On 4 June 2015, the Ukrainian parliament adopted the Draft Law on Introduction of Changes to Certain Laws of Ukraine with respect to Securing Competitive Conditions for the Production of Electricity from Alternative Energy Sources, No. 2010-d of 19.05.2015 (the Law). The Law, which contains various changes to the current feed-in tariff regime in Ukraine, is a milestone for a sector that has stagnated for the last several years due to several legislative barriers, such as a problematic local content requirement, a restrictive definition of biomass, unbalanced tariffs for various types of renewables, etc. The Law tackles many of these barriers.
Now the Law will be submitted to the President of Ukraine for signature after which it will enter into force on the date following the date of its official publication.
The Law contains the following changes:
1. Both products and waste will be considered as biomass for the purpose of qualifying for the feed-in tariff or “green” tariff (“GT”), as it is named in Ukraine. Currently, only waste qualifies, whereas energy crops and products of other industries do not.
2. As a general rule, GT will cover electricity produced by a power plant minus electricity consumed by a power plant for its operation, while currently all output of a power plant shall be purchased at GT. For households, only the difference between electricity produced and electricity consumed by a respective household will be purchased at GT.
3. Households will be eligible for GT if the total power capacity of their installations using solar and/or wind energy do not exceed 30 kW but not more than the power capacity allowed under their power purchase agreements with grid distributors. As of today, only households with solar installations up to 10 kW may qualify for the GT.
4. Application of a peak time coefficient for GT, in particular for solar and small hydro, will be cancelled. In general, rates of GT will be calculated under the following formula provided by Article 17-1 of the Law of Ukraine On Electric Power Industry (the Power Industry Law):
GTR = RP*C, where
- GTR: rate of GT depending on the alternative energy source, date the power plant was commissioned, power capacity of the power plant and other factors,
- RP: retail price for electricity for 2nd class consumers as of January 2009, established in accordance with Resolution of National Energy Regulation Commission No.1440 of 23.12.2008 converted at the applicable NBU exchange rate in €,
- C: coefficient established by Article 17-1 of Power Industry Law.
In general, the rates for solar will be decreased considerably in comparison with the effective regulation, while tariffs for wind and biogas will be slightly increased. GT for small hydro will remain unchanged, and there will be a new tariff for geothermal energy.
5. All GT rates will remain fixed in € and the UAH equivalent will be established quarterly at the last meeting of the National Commission for State Energy and Public Utilities (the Regulator) during each respective quarter based on the average €/UAH exchange rate during the 30 day period preceding the meeting.
6. There will be no €/UAH exchange rate link of feed-in tariff for power plants commissioned starting with 2025. These rules will also start applying to households.
7. The current mandatory local content requirement will be cancelled.
8. The use of locally produced equipment in a project is instead encouraged by means of a premium payment. Producers could be eligible for a premium of 5 percent of the eligible GT rate if the ”level of locally produced equipment” in a project is 30 percent, or a premium of 10 percent of the eligible GT rate if the project contains at least a 50 percent “level of locally produced equipment.” The premium will not apply for power plants commissioned starting from 2025, nor will it apply to households. The Law contains the lists of equipment which could qualify as locally produced equipment and based on which one could calculate the share of local component in a project. The list appears in Table 2 below.
9. The Regulator will determine the level of locally produced equipment based on certificates from the Chamber of Commerce of Ukraine and other confirming documents.
10. Inclusion of power plants with more than 5 MW power capacity into the Plan for Development of Unified Energy System of Ukraine for 10 years will no longer be a prerequisite for obtaining the GT.
11. There will be a special procedure elaborated by the Regulator to buy all electricity qualifying for the feed-in tariff.
12. Rules for preferred connection to the grid at the expense of the grid owner will be cancelled.
13. The issue with payments to large solar plants installed before July 1, 2015 with high solar tariffs is resolved by establishing temporarily reduced feed-in tariffs for solar power plants with installed power capacity of more than 10 MW (in € per kWh as listed below):
- If commissioned until March 31, 2013: 0,2585 eurocents;
- If commissioned from April 1, 2013 until December 31m 2014: 0,1885 eurocents;
- If commissioned from January 1, 2015 until June 30, 2015: 0,1697 eurocents.