Reducing the “green” tariff scares investors

The proposal of the Ministry of Energy and Coal Industry to reduce the FIT for solar power plants to the level of the “green” tariff for wind power plants is not economically feasible, since they have different efficiency ratios, CAPEX and OPEX, and the volume of attracted investments. This was stated by Dmytro Lukomskyi, a representative of one of the largest Ukrainian developers of solar power plants.

Thus, 1 MW of the installed capacity of a wind power plant generates almost three times more electricity than 1 MW of a solar power plant. That is, with the same cost per kilowatt-hour, solar projects, due to their specifics, will obviously lose to other types of renewable energy sources, the specialist said. Plus, the cost of a wind turbine is several times lower than the cost of a solar power plant.

It is possible to reduce the “green” tariff (although not to the level of wind energy), but subject to the abolition of the local content. If the industry remains at high costs for the purchase of equipment for the construction of solar power plants, but the “green” tariff decreases, then the financial performance of projects will deteriorate sharply, investors will curtail projects in this industry and will not return to Ukraine again, the expert predicts.

According to the company’s calculations, the average payback period for solar energy projects before the introduction of the local content requirement at the actual tariff was 5-6 years. After the entry into force of the requirement for the local content (30% in solar modules from July 1, 2013) – the payback for the projects will be increased to 7-8 years.

It is necessary to introduce such coefficients for solar and wind energy so that the payback periods of projects in these areas are approximately the same, for example, five years. If the “green” tariff is reduced to the level of 25-27 eurocents per kWh, but at the same time the local content requirement is canceled, total payments by the “green” tariff in Ukraine will decrease, and the solar industry will remain attractive to investors. Perhaps, there will be no utility-scale PV projects in it, but medium and small companies will remain, says Dmytro Lukomskyi.

We will remind that today in Ukraine there is a high “green” tariff designed to stimulate the attraction of investments in the production of electricity from renewable sources, in particular, solar and wind energy.

The requirement to use domestic materials, equipment and work in the construction of power plants based on renewable energy sources was legislatively established in 2009, simultaneously with the introduction of “green” tariffs to support national producers of materials and equipment for renewable energy, as well as to protect the domestic market from dumping Asian suppliers (mainly from China). At the same time, the cost of local equipment for the construction of solar power plants is higher compared to foreign counterparts.