Renewables in Ukraine: latest news

1. RECENT DEVELOPMENTS

A new Procedure for Obtaining the European Commission’s conclusions on energy draft laws was published on April 2, 2020 [1] (the “Procedure”)

Pursuant to the Procedure all draft laws, regulations of the Cabinet of Ministers and other central executive bodies in the field of energy will be subject to mandatory checks by the European Commission to confirm their compliance with the updated Annex XXVII to the Association Agreement between the European Union and the European Atomic Energy Community and their Member States.

Draft Resolution of the Cabinet of Ministers of Ukraine “On Amendments to the Regulations on Imposing Special Responsibilities on Electricity Market Participants to Ensure Public Interests in the Functioning of the Electricity Market” was published on May 8, 2020 [[2]](https://www.integrites.com/publications/renewables-in-ukraine-latest-news/#_ftn2).

The Resolution introduces the following changes:

>> the special obligations of the Guaranteed Buyer were supplemented with a commitment to purchase or sell electricity pursuant to the bilateral agreements concluded upon the e-auctions;

>> the rule for calculation of the estimated amount of electricity sales was adjusted, which is expected to eliminate the imbalances of electricity power

>> price restrictions for GB when selling electricity have been removed. In each settlement period, NPP producers sell to GB 80% of their projected amount of electricity (+ up to 5% under bilateral agreements at special sessions) and HPPs – 35% of their projected production; and

>> GB and USPs will be obliged to publish detailed information about the volumes of the purchased and sold electricity in due time

A start of “green auctions” has been postponed

In accordance with the Law of Ukraine “On Alternative Energy Sources” auctions for allocation of support quotas (“green auctions”) were supposed to be established commencing from July 1, 2019, and should have been conducted until December 31, 2029. “Green auctions” shall be conducted twice per year no later than April 1st and October 1st of the respective year. However, as of April 1, 2020, the annual support quotas for their distribution in 2020 have not been established as well as a number of supporting legislative acts for announcing and conduction of the auctions have not been adopted.

Ukrenergo launched a new product in the Balancing Market – the “two-minute reserve”

On April 1, 2020, a new product began to operate on the balancing market – the “two-minute reserve”. This product will be relevant mainly for hydropower plants and, in the future, for other highly maneuverable generation. According to the Ukrenergo’s Generation Adequacy Report, and up to 2 GW of new high maneuverability and 2 GW of energy storage systems should be built in the near future to ensure operational safety in the Ukrainian power system.

A new Limitations Management Rules (the “Rules”) and a new Cross-Border Intersections Capacity Allocation Procedure were approved by NEURC on April 3, 2020

The Rules establish the procedure and requirements for limitations management, the procedure for the determination of the capacity allocation structure, the procedure for releasing information on cross-border capacity, etc. The new Cross-border intersections capacity allocation procedure determines the auctioning rules for cross-border intersections capacity allocation.

Transmission System Development Plan for 2020-2029 was adopted

This document defines the key directions and measures for the development of Ukrenergo networks, the estimated cost of implementing network development projects and the sources of their financing. Within the next 10 years, Ukrenergo plans to construct 8 new substations, renovate 102 active substations, construct 3 thousand km of transmission lines 220-750 kV and renovate over 1.5 thousand km of 220-330 kV power transmission lines. The implementation of such plan will require 69 billion UAH.

2. OVERVIEW OF PROSPECTIVE LEGISLATION

► Draft Law of Ukraine On the State Budget of Ukraine for 2020” No 3459 dated 05.2020 [3]

This draft law is intended to discharge the credit and debit debt up to UAH 30 billion of the State Enterprise “Energorynok” at the wholesale electricity market (the debt which arose prior 01.07.2019) and to terminate the State Enterprise “Energorynok”. In particular, the draft law envisages designating the state funds in the amount of UAH 7,9 billion to discharge the credit and debit debt of the State Enterprise “Energorynok”. The draft law allows the Ministry of Finance of Ukraine to issue the treasury bonds and exchange them for the additional shares of the state electricity producers as well as state-owned enterprise National Energy Company Ukrenergo.

► Draft Law of Ukraine On Amendments to the Law of Ukraine “On the Electricity Market” No 3388-1 dated 08.05.2020[4]

This draft law is intended to deal with a non-payment crisis in the electricity sector caused by the restrictive quarantine measures and provides that the funds received by the Transmission System Operator (Ukrenergo) from the allocation of the interstate capacity as of April 1, 2020, shall be applied as follows:

30% of funds shall be invested in the transmission system (in particular, the construction of new interstate power lines) and applied towards state budget payments, liabilities arising from the revenue recognition (received from the distribution of interstate capacity) and repayment of debts under agreements on access to interstate capacity;

70% of funds shall apply towards the repayment of debt to the Guaranteed Buyer for the provided services in order to increase the share of electricity production from the alternative sources. The Guaranteed Buyer shall be obliged to transfer such funds according to the following order:

50% of funds shall be allocated to the business entity engaged in the production of electricity at nuclear power plants; and

50% of funds shall be used to pay for the electricity generated at the electricity facilities using the alternative energy sources at the established “green” tariff or at the auction price.

► Draft Law of Ukraine On Amendments to Certain Laws of Ukraine (Regulating the Crisis of Non-Payment in the Electricity Market and Issue of Certification of the Transmission System Operator) No. 3364 dated 21.04.2020.

The draft law regulates the issue of the TSO certification based on an independent system operator (ISO) model and provides that the certification process should be monitored by the controller, an individual responsible for monitoring, reporting and compliance with the requirements for separation and independence by the transmission system operator.

► Draft Laws On Certification of Ukrenergo according to the ISO model:

Draft Law On Amendments to Certain Laws of Ukraine No. 3267 dated 26.03.2020 [5].

The draft law has been developed with a view to the separate the activities related to the transfer of electric energy (an independent system operator (ISO) model) and to certify the transmission system operator in accordance with the requirements of the EU Third Energy Package. The draft provides that Ukrenergo owns the transmission system on the right of economic management while the property remains in the ownership of the state.

Draft Law On Amendments to Certain Laws of Ukraine №3364 dated 21.04.2020[6]. This draft law deals with the usage of funds received by the Transmission System Operator (Ukrenergo) from the distribution of interstate cross-section. The draft law is intended to solve the non-payment crisis that arose at the electricity market in 1Q and 2Q of 2020 due to the existing debt of the Guaranteed Buyer. The draft provides legislative regulation of the issue of the TSO certification based on an independent system operator (ISO) model and indicates the activities associated with the organization of certification for this model.

[1] See https://www.rada.gov.ua/news/Novyny/191756.html

[2] See https://menr.gov.ua/news/35277.html

[3] See http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_1?pf3511=68793

[4] See http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_1?pf3511=68788.

[5] See http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_1?pf3511=68472

[6] See http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_1?pf3511=68628