Ukrainian Prime Minister Shmyhal Denys along with the country's renewable energy industry representatives signed on a memorandum of understanding (MoU) that secures acceptance from the private sector to bring down feed-in-tariff (FiT) rates for renewable energy installations in the country.
On its website, Ukraine based law firm Redcliffe Partners details the understanding reached, as officially the MoU hasn't been released as yet.
For solar PV installations of up to 1 MW system size commissioned between July 1, 2015 to December 31, 2019 the FiT has been reduced from 15% to 10% for less than 1 MW sizes. With effect from January 1, 2020, irrespective of the installed capacity, there will be a 2.5% reduction in rates.
For installations commissioned before July 1, 2015, the FiT has been capped at the level of ground mounted solar systems of less than 10 MW capacity commissioned before March 31, 2013, which represents a reduction of 15%.
The law firm says as per the discussions reached the FiT term will not be extended and will continue to remain in effect till December 31, 2029.
Solar power projects under construction with preliminary power purchase agreements (PPA) will need to come online by July 31, 2020 to be able to claim a FiT. Those coming online post this date will not be eligible and can seek state support if they win auctions with a 20-year PPA. Such projects can also sell power generated in the open market. For wind power projects there is no cut-off date.
In return, the government has promised to ensure timely payments for electricity produced under the FiT at the beginning of the month once the changes come into effect officially. All money the offtakers owe to renewable energy producers since January 1, 2020 will be paid in installments—40% in Q4/2020 and the remaining in quarterly installments of 15% to be completed by the end of 2021.
Once the Restructuring Law is legally adopted, within 2 months of that Ukraine says it will launch renewable energy auctions allotting quotas to various energy sources. The first such auction will be held before the end of 2020. Eligible projects need to ensure grid availability for the power their projects will generate.
The above and more matters agreed to under the MoU were reached following a lengthy negotiation process between the 2 parties, says Redcliffe Partners and adds that it is not legally binding currently but a framework political arrangement.
In 2019, Ukraine installed around 4 GW PV, up from 700 MW the year before, turning the country into a global top 10 solar market. The retroactive cuts of the government are an attempt to decrease cost of a systems that was offering extremely generous feed-in tariffs.
In SolarPower Europe's mid June 2020 released Global Market Outlook 2020-2024, Artem Semenyshyn, Executive Director of the Solar Energy Association of Ukraine (ASEU) wrote that the "key challenges faced by the Ukrainian solar sector include a lack of trust from he investor's side to the government's activities in the RE sphere, huge debts for purchased electricity (only 5-11% are paid for the period of March-May 2020) and possible retrospective changed of the FIT for all RES facilities." Now that there seems to be an agreement with the solar industry about the retroactive cuts from the government it remains to be seen if this will re-establish trust from investors in the Ukrainian solar policy framework.
In February 2019, the European Bank for Reconstruction and Development (EBRD) issued a call to look for a consulting firm to support Ukraine's transition to renewable energy competitive auction mechanism (see Consultant Sought For Ukraine's RE Auction Program).