The situation in the renewable energy sector needs to be stabilized

26/ 05/ 2022

Today, Ukraine’s energy sector, like any other, is going through difficult times and it will need to be rebuilt so that the country can achieve energy independence and further integration of its energy system into the European one. According to the EBA member companies, the renewables will be a key part of Ukraines post-war reconstruction as it represents the countrys chosen path to a green transition and a European identity. According to business representatives, the current level of payment for solar power generation (SPG) and wind power (WPG) is insufficient to cover the costs associated with the operation of RES stations. As estimated by the EBA Energy Committee, this level of coverage amounts to 15-16%. Meanwhile, according to business representatives, SE Guaranteed Buyer receives enough funds from the supply of electricity to cover nearly 30% of payments to RES producers now. However, unfortunately, only part of these funds goes directly to RES producers. That is why business representatives have developed an Action Plan to stabilize the RES sector as the situation needs to be resolved. The implementation of the proposed measures will save about 6 GW of RES capacity by the end of 2022, avoid defaults, bankruptcies, and shutdowns, and create a financial foundation for further development of the RES industry, which is critical to Ukraines energy independence. Thus, a payment level of 35% will cover operating costs, tax costs, and imbalances. To do this, it is necessary to direct all funds of the State Enterprise Guaranteed Buyer from the sale of electricity to RES producers. At this level, business representatives claim that it is also possible to pay a small percentage of interest to foreign investors. That will create a favorable basis for negotiations on debt restructuring. Moreover, it will be a gesture that Ukraine keeps its word in business and fulfill international commitments. At present, creditors of enterprises find it very difficult to agree to debt restructuring. Moreover, the revenues of companies are insufficient not only to cover the interest on bank loans but also to cover the operating costs of enterprises. At the same time, a significant problem is the potential imposition of value-added tax on the reduction of the load on RES. In the absence of revenues for RES restrictions, this imposes additional costs on RES producers without sources of coverage. In the next stages of the plan to stabilize the RES sector, the above levels of payments should be increased to 55% and 90%, which will ultimately help stabilize the industry. Therefore, the European Business Association calls on the Government and deputies of the Verkhovna Rada of Ukraine to help ensure the stability of payments to the RES sector to ensure Ukraines European energy future and the stable functioning of the energy sector.

According to business representatives, the current level of payment for solar power generation (SPG) and wind power (WPG) is insufficient to cover the costs associated with the operation of RES stations. As estimated by the EBA Energy Committee, this level of coverage amounts to 15-16%. Meanwhile, according to business representatives, SE “Guaranteed Buyer” receives enough funds from the supply of electricity to cover nearly 30% of payments to RES producers now. However, unfortunately, only part of these funds goes directly to RES producers.

That is why business representatives have developed an Action Plan to stabilize the RES sector as the situation needs to be resolved.

The implementation of the proposed measures will save about 6 GW of RES capacity by the end of 2022, avoid defaults, bankruptcies, and shutdowns, and create a financial foundation for further development of the RES industry, which is critical to Ukraine’s energy independence.

Thus, a payment level of 35% will cover operating costs, tax costs, and imbalances. To do this, it is necessary to direct all funds of the State Enterprise “Guaranteed Buyer” from the sale of electricity to RES producers. At this level, business representatives claim that it is also possible to pay a small percentage of interest to foreign investors. That will create a favorable basis for negotiations on debt restructuring. Moreover, it will be a gesture that Ukraine keeps its word in business and fulfill international commitments. At present, creditors of enterprises find it very difficult to agree to debt restructuring. Moreover, the revenues of companies are insufficient not only to cover the interest on bank loans but also to cover the operating costs of enterprises. At the same time, a significant problem is the potential imposition of value-added tax on the reduction of the load on RES. In the absence of revenues for RES restrictions, this imposes additional costs on RES producers without sources of coverage.

In the next stages of the plan to stabilize the RES sector, the above levels of payments should be increased to 55% and 90%, which will ultimately help stabilize the industry.

Therefore, the European Business Association calls on the Government and deputies of the Verkhovna Rada of Ukraine to help ensure the stability of payments to the RES sector to ensure Ukraine’s European energy future and the stable functioning of the energy sector.