective of the capacity) are not any longer eligible for FiT.

Biomass/biogas projects

Biomass and/or biogas projects will be eligible for the FiT only if commissioned before 1 January 2023. 

Balancing responsibility of Renewable Energy Sources Producers 

Effective from 1 January 2021, the Renewable Energy Sources Producers ("RES Producers") that are members of the "green tariff balancing group" must pay for imbalances (the difference between the actual and scheduled production) to the Guaranteed Buyer as follows:

REPs exceeding 1MW:

  • 50% from 1 January 2021.
  • 100% from 1 January 2022.

Until 31 December 2029, the above specified RES Producers would be liable for compensation of imbalances only in case if the hourly imbalances (tolerance margin) exceed 10% for wind energy units, and 5% for solar energy units.  

REPs with capacity less than, or equal to, 1MW:

  • 10% from 1 January 2021 and increasing by 10% annually reaching 100% in 2030.

Stabilization clause: no further changes to the FiT until 2030

The State provides the following guarantees to the REPs currently operating under the FiT and to the REPs eligible for the FiT in future: 

  • The laws of Ukraine effective on the date of effectiveness of the Law will apply, except for the new laws which when adopted would decrease the taxes and duties or cancel such, simplify the regulatory and state supervision framework, soften the liability or otherwise improve the state of the REPs.
  • From 1 July 2020 until 31 December 2029, the FiT as well as the decreasing coefficients will not be changed or canceled. 

The above guarantees do not extend to changes in law that may occur in the area of defense, national security, public order and environment protection.

The stabilization clause under the law of Ukraine "On the Foreign Investment Regime" ("Foreign Investment Law") provides that the rights and obligations of the parties to the PPAs shall be governed by the laws effective as of the date of effectiveness of the Law. The state guarantee provided pursuant to the Foreign Investment Law does not extend to changes in law that may occur in the area of defense, national security, taxation, public order and environment protection. 

Local content premium

The Law introduced the premium in the amount of 20% to be added to the FiT or the auction prize for use of more than 70% of the Ukrainian original equipment with a cap of 10% after six years of operation of respective REP. 

The above premium is in addition to existing premiums of 5% and 10% for use of 30% and 50% of the Ukrainian origin equipment, respectively. 

Proposed sources of funds to repay the indebtedness of the Guaranteed Buyer to RES producers in the course of 2020 to 2021:

  1. State budget funds covering at least 20% of the forecasted revenues of RES producers in the relevant year.
  2. 35% of funds received by the TSO from cross-border capacity allocation as of 1 July 2020.
  3. Proceeds from placement of five-year term domestic state bonds.  

Curtailments by the TSO

Effective from 1 January 2021, the transmission system operator ("TSO") beyond the balancing market may curtail the FiT-based or auction-based REPs by purchasing of the "load decrease" service to ensure the system safety.

The TSO will pay the RES Producer for the "load decrease" service the compensation in the amount equal to the FiT or the auction prize based on the methodology to be approved by the Regulatory in the next month. 

Green metallurgical enterprises are out of the "game" 

Until 31 December 2029, metallurgical enterprises, which satisfy the eligibility criteria for being "green" metallurgical enterprises1 are expressly exempted from paying the TSO transmission tariff component that covers the increase of the renewable energy share.

Click here to access the Ukranian version.

1 The Law defines the green metallurgical enterprises as a legal entity engaged in steel production business in compliance with the norms on direct emissions of carbon dioxide as a result of steel production at the level of not more than 250 kilograms per ton of steel products and exclusively by electric arc production method.

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