Energy Talk: ways to overcome the crisis and development prospects for RES in 2021
On November 4, the European Business Association together with Kyiv Post held the Energy Talk, where experts shared their views on the current situation in the Ukrainian electricity market given the non-fulfillment of the Memorandum of Understanding signed by the Government with renewable energy producers.
The event featured Ukrainian and foreign investors, representatives of embassies, and European organizations, leading analysts on economic and energy policies. Therefore, within 2.5 hours, all stakeholders were able to present their position on the settlement of debts to RES producers in 2020, Ukraine’s accession to the European Green Deal, and its implications for the business, as well as prospects for the development of renewable energy sector in 2021.
View the Energy Talk video at the link.
Thus, Kyrylo Kryvolap, Head of Economic Recovery Center, Adviser to the Prime Minister of Ukraine, presented the position of the Ukrainian authorities. According to him, the current energy crisis, which arose in the spring of this year and became one of the largest since independence, is a consequence of the state’s excessive use of manual regulation tools. In the pre-crisis period, the green energy industry did not experience problems with attracting foreign investment. During the years of independence, 20-25% of the total volume of foreign investments in Ukraine was invested in alternative energy. Therefore, the development of the National Economic Strategy 2030 will consider relevant energy issues, namely, improving the efficiency of electricity consumption, modernization of electricity grids, accession to the EGD, development of hydrogen energy, etc.
In turn, Torsten Woellert, EU Delegation, Policy Officer, believes that in 2014 Ukraine’s energy sector faced graver problems that were related to the energy security of the whole country. Nevertheless, the country managed to avoid an energy collapse back then. Also, Mr. Wellert stated that representatives of the Ministry of Energy of Ukraine reconfirmed to him their commitments to solve the current crisis in the RES market during their recent online meeting. Therefore, EU officials believe that Ukraine will continue to develop its alternative energy sector so that it can fulfill its obligations under the EGD and become a partner of the EU in achieving carbon neutrality across the European continent by 2050.
According to Erik Svedahl, Ambassador Extraordinary and Plenipotentiary of Norway to Ukraine, in 2019 Norwegian companies invested $ 1.5 billion in Ukraine’s RES, which is 20% of all foreign investment in this sector. However, some companies intend to sue the arbitration against the Ukrainian government due to its non-compliance with obligations to investors. At the same time, Mr. Svedahl hopes that the Ukrainian side will not allow the situation to escalate, which could negatively affect the investment climate in the country. A similar view is shared by Adam Barbolet, Counsellor Commercial, Senior Trade Commissioner at the Embassy of Canada. He considers that the current crisis in the energy market is incompatible with the priorities that Ukraine’s government set for the attraction of investments.
Geoff Berlin, Founder, Ukraine Power Resources, believes that the credibility of Ukraine’s Government was severely damaged by its own actions. At the beginning of the crisis, industry players were willing to compromise by limiting the capacity of their production and moving the sale of alternative electricity to auction. However, the auctions were never launched. Also, the Government did not accept the investors’ offer and did not extend the reduced green tariff.
At the same time, Carl Sturren, Managing Director, VindKraft, and co-chair of the EBA Energy Committee, has a more optimistic view. According to him, the current crisis in the RES industry is not a market-driven problem, but rather a political one. Therefore, everything can get back on track if there is a political will. More importantly, Ukraine lacks a comprehensive strategy for modernizing the energy sector. Most thermal power plants in Ukraine were built in the ’50s and ’60s. Also, 2/3 of the existing nuclear power plants will be decommissioned in Ukraine by 2030, In this context, the development of RES is a strategically important task for the Ukrainian government, therefore, it is necessary to get rid of the factors hindering the growth of the industry as soon as possible.
Sergiy Shakalov, the CEO, KNESS Group, also emphasized the necessity to speed up the solution of the problem. According to him, the alternative energy sector will continue to grow because it is an established global trend. Therefore, the compliance with the obligations is no longer a question of supporting the RES industry, but of maintaining the image of the state as a reliable partner for investors.
Also, Aleksandr McWhorter, Country Manager, CITI bank, supported the view that this year is a record year in terms of global investment in green bonds. He also stressed the need for the government to pursue a consistent policy towards its investors.
Oleksandr Kharchenko, Managing Director, Energy Industry Research Center, considers that there is a risk of overproduction of green energy if it is produced at the level provided for in the EGD. This will lead to a significant reduction in price. Therefore, in the future, it is necessary to stimulate energy consumption or find a way to store large amounts of electricity.
At the same time, Svitlana Chekunova, Leading Energy Expert, Razumkov Center, suggested several options for solving the problem of public debt, namely, to envisage funds for debt repayment in the draft State Budget, to issue domestic government bonds, and to adopt a draft law that enables the government to repay existing debts to RES producers. Besides, the level of tariffs for 2021 must be reasonable and consider realistic energy forecasted balance, non-discriminatory restrictions on renewable, actual green electricity consumption, and so on.
On behalf of the European Business Association and Kyiv Post, we thank all the speakers for the comprehensive discussion. We hope that the positions of the international community and the business representatives will be taken into account in resolving the crisis in the RES sector, and in the near future, the issue will still be settled positively for both the business and the government.
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