On 4 December 2018, the Committee on Fuel and Energy Complex, Nuclear Policy and Nuclear Safety approved the updated version of the main conditions for the Draft Law on Amendments to Some Laws of Ukraine on Ensuring Competitive Conditions for the Production of Electricity from Alternative Energy Sources (the "Draft Law"). This Draft Law aimed to introduce an auction scheme for the realization of the future projects based on renewable energy sources ("RES"). The main conditions for the Draft Law were revised based on the results of numerous meetings and round tables about a potential auction scheme with investors, developers, renewable producers, renewables associations and other stakeholders. The main conditions approved by the Committee will be included in a Draft Law for the first hearing in Verkhovna Rada in December 2018.
The revised Draft of Law will contain the following main conditions:
Date of Implementation
From 1 January 2020
Participants of auctions
All RES technologies that reached 15% in general volume of the RES generation.
In 2020 – > 20 MW – Wind; >
10 MW – Solar
From 2021 till 2022 – > 20 MW –
Wind; > 5 MW – Solar
From 2023 – > 3 MW – Wind; > 1
MW – Solar
Auction scheme
Participants submit closed offers that contain a technical proposal (the amount of capacity that the participant intends to put into operation) and a price offer (price per 1 kW hour of electricity). Winners shall be determined on the basis of simultaneous disclosure of technical and price proposals. The only criterion for choosing winners is price.
The requirements for participants of auctions:
- confirmed ownership / lease rights on the land plot;
- concluded grid connection agreement;
- bank guarantee of USD 15,000 (USD 5,000 before auction and USD 10,000 for winners for bids) per 1 MW.
The term for pre-PPA signing
Till 31 December 2019
Conditions for signing of the pre-PPA:
- confirmed ownership / lease rights on the land plot;
- concluded grid connection agreement;
- permit for the construction of an object.
Conditions for receiving the feed-in tariff – commissioning of the facility within 2 years for the solar farms and 3 years for all other types of RES. The level of the feed-in tariff shall be determined on the date of putting of the facility into operation.
Feed-in tariff for other projects
Decrease for Solar: in 2020 – 25% with a further decrease of 2.5% each year for 3 years.
Decrease for Wind: in 2020 pursuant to the current wording of the Law – 10% with the further decrease on 1,5% each year during 3 years.
The period of new support
20 years
The most important condition for the auction is the presence of competition. The amount of capacity for which auction participants are entitled to state support cannot be more than 80% of the aggregate value proposed by all participants in the auction.
What will future renewable energy producers have to do?
The future renewable energy producers shall take into account the proposed changes of the supportive schemes:
- in the execution schedules for renewable projects;
- in contractual negotiations with suppliers of equipment, general contractors and EPC-contractors;
- in condition of financing of the projects by financial institutions; and
- in the financial models of renewable projects.
How we can help?
We are more than happy to assist you in resolving any issue related to the proposed amendments to legislation, including:
- complex assessment of renewable projects from prospective of participation in auction schemes and attraction of financing;
- evaluation and mitigation of possible risks in realization of renewable projects under the new supportive scheme;
- legal support of renewable projects during the transition period from the feed-in tariff till auction.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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