New rules of the game in Ukraine's renewable energy market
Implications for investors and the industry
July 24, 2020
Kyiv, Ukraine
This week, on July 21, the Ukrainian Parliament (Verkhovna Rada) adopted the Law [1] on the Improvement of Support Measures for the Production of Electricity from Alternative Energy Sources. The Law is the compromise outcome of long-running negotiations between the Government and international renewable energy investors in Ukraine, reached under the Energy Community Dispute Resolution and Negotiation Centre.
The Law provides a reduction in tariffs for solar power plants and wind power stations and so alters the investment conditions in the green energy space, since their stability until 2030 had previously been guaranteed. Investors were forced to agree to the new conditions in the face of spiralling State debt from the sector and protracted lobbying by influential industrial consumers of electricity for even greater renewable tariff reductions.
The Government has long been arguing that the recent explosive growth in green energy production had made the previous tariff system unsustainable, so will be relieved to have brokered a resolution at this week's extraordinary Rada sitting. The issue had become even more pressing during the pandemic crisis, with the resulting fall in energy demand bringing even greater imbalance to the national energy market.
To sweeten the deal to investors, the Government has granted new guarantees of the immutability of the legislation as of the date of its adoption, as well as partial payment to green energy producers from the budget. However, it has resisted investors' requests to extend the tariff agreement by 2032.
A more detailed look at the background to the conflict that has been resolved, at least for now, by the new Law in our overview.
