Is it real to have PV industry in Ukraine without support?

Solar energy, while only dreaming to become the real alternative in Ukraine, demonstrates serious development rates. Predictability and transparency help this sector foremost, other industries can hardly boast that. Such, it would seem, paradoxical opinion was delivered during energy-related debates about whether rule of “local component” is needed or not, organized by Institute of Power Research. Alexander Yudenko, director of solar energy department at Kwasar PJSC, and Dmytro Lukomskyi, co-founder and business development director at Rentechno LLC speak about problems and prospects, and also about the economic mechanisms of operational stimulation of enterprises, making component parts for solar electric stations.

Dmytro Lukomskyi:

Nowadays solar energy in the whole world is an industry, that is regulated rather by state authority, than by market environment. Therefore it should be examined exactly in this context.

I consider that  state authorities have a right to implement measures, intended to support certain industries, consequently, can lay on some limitations. It’s about cases, where these limitations are focused on public policy implementation in power generation sector. For domestic solar energy sector such aims currently or prospectively are following: providing of energy security of the state in a long-term prospect; bringing in investments into the whole country or into separate regions; creation of additional job vacancies and increased demand on highly skilled labour force; increase of withholdings in local and state budget; influence on development of such contiguous industries as metallurgy, engineering, instrument-making, information technologies; stimulation of development of science and industry-specific education.

But obviously, that the question of state regulations always needs to be examined with some carefulness, because with wrong planning and realization it can give a negative effect, that annihilates all expected profits. There already were examples in global experience, when preferences to local companies on emerging markets of alternative energy resulted in “fading” of these markets even with relatively high and attractive “green” tariff rate. It seems for me, that it is possible to avoid problems only if government control leaves some space for functioning of open market mechanisms. So any operating limitations must keep a possibility to exist for plenty of companies that will freely compete and offer quality products or services for a reasonable cost.

Moreover, predictability and transparency of existent measures on industry stimulation are very important factors. It is not a secret that businesses are very sensible to frequent changes of legislative acts, and these changes work as enhanceable risk factors for any business. Talking about market of solar energy, there are two important limitations present in Ukraine today, that directly relates to the rule of “local component”. Firstly, for “green” tariff receipt in any project of alternative energy there must be some legally prescribed percent of raw materials, components, fixed assets, works and services of Ukrainian origin. Secondly, another additional condition works for solar power-stations, namely using only solar modules with specified share of components and raw materials of domestic production. And the question here is already not about works or services, but exceptionally about raw materials and components.

In case of first mentioned limitation I can’t see anything fundamentally bad there. There is already plenty enough companies in Ukraine now, making various products and providing different services that fully comply with this limitation. Yes, the state lays on certain limitations on the industry, but the market remains relatively free however. As for the second limitation, I consider it as absolutely ill-timed. This limitation did not inure yet and is not finally formalized. Nowadays there are several companies in Ukraine, whose products would correspond to this limitation. And this already looks like some relative “monopolization” of the market.

Summarizing the talk above, I want to underline once again, that in general the rule of “local component” has full right to exist, but only in case if industry of solar energy continues to work on the whole in accordance with market mechanisms, and legislative field remains clear, relatively stable and predictable.