The promotion of the renewable energy sector has brought the first results. Renewable sourced electricity facilities with a total capacity of 96 MW have been put into operation for the period September 2010 to September 2011.

Growth on target

According to the State Program of Energy Efficiency for 2010-2015, the share of renewable energy sources in the total energy generation in Ukraine should increase to up to 10% by 2015, while the current share represents less than 1%. In line with this target, and in line with market reports, the production of electricity from renewable energy sources for the first half of 2011 has grown by 16% compared to the same period in 2010, and renewable electricity generation reached 274 million kilowatt hours (kWh).

The growth in electricity generated from renewable energy sources comes from new hydro, solar, and wind power facilities put into operation in the first half of 2011. A new 47.5 megawatt (MW) solar photovoltaic (PV) facility was installed in Crimea by Activ Solar GmbH. The first part of Wind Park “Novoazovskyi”, with 25 MW, was connected to the Ukrainian energy system by LLC Wind Park “Novoazovskyi” in the Donetsk region. It is expected that new PV and wind power facilities will be installed and operating in the second half of 2011 and in 2012.

Attracting investors with “green” tariffs

To attract private investors to renewable energy projects, the government has introduced incentive tariffs for electricity generated from renewable sources. The value of these incentive tariffs, also called “green” tariffs, depends on the source of the renewable energy used to produce electricity and other factors.

Based on the method of installation of a solar energy facility and its installed capacity, the value of the green tariff varies from UAH 4.321 (ca. EUR 0.398) to UAH 4.714 (ca. EUR 0.434) per one kilowatt (kW). The green tariff for electricity from wind power depends on the installed capacity of the wind power park and varies from UAH 0.702 (ca. EUR 0.065) to UAH 1.228 (ca. EUR 0.113) per kW. However, for renewable energy facilities put into operation after 2014, 2019, and 2024, the value of green tariffs will drop by 10%, 20%, and 30% respectively. The green tariffs will stay in place until 1 January 2030.

To sell electricity at the green tariffs, owners of renewable energy facilities must procure that the value of Ukrainian sourced materials, fixed assets, and services in the total capital expenditures of the renewable energy facility reaches at least (i) 15% starting from 1 January 2012; (ii) 30% starting from 1 January 2013; and (iii) 50% starting from 1 January 2014.

Also, from 1 January 2013, solar energy facilities must use PV modules produced using Ukrainian sourced raw materials whose value is at least 30% in the total value of the PV modules. Starting from 2014 the required value of Ukrainian sourced materials in the total production value of the PV modules will increase to 50%.

Connection to the electricity network?

An important factor to consider when deciding whether to invest in a renewable energy facility in Ukraine is connection to the electricity network. The connection can be made based on a connection agreement between the owner of the facility and an operator/owner of an electricity network located on the territory adjacent to the renewable energy facility. Given that many technical issues may arise concerning connection to the grid, it is advisable to negotiate the terms of the connection agreement and the costs involved with the electricity network operator/ owner before the erection of the facility starts.

Licence for electricity generation

Producers of electricity from renewable energy sources will obtain a licence for electricity generation if (i) the installed power capacity of a renewable energy facility equals or exceeds 10MW, or (ii) irrespective of the installed power capacity, such producers intend to trade electricity generated from renewable energy sources on the Wholesale Electricity Market of Ukraine (“WEM”), operated by the State Enterprise “Energorynok”. The producers may also choose to sell electricity directly to customers or electricity supply companies based on direct contracts and at agreed prices which, however, may not be lower than the green tariffs. By law, electricity not sold via direct contracts with customers or supply companies must be purchased by the WEM. This law ensures that owners of renewable energy facilities make a profit on their investments.

To attract private investors to renewable energy projects, the government has introduced incentive tariffs for electricity generated from renewable sources. The value of these incentive tariffs, also called “green” tariffs, depends on the source of the renewable energy used to produce electricity and other factors.