RENEWABLE ENERGY: INTEGRITES industry update

23.04.2019

On April 11, 2019, Draft Law No. 8449-d “On Introduction of Certain Changes to Laws of Ukraine On Insuring of Competitive Conditions for Generation of Electricity from Alternative Energy Sources” (the “Draft Law“) was submitted for the second reading. The Draft Law provides new regulations for the support of the production of electric power from renewable energy sources (“RES”) and specifies the following:

✓ Currently, production of electric power from RES is supported by means of a feed-in tariff (“FiT”). However, the Draft Law provides for a new additional procedure. Starting from January 1, 2020 producers of electric power from RES (“Producer”) will be able to participate in auctions (“Auctions”) for the purchase of so-called quotas to support the production of electric power from RES (“Quotas”). The auctions will be launched starting from January 1, 2020 and will be conducted two times a year with deadlines on or before April 1 and October 1.

✓Auctions will be mandatory for (i) wind power plants (“WPP”) with the installed capacity exceeding 5 MW, and (ii) solar power plants (“SPP”) with the installed capacity exceeding 1 MW. However, producers that have already obtained FiT will not be able to participate in the All other producers may participate in the Auctions voluntarily.

✓Auctions will be conducted on the “Prozorro” platform.

✓Annual Quotas for each type of RES will be approved by the Cabinet of Ministers of Ukraine. However, during the transition period in 2020-2022 the quotas will be allocated as follows:

? no less than 30% for SPPs;

? no less than 30% for WPPs; and

? no less than 15 % for other RES.

Afterwards, annual Quotas will be allocated as follows:

? no less than 15% for SPPs;

? no less than 15% for WPPs; and

? no less than 15% for other RES.

✓Each participant of the Auction must submit a bank guarantee in the amount of EUR 5.00 per kW, which will be refunded after completion of the Auction. Afterwards, the successful bidder will have to provide a new bank guarantee in the amount of EUR 15.00 per kW.

✓ The successful bidder is obliged to sign a Power Purchase Agreement (“PPA”).

✓ Duration of the Quotas: 20 years.

✓ The National Regulatory Commission of Ukraine on Energy and Utilities (“Commission”) will continue to issue FiT only to those Producers who will execute PPA or the so-called preliminary PPA (for the purpose of this newsletter, further the preliminary PPA and PPA are jointly the “PPA”). The deadline for execution of such PPA is December 31, 2019.

✓ Provided that the Producer has executed the PPA prior to December 31, 2019, the FiT will be issued upon commissioning of the relevant RES. However, this rule is not mandatory in order to obtain a FiT. The SPP must be commissioned within 2 years following execution of the PPA and other RES – within 3 years.

✓ The rate of the FiT will be determined on the RES commissioning date and not on the date of the PPA.

✓ The FiT will be valid until 2030.

✓ The FiT will be reduced gradually as follows:

? FiT for SPP will be reduced by 25% in 2020 and will be further reduced by 2,5% each year within the following 3 years;

? FiT for WPP will be reduced by 10% in 2020. For turbines of up to 2 MW, FiT will be further reduced by 1,5% each year within the following 3 years;

? FiT for micro-, mini- and small hydro power plants and geothermal facilities will be reduced by 10% in 2020; and

? FiT for other RES will remain unchanged.

✓ The bonus for local equipment will remain the same (up to 10% for 50% of certain local equipment).

✓ Technical specifications (“TS”) to grid connection shall be valid:

? for SPP – 2 years from the date of issuance; and

? for other RES – 3 years from the date of issuance.

However:

? TS of the Auction’s successful bidder will be valid during the period of construction (i.e. up to 2 years for SPP and up to 3 years for other RES);

? TS, issued before the entry into force of the Draft Law, shall be valid:

>> for SPP – 2 years from the Draft Law’s date of entry into force; and

>> for other RES – 3 years from the Draft Law’s date of entry into force.

Notwithstanding the above, please note that during the second reading certain provisions of the Draft Law may be changed.