Alternative draft laws on auctions for support of renewables in Ukraine

Please be informed that following the registration on 7 June 2018 by a number of members of the parliament, including Acting Head of Fuel and Energy Committee of the Ukrainian Parliament Oleksandr Dombrovskyy and Head of the Subcommittee on Power Industry of the mentioned parliamentary committee Lev Pidlesetskyy of the Draft Law on Introduction of Certain Changes to Laws of Ukraine regarding Ensuring Competitive Conditions for Generation of Electricity from Alternative Energy Sources No. 8449 (the “Draft No. 8449”), available in Ukrainian at  http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_1?pf3511=64170, other members of the parliament registered 6 alternative draft laws to Draft No. 8449. The key differences of the alternative drafts with the Draft No. 8449 are discussed below:

1. Draft law No. 8449-1 dated 20 June 2018 registered by 7 members of the parliament, inter alia by Maksym Efimov and Viktor Galasiuk (head of the parliamentary committee on industrial policy and entrepreneurship, available at http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_1?pf3511=64252, envisages

1.1.    The current “green” tariff scheme of support shall be in place until 1 January 2025 (not until 1 July 2019), including companies which signed pre-PPA by that date, and the mandatory auctions shall be in place starting with the same date.

1.2.   RES power plants other than solar and wind power plants regardless of power capacity (Draft No. 8449 suggests to exclude from “green” tariff coverage only solar power plants with the capacity over 10 MW and wind power plants with the capacity over 20 MW) are entitled to the current “green” after 1 January 2025 (and not since 1 July 2019 as per Draft No. 8449).

1.3.   The “green” tariff for wind shall be reduced faster than provided by the current laws and Draft No. 8449 for new wind farms (with turbines 2 MW and more) according to the following schedule

1.3.1. approximately EUR 0,081 per kWh starting with 1 January 2020;

1.3.2. approximately EUR 0,071 per kWh starting with 1 January 2025;

1.4.   The “green” tariff for solar shall be reduced slower than provided by Draft No. 8449 for new solar power plants (both ground mounted and rooftop) according to the following schedule

1.4.1. for ground-mounted installations approximately EUR 0,12 per kWh starting with 1 January 2020 and EUR 0,105 per kWh starting with 1 January 2025.

1.4.2. for roof top installations (other than households) approximately EUR 0,13 per kWh starting with 1 January 2020 and EUR 0,115 per kWh starting with 1 January 2025;

1.5.   No increase of the cap for simplified procedure of obtaining “green” tariff for solar and wind power plants up to 500 kW and coverage by persons other than households as suggested by Draft No. 8449.

1.6.   Increase of the percentage of the premium for local content

1.6.1. if the local content in the respective power plant exceeds 30%, the power plant may obtain 10% bonus to either “green” tariff or the auction price (currently, the 5% bonus).

1.6.2. if the local content in the respective power plant exceeds 50%, the power plant may obtain 15% bonus to either “green” tariff or the auction price (currently, the 10% bonus).

1.6.3. if the local content in the respective power plant exceeds 70%, the power plant may obtain 20% bonus to either “green” tariff or the auction price as discussed below (the Draft No. 8449 offers the 15% bonus).

1.7.   The schedule for implementation of the secondary legislation is shifted to 2024 and 2025.

2. Draft law No. 8449-2 dated 20 June 2018 registered by 24 members of the parliament, inter alia by Sergiy Shakhov, Sergiy Rudyk, available at http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_1?pf3511=64253 , envisages

2.1.   The current “green” tariff scheme of support shall be in place until 1 January 2020 (not until 1 July 2019), including companies which signed pre-PPA by that date, and the mandatory auctions shall be in place starting with the same date.

2.2.   RES power plants other than solar and wind power plants regardless of power (Draft 8449 suggests to exclude from “green” tariff coverage solar power plants with the capacity over 10 MW and wind power plants with the capacity over 20 MW), are entitled to the current “green” after 1 January 2025 (and not since 1 July 2019 as per Draft No. 8449).

2.3.   No changes in “green” tariff for solar and wind under the current “green” tariff legislation.

2.4.   Increase of the percentage of the premium for local content

2.4.1. if the local content in the respective power plant exceeds 30% the power plant may obtain 10% bonus to either “green” tariff or the auction price (currently, the 5% bonus);

2.4.2. if the local content in the respective power plant exceeds 50% the power plant may obtain 15% bonus to either “green” tariff or the auction price (currently, the 10% bonus);

2.4.3. if the local content in the respective power plant exceeds 70% the power plant may obtain 20% bonus to either “green” tariff or the auction price as discussed below (the Draft No. 8449 offers the 15% bonus).

2.5.   The schedule for implementation of the secondary legislation is shifted to 2024 and 2025.

3. Draft law No. 8449-3 dated 20 June 2018 registered by 24 members of the parliament, inter alia by Valeriy Pysarenko, available at http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_1?pf3511=64267, envisages

3.1.   The current “green” tariff scheme of support shall be in place until 1 January 2020 (not until 1 July 2019), including companies which signed pre-PPA by that date, and the mandatory auctions shall be in place starting with the same date.

3.2.   RES power plants other than solar power plants with capacity over 0,5 MW,  wind power plants and biomass power plants with capacity over 3 MW (Draft 8449 suggests to exclude from “green” tariff coverage solar power plants with the capacity over 10 MW and wind power plants with the capacity over 20 MW), are entitled to the current “green” after 1 January 2025 (and not since 1 July 2019 as per Draft No. 8449).

3.3.   The “green” tariff for solar shall be reduced slower than provided by Draft No. 8449 for new solar power plants (both ground mounted and rooftop) according to the following schedule

3.3.1. for ground-mounted installations approximately EUR 0,13 per kWh starting with 1 January 2020 and EUR 0,12 per kWh starting with 1 January 2020;

3.3.2. for roof top installations (other than households) approximately EUR 0,148 per kWh starting with 1 January 2020 and EUR 0,13 per kWh starting with 1 January 2025.

3.4.   The cap for solar and wind power plants for households shall be increased up to 50 kW.

3.5.   No changes in premium for local content.

3.6.    A number of changes to the expected auction procedure, in particular:

3.6.1. The auction starts with the “green” tariff and the company which will give a lower price wins (Draft No. 8449 provides for the increase of the price towards the “green” tariff until any company decides to accept the price);

3.6.2. Bank gurantee shall be EUR 5,000 per 1 MW;

3.6.3. The winner shall increase its bank guarantee up to EUR 10,000 per 1 MW after the auctions.

4. Draft law No. 8449-4 dated 22 June 2018 registered by 7 members of the parliament, inter alia by Volodymyr Parasyuk and Igor Lutsenko, available at http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_1?pf3511=64279, envisages

4.1.   No changes to the auction system.

4.2.   Reduced “green” tariff for wind power plants with turbines over 100 MW;

4.3.   Reduced “green” tariff for ground mounted solar power plants with capacity over 100 MW

4.3.1. starting with 1 October 2018 – EUR 0,075;

4.3.2. starting with 1 January 2020 – EUR 0,068;

4.3.3. starting with 1 January 2025 – EUR 0,06.

4.4.   No other changes to the effective legislation.

5. Draft law No. 8449-5 dated 22 June 2018 registered by 7 members of the parliament, inter alia by Viktoriya Voytsytska and Oleksiy Mushak, available at http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_1?pf3511=64280

5.1.   The current “green” tariff scheme of support shall be in place until 1 January 2019 (not until 1 July 2019), including companies which signed pre-PPA by that date, and the mandatory auctions shall be in place starting with the same date.

5.2.   RES power plants other than solar and wind power plants with capacity over 0,5 MW (Draft No. 8449 suggests to exclude from “green” tariff coverage solar power plants with the capacity over 10 MW and wind power plants with the capacity over 20 MW), are entitled to the current “green” after 1 January 2019 (and not since 1 July 2019 as per Draft No. 8449).

5.3.   All solar and wind power plants with the installed capacity up to 100 kW of both individuals and business entities will obtain the “green” tariff and the right to sell electricity to the grid owners (now only households with installations up to 30 kW are entitled to such support and Draft No. 8449 suggests to have a cap of 500 kW). Only the net output will be purchased.

5.4.   The “green” tariff for wind shall be reduced faster than provided by the current laws and Draft No. 8449 for new wind farms for all types of turbines and for 2 MW there will be the following schedule

5.4.1. approximately EUR 0,076 per kWh starting with 1 January 2020;

5.4.2. approximately EUR 0,066 per kWh starting with 1 January 2025;

5.5.   The “green” tariff for solar shall be reduced faster than provided by Draft No. 8449 for new ground mounted solar power plants (both ground mounted and rooftop) and

5.5.1. will range depending on a geographical zone of solar power plants up to 3 MW from approximately EUR 0,081-0,1 per kWh starting with 1 April 2019 and EUR 0,072-0,088 per kWh starting with 1 January 2025.

5.5.2. for other ground mounted solar power plants will equal to approximately EUR 0, 081 per kWh starting with 1 April 2019 and EUR 0,072 per kWh starting with 1 January 2025;

5.6.   All other “green” tariff remain the same as in Draft No.8449.

5.7.   The premium for the local content requirement shall remain as provided by the current laws.

5.8.   Tolerance for liability due to imbalances under “green” tariff shall constitute 5% regardless of RES type (currently, it is 10% for wind, and 5% for solar and small hydro)

5.9.   Winners of the auctions shall reimburse imbalances cost in full.

5.10.The schedule for implementation of the secondary legislation is shifted to 2018 and 2019.

6. Draft law No. 8449-6 dated 22 June 2018 registered by Yuriy Chyzhmar, available at http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_1?pf3511=64281

6.1.   All solar and wind power plants with the installed capacity up to 1 MW of both individuals and business entities will obtain the “green” tariff and the right to sell electricity to the grid owners (now only households with installations up to 30 kW are entitled to such support and Draft No. 8449 suggests to have a cap of 500 kW). Only the net output will be purchased.

6.2.   The reduction of “green” tariff solar as provided by Draft No. 8449 and for wind as provided by the current law since 1 January 2020 shall occur starting with 1 July 2019. In 2025 there should be a bit less reduction of solar tariffs than provided by Draft No. 8449.

6.3.   PPAs for new power plants with capacity up to 1 MW shall be signed for 20 years from the award of “green” tariff and for new power plants with capacity from 1 MW up to 10 MW for 15 years provided that such power plants are commissioned after 1 January 2020.

6.4.   All-Ukrainian quotas for RES shall cover all types of RES and the respective share shall be established for each one. Biogas, biomass and small hydro shall receive not less than 20% of the all-Ukrainian quota.

6.5.   Pilot auctions in 2019 shall cover 50 MW of solar and 50 MW of wind.

The deadline for submission of the alternative draft laws (14 days) has elapsed and now the parliamentary committee shall work with 7 registered drafts. It is unclear provisions of which one will be finally supported by the parliamentary committee and the parliament.

by Maksym Sysoiev, Dentos