On 1 May 2009 new licensing conditions for the generation, transmission and supply of heat (the Licensing Conditions) came into effect in Ukraine. There are three sets of the Licensing Conditions, one for each type of activity (generation, transmission and supply), adopted by three joint orders of the Ministry of Housing and Public Utilities of Ukraine and the State Committee of Ukraine on Regulatory Policy and Entrepreneurship dated 30 December 2008 (Nos. 167/417, 168/418 and 169/419 respectively).

The Licensing Conditions replace the licensing conditions adopted in 2007. They neither principally change the previous licensing procedure for the generation, transmission and supply of heat nor introduce new qualification requirements for potential licensees. However, the Licensing Conditions make the licensing of heat generation more centralized and introduce two additional licenses for companies that generate heat using cogeneration technologies or alternative or renewable sources of energy.

Centralization of licensing of heat generation

In Ukraine, the generation, transmission and supply of heat may be licensed by two types of heat licensing authorities:

  • The relevant regional state administration, which may issue a local license permitting such activities only in a particular region; or
  • The Ministry of Housing and Public Utilities, which may issue a state license permitting such activities throughout Ukraine.

The Licensing Conditions make licensing more centralized by requiring the Ministry of Housing and Public Utilities to issue a license for generation of heat if a company has heat generation capacity exceeding 20 KCal/h (the previous threshold was 50 KCal/h).

Additional licenses for generating heat using cogeneration technologies or alternative or renewable sources of energy

Before the Licensing Conditions came into effect, Ukrainian law did not specify what authority was responsible for licensing the transmission and supply of heat generated using cogeneration technologies or alternative or renewable sources of energy. The National Electricity Regulatory Commission of Ukraine (NERC) was explicitly authorized to license only cogeneration of heat and electricity and generation of heat from alternative or renewable sources of energy. The old licensing conditions specifically excluded licensing of transmission and supply of heat generated using cogeneration technologies or alternative or renewable sources of energy from the authority of the regional state administrations and the Ministry of Housing and Public Utilities. As a result, companies generating, transmitting and supplying heat using cogeneration technologies or alternative or renewable sources of energy obtained only one heat generation license from NERC.

The new Licensing Conditions address this issue and require that the transmission and supply of heat generated using cogeneration technologies or alternative or renewable sources of energy may be done only on the basis of two separate licenses (one for transmission and one for supply) issued by the relevant heat licensing authority.

Therefore, if a company desires to generate heat using cogeneration technologies or alternative or renewable sources of energy, transmit such heat through its own transmission lines and sell it to at least one consumer, it must receive three separate licenses: one generation license from NERC and two licenses from the relevant heat licensing authority for transmission and supply.

With only a heat generation license issued by NERC, a company may still generate heat using cogeneration technologies or alternative or renewable sources of energy and then transmit it for its own internal consumption, but not to third parties.

As a matter of Ukrainian law, the generation, transmission and supply of heat without a license may lead to administrative liability of a company and administrative or criminal liability of its officials.