EBA supports Ukraine in joining global trend of auctions for electricity from renewable sources

26/ 06/ 2018

The European Business Association appeals to MPs and authorized state bodies to encourage producers of alternative energy sources in Ukraine. An important step in this regard is auctions to purchase / sell electric energy. This mechanism will help to develop the industry and attract investment. Consumers will benefit as the winner of the auction will be the company that will be able to offer the best, lowest price. Auctions are planned to be implemented from July 1, 2019. Seven alternative legislative initiatives are currently being proposed to resolve this issue. This is the best proof that alternative energy has considerable interest among parliamentary, business and public figures. However, there are some concerns in the business community. Power is a tariff-based industry. If the auction principle wouldn’t be implemented, there may be a risk of rising electricity prices, absence of fair payments and investor rights violations. Consequently, such a transition should be gradual. In order for companies to have the right to sell electricity at a green tariff, it is necessary to conclude preliminary energy sales contracts under the green tariff by July 1, 2019. However, by this date the companies are not able to do so as, firstly, it is necessary to draw up the right to land (where the relevant power plant is located), to sign a contract for joining the network and to obtain a permit for building. But contracts for selling energy can be signed only from July 1, 2019. In addition, some practical points are unclear: - When will a typical example of the contract be developed (now the standard form is not defined)? - Will the green tariff, proposed by the draft law, be extended to such companies? The European Business Association prepared some comments and suggestions on the draft of the law. The Association appeals to MPs and authorized state bodies to consider these proposals. That will help to support manufacturers of alternative energy, reform the industry and create investment attractiveness. At the moment, we still have enough time to develop an effective regulatory framework and launch a quality system. Additional information: By 2025, renewable energy as part of Ukraine’s total is expected to increase to 12%. By 2035, renewables should constitute not less than 25% (in accordance with the Energy Strategy approved by the Government). According to the information of the Ministry of Fuel and Energy of Ukraine, in 2018 the total amount of electricity generated from alternative energy sources stands at 1.5% of the overall sources of electricity production.

Seven alternative legislative initiatives are currently being proposed to resolve this issue. This is the best proof that alternative energy has considerable interest among parliamentary, business and public figures. However, there are some concerns in the business community. Power is a tariff-based industry. If the auction principle wouldn’t be implemented, there may be a risk of rising electricity prices, absence of fair payments and investor rights violations. Consequently, such a transition should be gradual. In order for companies to have the right to sell electricity at a “green” tariff, it is necessary to conclude preliminary energy sales contracts under the “green tariff” by July 1, 2019. However, by this date the companies are not able to do so as, firstly, it is necessary to draw up the right to land (where the relevant power plant is located), to sign a contract for joining the network and to obtain a permit for building. But contracts for selling energy can be signed only from July 1, 2019. In addition, some practical points are unclear:

– When will a typical example of the contract be developed (now the standard form is not defined)?

– Will the “green tariff”, proposed by the draft law, be extended to such companies?

The European Business Association prepared some comments and suggestions on the draft of the law. The Association appeals to MPs and authorized state bodies to consider these proposals. That will help to support manufacturers of alternative energy, reform the industry and create investment attractiveness. At the moment, we still have enough time to develop an effective regulatory framework and launch a quality system.

Additional information:

By 2025, renewable energy as part of Ukraine’s total is expected to increase to 12%. By 2035, renewables should constitute not less than 25% (in accordance with the Energy Strategy approved by the Government). According to the information of the Ministry of Fuel and Energy of Ukraine, in 2018 the total amount of electricity generated from alternative energy sources stands at 1.5% of the overall sources of electricity production.