On 4 September 2018, the Ukrainian parliament passed the law “On Amendments of Certain Legislative Acts of Ukraine (in Relation to Investment Attractiveness of Construction of Renewable Energy Objects)” (the “New Law”). It will enter into force the next day after signing by the President (unless vetoed) and official publishing. The New Law is likely to accelerate the development of new renewable power plants by simplifying regulatory requirements.
All constructions are classified in Ukraine at the designing stage in three consequence classes: objects with insignificant (CC1), medium (CC2), and significant (CC3) consequences. Ukrainian law has different regulatory requirements for each consequence class. For example, as opposed to CC2 and CC3 objects, CC1 objects:
- are exempt from expert examination of design documentation;
- do not require construction permits and commissioning certificates, but follow simpler procedures that only require submission of a notification on commencement of construction works (prior to commencement of the construction) and a declaration of readiness of the object for operation (after completion of the construction);
- are allowed to be constructed by contractors who do not have construction licenses.
The New Law lowers the threshold for classification of construction projects so that they can be considered as CC1 objects.
In particular, the New Law changes one of the main requirements for classification – the amount of material and social damages that can be caused by the breakdown of the object that is classified. At the moment, for a construction project to be classified as CC1 object, the outlay must not exceed 2,500 statutory minimal wages (currently UAH 9,307,500 or approximately EUR 284,000).
Under the New Law, construction projects are still subject to EUR 284,000 damages threshold, but the damages of the customer (that include the cost of the project construction) are not included in this amount if no state funds or guarantees are involved in the project. Considering that the customer’s damages (that include the cost of the project construction) usually amount to the majority of the material and social damages that can be caused by the breakdown of the object that is classified, it will be much easier for construction projects to be classified as CC1 objects, and enjoy benefits listed above as cost of their construction will not be taken into account.
With respect to solar and other renewable power projects that usually don’t have any other material or social damages that can be caused by their breakdown except for customer’s damages this means that they will be usually considered as CC1 objects irrespective the cost of the project, if no state funds or guarantees are involved.
In relation to wind power projects, the New Law also:
- allows existing wind power projects classified with a level III complexity category (see the table below) to be classified as CC1 objects;
- establishes that wind power projects subject to an environmental impact assessment (the “EIA”) can be classified as CC1 objects, if they receive a positive expert view by an authorised environmental body; and
- clarifies that expert examination of the designing documentation of a CC1 classified wind power project is performed only in relation to its compliance with expert view of an authorised environmental body and with the results of an EIA.
Construction projects, however, can be still classified as CC2 or CC3 objects on the basis of other requirements to consequence classes established by Ukrainian law (for instance, if they require an EIA).
The following table briefly outlines the requirements for each consequence class under the existing legal regime and lists (in yellow) the changes to be introduced by the New Law.