On 21 July 2020, the Parliament of Ukraine has adopted the Law “On Amendments to Certain Laws of Ukraine on Improving Conditions for Supporting Renewable Energy Production” (“Law”).
The Law has been elaborated based on the Memorandum of Understanding on Regulation of Issues in Renewable Sector, signed on June 10, 2020, between the Government and key energy industry associations, and introduces several changes into the regulation on support quota distribution auctions (“Auction”), feed-in-tariff (“FIT”) and state guarantees regarding investment protection of producers (“Producers”) of energy from renewable energy sources (“RES”).
- Reduction of FiT (below we provide information only for RES facilities equal to or exceeding 2 MW)
REGULATION OF AUCTIONS
- The minimum mandatory share of annual support quotas for each type of RES facilities (i.e. wind, solar, hydro, etc.) is reduced from 15% to 10%
- The maximum share of support quotas that can be received by one beneficial owner during one calendar year is 25%
- The maximum starting prices for bidding at Auctions has been limited as follows:
Type of RES facility
Date of Auctions
|Wind and solar
|by December 31, 2024||not exceeding 9|
|from January 1, 2025||not exceeding 8|
Other RES facilities
|irrespectively of date||not exceeding 12|
Curtailment: full compensation to Producers for generation load curtailment outside the Balancing Market
|Responsibility for imbalances:
► RES facilities with the installed capacity equal to or less than 1 MW shall bear liability for imbalances under the current legislation (i.e. starting from January 1, 2021, the liability will increase annually by 10% and will reach 100% from January 1, 2030).
► RES facilities with the installed capacity exceeding 1 MW shall bear liability for imbalances:
– no liability until December 31, 2020
– 50% of the price of imbalanced energy after 1 January 2021
– 100% after 1 January 2022
The tolerance margin is 5% for solar and 10% for wind.
- FiT for solar plants commissioned after October 31, 2020 will be decreased accordingly (de facto, this is the cutoff date for solar plants under FiT):
>75 MW – by 60%;
<75 MW – by 30%.
- FiT for wind farms commissioned within 3 years from the execution date will be reduced by 2,5% only (i.e. the cutoff date has been kept as before)
- Legal regulations on FiT will apply to Producers for the whole FiT period.
- FiT will not be changed or canceled until December 31, 2029 (including FiT coefficients).
- The Law on Protection of Foreign Investments will particularly be specified covering the protection of FiT.
- However, the stabilization clause does not cover changes in taxation.
FINANCING OF THE GUARANTEED BUYER
The Law provides for the following sources to finance the Guaranteed Buyer (“GB”):
- it is expected that the Government will finance the GB from the state budget in the amount of not less than 20% of the estimated production by Producers per year;
- the Government may temporary allocate 70% of the proceeds raised by Ukrenergo (the Transmission System Operator) from the allocation of the cross-border capacities as of 1 July 2020 for the purpose of paying the GB. The GB must allocate then 50% of these funds to pay renewables;
- increase of transmission tariff of Ukrenergo.
Although the Law does not specifically address the outstanding debts of the GB, it expressly stipulates that a specific law dealing with the repayment of debts must be drafted by the Government within three (3) months.
In addition, the Government is considering enacting separate legislation enabling issuance of government domestic bonds to settle the GB’s debt before Producers in August 2020.