The Ministry of Energy and Environmental Protection of Ukraine is considering slashing feed-in tariffs (FITs) for existing large scale PV plants 15-25%, trade body the Ukrainian Association of Renewable Energy (UARE) has told pv magazine.
An announcement to that effect was reportedly made by Konstantyn Chyzhyk, deputy minister of energy and environmental protection, during the Ukrainian Energy Forum event.
The FIT cuts under consideration would see solar plants with a generation capacity of up to 10 MW shoulder a 15% reduction in payments with the figure rising to a 20% cut for 10-50 MW projects and 25% for larger facilities. Chyzhyk reportedly offered to soften the blow for developers by extending the term of affected ten-year contracts by five years.
The FIT program which expired at the end of last year paid large scale, ground-mounted PV projects €0.1502/kWh over a period of 10 years.
An alternative method of reducing the cost of subsidizing Ukrainian solar would see developers of PV projects of all sizes agreeing to take a “voluntary” 12.5% FIT reduction. Russian press agency Interfax reported Chyzhyk told the energy forum on Thursday: “The logic of this option is that such a reduction is much smaller than a decrease [combined with] extending the payment term. [Either] you pass restructuring, extending the payment term but at the same time you lower the feed-in tariff by a larger percentage, or you [do] not extend [the] payment term but at the same time take a slightly lower tariff reduction.”
With Ukraine currently sparing solar developers costs of imbalance – the obligation to financially compensate the grid for over or under-production from their generation assets – the National Investment Council head of office reportedly warned, project owners who do not agree to voluntary cuts will face the introduction of such payments this year. Developers who play ball, however, will not have to pay such costs until 2022, Chyzhyk reportedly suggested.
The energy forum also reportedly heard the proposed retroactive FIT cut for wind power facilities would be 10% combined with five-year payment contract extensions.
Renewables lobby group the UARE said the proposals flew in the face of plans announced by Ukrainian president Volodymyr Zelensky to attract renewables investment.
“If the proposal of the ministry … will be implemented, the country will lose the trust of investors and the plan of attracting $50 billion of investments within [the] next five years will [fail],” the trade body stated.
The association revealed the government had been in talks with the renewables industry since October as it attempts to reduce a financial deficit at the Guaranteed Buyer, a state-owned body which must purchase all renewable energy generated in Ukraine.
“Since that time [October] a lot of working group meetings were held where investors offered changes that can be acceptable for them,” the UARE said. “Unfortunately, offers presented by the Ministry of Energy and Environmental Protection of Ukraine on Thursday are far different from those investors can agree on. The proposed changes are not acceptable for the producers of electricity from renewable energy sources, as they will lead to … investment default.”
The association added, there are already delays in renewable energy payments which negatively affect market and investor sentiment.
The UARE said its members had proposed a 10% FIT cut for clean energy facilities with a generation capacity of up to 10 MW and 15% for larger projects, with the reduction applied only to facilities operational from the start of 2017 to the end of last year. In return, developers asked for contract extensions to the end of 2034.
The trade body asked for small solar projects – with a capacity of less than 1 MW – to be exempted from costs of imbalance obligations along with all facilities which entered operation before June 11, 2017, when an ‘On Electricity Market’ law came into force. In the event of government plans for a voluntary FIT cut to be offered, the UARE suggested developers who do not accept such payment reductions could pay costs of imbalance from next year. Developers who accepted such a payment regression, suggested the trade body, could pay only 10% of such costs next year, with the percentage rising 10% annually to hit 100% in 2030.
Ukraine had 1.3 GW of installed PV capacity at the end of 2018, according to International Renewable Energy Agency statistics. Large projects commissioned last year included a 240 MW solar plant and a further 240 MW of net-metered rooftop PV was also deployed, ensuring the nation currently boasts at least 1.8 GW of solar capacity.
This article was amended on 02/03/20 to specify that Konstantyn Chyzhyk is the Ukrainian deputy minister of energy and environmental protection and not, as previously reported, the head of office at non-governmental business organization the National Investment Council.
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The name of the speaker is incorrect, there were NO retrospective changes introduced, but only voluntary. Very unprofessional article.
Hi Maria, Our correspondent has written in good faith that the government has proposed reducing the FIT paid to projects to a lower level than that agreed in contracts signed from 2017-2019. We can indulge in semantics all we like but if this is true, as Interfax reported and as the trade body quoted in the article have told us, that is the textbook definition of a retrospective FIT cut. Our correspondent has also double-checked the spelling of the name of the speaker quoted and has been told it is spelt correctly. If you know differently on either count, please let us know here.
The position of the speaker is incorrect, Kostyantyn Chyzhyk is a Deputy Minister of Energy and Environmental Protection of Ukraine for European Integration for more than 6 months already. And the author is naming him as “National Investment Council head of office”.
Also here is the official presentation: https://t.me/invest_in_ua/112
There are no retrospective changes presented by the Ministry. Please check the official sources of information but not listen to Russian media.
Also, there is no such “trade body” at UARE Association. It doesn’t exist.
To supplement Emiliano’s reply and hopefully address your other criticisms. The UARE corresponded directly with Emiliano and we consider the national industry body of the renewables industry just as much a reliable primary source as the government.
It is wrong to claim Emiliano has taken all the information reported in this article from “Russian media”, by which I presume you mean the Interfax news agency.
In terms of the UARE, I think you may have misinterpreted use of the phrase “trade body”. We have not reported that the UARE has a department called the (or a) trade body, the phrase is simply a generic term for an organization which represents businesses and members of a specific trade or industry, in this case renewables.
Finally, in stating the government is proposing retroactive measures as an alternative to voluntarily-accepted cuts to subsidies, we have no reason to question what our sources at the UARE, who were present at the meeting in question, have told us. I hope that addresses your concerns.
Dear Maria, we have amended the name of the minister and made a rectification. As for the FIT cuts, they are retroactive, as the government is forcing investors to change the contract conditions that were previously established. We have reported about similar FITs “restructuring” or “re-negotiations” over the past years across several markets and we always referred to this kind of changes as retroactive. Spain implemented an abrut FIT cut with no possibility for investors to get the same payments over a longer time frame, and Italy, instead, made the same thing Ukraine is doing now. If you want to claim the Italian way is somehow better than the Spanish one, I agree. But in both cases we have to define the changes as retroactive and in both cases we are seeing something that is not exactly what investors like.
Dear EMILIANO BELLINI
Your article 100% right. We as a leader for attraction Investment in Renewable in Ukraine now have the big problem with minister of energy and environmental protection.
Today team from Ministry side completely unprofessional in Energy and Investment relationship.
We try explain them how working energy market but still the same position.
I hope President change them nearest time for solve biggest mistake in his energy politics.
Thanks for your works
Statement of EUEA and UWEA: Regarding FiT in Ukraine
Full text of the Statement
Joint Statement of EUEA and UWEA
Kyiv, Ukraine 4 March 2020
Members of the European Ukrainian Energy Agency (“EUEA”) and the Ukrainian Wind Energy Association (“UWEA”) have always been committed to help Ukraine attract new investors, technologies, financing, know-how to the renewable energy (“RE”) sector and to enhance the country’s energy independence.
Shortly after Ukraine’s adoption of the EU electricity market model on 1 July 2019, malicious litigation blocked the payments of the transmission tariffs to the transmission system operator. The Government of Ukraine (“GoU”) responded with amendments to the public service obligations (“PSO”) mechanism that are not consistent with that market model and have produced serious financial and operational distress. This has resulted in a non-bankable environment for RE sector.
To help the GoU restore orderly financial and technical operation of the sector, RE investors in October 2019 proposed a set of measures to make the Guaranteed Buyer (“GB”) bankable and expressed willingness as one of those measures to accept a voluntarily “green” tariff restructuring. This was confirmed in December 2019 with a joint letter to the President of Ukraine, signed by companies representing a large majority of Ukraine’s current and prospective RE capacity.
While supporting the idea of a “green” tariff restructuring, we have always made it clear that a restructuring of “green” tariffs can only represent a part of the solution. In parallel, the GoU needs to make the GB bankable. The Government and the Regulator now have all of the tools required to unwind their temporary fixes and implement the original EU market model in full, while also addressing the GB deficit and ensuring long-term RE PSO sustainability.
Investors tried, but failed, to agree with the Ministry of Energy and Environmental Protection (“MEEP”) on the required transition. In light of the matter’s urgency and importance, we requested the Energy Community Secretariat (“EnCS”) to enter as an independent mediating party early December 2019. Our aim was to reach a comprehensive agreement that would extend beyond the “green” tariff restructuring and that would ensure long-term stable operations of the electricity sector.
Since the mediation started in late January 2020, we made good faith efforts to deliver high quality and constructive input to all of the mediator-requested working groups and discussions We were therefore surprised and disappointed when the MEEP unilaterally published its latest proposal on its web site on February 27th, the day after it was sent to the mediator. This violates the agreed mediation confidentiality rules and undermines the effectiveness of mediation.
We remain determined to find arrangements which will promptly achieve full implementation of the EU market model in Ukraine and stabilize operations of electricity sector, while respecting the rule of law and ensuring the protection of investor rights which are essential for attracting future FDI.
We remain convinced that the EnCS mediation is the best way forward and express our appreciation for the positive role played by the EnCS in that process.
After internal consideration by our members of last week’s MEEP proposal, we will provide our comments within the mediation framework and will continue to participate in mediation in good faith with the hope of finding a reasonable solution in the interest of Ukraine, its investors and above all, its electricity consumers.
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