Energy derived from renewable sources is a trend all over the world today. The development of alternative energy is aimed at improving the environment, reducing the use of traditional (exhaustible) energy sources, the energy independence of both private households and the state as a whole, and also has favorable prospects for the economy. Therefore, in many countries of the world, governments use various economic and administrative incentives for those producers that generate these types of energy. Naturally, in different states these motivational levers have their own characteristics and distinctive features. In Ukraine, such incentives are called “green tariff”.
A bit of history
For the first time in the world, feed-in tariffs for the purchase of electricity, as well as the concept of this mechanism, were initiated in 1978 in the United States by President Jimmy Carter. Then he signed the Law on the regulation of public utilities and the National Energy Law, which encouraged energy conservation and the development of renewable energy sources (hereinafter RES). The first European country where this concept was developed was Germany. Here, in 1990, appropriate changes were made to the energy legislation. Today, alternative energy is being developed in more than 50 countries around the world with the help of “green tariffs” in one form or another and relevant legislation.
In Ukraine, work in this direction actually began in 2009, when the “green tariff” was introduced and the state enterprise “Energorynok” was created (on July 1, 2019, it was replaced (created on its basis) by two enterprises of the State Enterprise “Market Operator” and SE “Guaranteed Buyer”). But experts call 2015 the “starting point” of the real boom in investments in renewable energy. Just then, the alternative energy market was demonopolized in Ukraine at the legislative level (the President signed the Law “On Amendments to Certain Laws of Ukraine Regarding Ensuring Competitive Conditions for the Production of Electricity from Alternative Energy Sources” https://zakon.rada.gov.ua/laws /show/514-19 ), and investors, including international ones, are provided with ample opportunities for investment.
Initially, the tariff for “green” projects in Ukraine became one of the highest in the world, which made investments in this sector very attractive. Over time, the legislation regulating the “feed-in tariff” has been repeatedly amended, including in 2019, which became one of the most “fruitful” periods in this area. It was last year that discussions arose around the “green tariff” and certain problems with this issue, which continue today, including at the legislative level. We will talk about this briefly at the end of the article. In the meantime, we will tell you what a “green tariff” is and how to connect it.
What is a “green tariff”?
“Green Tariff” is special conditions, a somewhat overpriced price, at which the state undertakes to buy out the entire volume of excess electricity (all 100%) generated by renewable energy sources (sun, wind, biofuel, water) and given to the public grid. This tariff applies to both individuals and legal entities. Thus, this mechanism motivates the owners of alternative energy sources to develop this area more actively, and helps to attract investors. Due to the fact that such a “feed-in tariff” for electricity is significantly higher than the market one, solar, wind and other alternative installations pay off much faster, and investors can plan their income and develop their business.
How to connect to the “green tariff”
Connecting to the “feed-in tariff” is a rather laborious process, because in addition to the selection and installation of the equipment itself, it is also necessary to prepare a package of documents submitted to the state for connection to the compensation system for the sold surplus electricity. You can go through this procedure on your own or seek help from intermediary firms – companies specializing in connecting to the “green tariff”. Typically, their services are 10-25% of the cost of equipment.
Stages of connection to the “green tariff” for individuals / households:
- design, purchase and installation of equipment (for example, a solar power plant (SPS) of a grid type);
- obtaining permission to connect to local power networks: preparing documents and submitting an application for connecting to the feed-in tariff in Oblenergo corresponding to the district (oblast);
- coordination of the installation with Oblenergo;
- inclusion in the circuit and installation of a bidirectional electricity meter;
- opening a special bank account (if one does not already exist);
- execution of a package of documents for payment for energy supplied to the grid at rates fixed by law (signing an agreement with Oblenergo on the purchase and sale, etc.);
- putting the system into operation.
Steps to connect to the “green tariff” for business:
- registration of a legal entity, if one does not already exist;
- conducting feasibility studies or developing a feasibility study (feasibility study);
- acquisition / lease of land for a power plant, coordination with the territorial community and relevant organizations, development of documentation and a land management project, receipt of a package of technical documentation on land management for allotment of a plot for rent / property, transfer of technical documentation for examination to the State Land Agency of the region with subsequent receipt of a cadastral number;
- development of project documentation, and before that – obtaining technical conditions for connecting the facility to the energy infrastructure (substations, overhead lines) for transmitting electricity to the grid;
- obtaining a building permit with the notification of GASK and the start of construction;
- conclusion of an agreement on connection to public power grids;
- connection to public power grids;
- obtaining a declaration on the readiness of the object for operation (SAIC certificate or a corresponding declaration – depending on the category of complexity of the object);
- submission of documents to NERC for obtaining a license for the production of electricity;
- submission of documents for the approval of the “green tariff” ( submission of the appropriate package of documents to NEURC);
- submission of documents for registration of membership in the Wholesale Electricity Market (WEM).
- conclusion of an agreement for the sale of electricity at a “green tariff”.
Thus, connecting to the “green tariff” can take several months for a private person and much more time – more than 1 year – for a legal one.
There are more nuances. An individual can connect to the “green tariff” with equipment that runs only on wind and solar energy. For legal entities, geothermal, hydro- and biogas electrical systems can also be connected to the preferential tariff system.
Current feed-in rates
In order to reduce possible fluctuations of the national currency, in Ukraine the feed-in tariff rates were pegged to the official euro exchange rate. Payments are usually made in the national currency, hryvnia, with a quarterly recalculation of the exchange rate.
As you know, since January 1 of this year, the rates of “green tariffs” have decreased in Ukraine. The corresponding resolution No. 2011 was adopted by the National Commission for State Regulation in the Spheres of Energy and Utilities (NEURC) on September 24, 2019. According to this document, the “green tariff” for electricity generated by SES with a capacity of up to 30 kW, which were put into operation (excluding VAT) amounted to:
- from 01.04.2013 to 31.12. 2014 – 989.62 kopecks / kWh (was 1090.60 kopecks / kWh);
- from 01/01/2015 to 06/30/2015 – 890.06 kopecks / kWh (was 980.88 kopecks / kWh);
- from 07/01/2015 to 12/31/2015 – 552.76 kopecks / kWh (was 609.16 kopecks / kWh);
- from 01/01/2016 to 12/31/2016 – 524.53 kopecks / kWh (was 578.05 kopecks / kWh);
- from 01/01/2017 to 12/31/2019 – 499.27 kopecks / kWh (was 550.21 kopecks / kWh).
For stations with a capacity of up to 30 kW, generating wind energy and put into operation from 01.07. 2015 to 31.12.2019, the “green tariff” is 320.96 kopecks/kWh (without VAT) instead of 353.71 kopecks/kWh.
For wind turbines up to 50 kW put into operation from 12/01/2019 year to December 31, 2019, the “green tariff” is also 320.96 kopecks / kWh (excluding VAT).
“Green tariff” for electricity produced by solar power plants with a capacity of up to 50 kW, provided they are located on roofs or facades buildings and other capital structures that were put into operation from 01/01/2019 to 12/31/2019 is 499.27 kop/kWh (excluding VAT).
The “feed-in tariff” for electricity generated using combined wind-solar systems of private households with a capacity of up to 50 kW and which were put into operation from 01/01/2019 to 12/31/2019 is 451.72 kopecks / kWh (excluding VAT) .
If until December 31, 2019 the feed-in tariff rate for electricity for private households was at the level of 0.18€, from 2020 for new connections the rate is 0.16€. A reduction in the feed-in tariff rate is planned not only for “home” SPPs, but also for industrial ones. If in 2019, for each kWh of electricity transferred to the grid, enterprises received 0.15 € for a ground-based power plant and 0.16 € for a roof, then from the beginning of 2020 the tariff was reduced to 0.14 € and 0.15 €, respectively. And if for small solar installations such a tariff reduction is not very noticeable, then for large capacities it can result in a serious minus from the income received from a solar power plant.
Also, from this year, for guaranteed redemption by the state of the surplus of generated electricity from newly connected facilities (wind generation over 5 MW and solar generation over 1 MW), it will be necessary to take part in auctions ( http://w1.c1.rada.gov.ua/pls /zweb2/webproc4_1?pf3511=65076 ). Their result should be the establishment of an auction price for such electricity, taking into account a possible surcharge of 5–10% for the use of Ukrainian technologies.
Green tariff rates for individuals
| RES installation site | Units | Rates until December 31, 2019 | Rates from 01.01.2020 |
| Roofing | € / kW*year | 0,18 | 0,163 |
| Ground | € / kW*year | 0,18 | 0,163 |
Green tariff rates for legal entities
| RES installation site | Units | Rates until December 31, 2019 | Rates from 01.01.2020 |
| On rooftops, up to 1MW | € / kW*year | 0,163 | |
| On the ground, up to 1MW | € / kW*year | 0,15 | 0,14 |
| On rooftops, > 1MW | € / kW*year | auction | auction |
| On the ground, > 1MW | € / kW*year | auction | auction |
What will happen to the “green tariff” next?
It must be said that 2019 turned out to be a very “stormy” year for the “green tariff” in Ukraine. Various government initiatives and changes to legislation caused a storm of emotions and concern among alternative energy producers, primarily small ones. As a result of public debate and a wave of indignation among the owners of solar installations, in the summer, on July 11, the Verkhovna Rada of Ukraine adopted, and on August 6, the President signed Law No. 2755-VIII (Bill No. 10357) http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_1?pf3511=66034 , according to which the guarantees of receiving the “green tariff” were returned to the owners of small solar power plants (up to 30 kW), regardless of the location of the installation until 2030. The law “On Amendments to Certain Legislative Acts of Ukraine Regarding Ensuring Competitive Conditions for the Production of Electricity from Alternative Energy Sources” (2712–VIII https://zakon.rada.gov.ua/laws/show/2712 ) was adopted earlier in April of the same year. -19 ) limited such home SES in receiving the “green tariff”. According to its wording, published on May 21, a new condition for receiving a feed-in tariff for households was to be the installation of stations up to 50 kW on roofs, facades of buildings and other capital structures (previously it was 30 kW without location restrictions). Under public pressure, this problem was corrected by the adoption of Law No. 2755-VIII (Bill No. 10357).
But among the positive aspects of the legislation is an increase in the permitted capacity of home SES from 30 to 50 kW, provided for by the April law on auctions http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_1?pf3511=65076 .
Another innovation is that in autumn the NEURC resolution came into force regarding the introduction of a new “Procedure for establishing, reviewing and terminating the “green tariff” for electricity for business entities, consumers of electricity, including energy cooperatives and private households whose generating installations produce electrical energy from alternative energy sources” (https://www.nerc.gov.ua/?id=44040 ). It expands the list of subjects to which it applies, as well as indicates additional documents that must be attached to the application submitted for the establishment / revision of the “green tariff”.
In addition, it was initially assumed that the existing tariffs, developed earlier in accordance with the law, would be valid until 2030 and gradually decrease – by this time, the “feed-in tariff” would have to be equal to the energy received from traditional sources. However, the events and statements of the authorities, published in the media, show that there is a possibility of further reduction of the “green tariff” rates in the near future. The main argument is that excessively high rates in Ukraine (about twice as high as in Europe) create conditions for abuses and super profits in the field of alternative energy.
Thus, in December 2019, NEURC came up with a proposal to reduce the tariff for all renewable energy sources and allow the transfer of such facilities to the state on the terms of reimbursement of all invested investments with economically justified profitability, but minus the funds already received under the “green tariff” (letter from the head of the NEURC Valery Tarasyuk to the relevant committee of the Verkhovna Rada, which was published by the publication “BusinessCensor”). In numbers it looks like this: set the tariff for ground solar power plants put into operation before the end of 2019 at the level of 9 euro cents per 1 kilowatt-hour, and for those that will be put into operation between 01.01. 2020 and December 31, 2029 – at the level of 8 euro cents. For rooftop solar stations, the tariff should be 10 and 9 euro cents, respectively. For wind power plants, tariffs are proposed to be fixed at a rate of 8 euro cents for facilities that were put into operation before the end of 2019, and for those put into operation in 2020-2029. – 7 euro cents. According to the regulator’s calculations, the reduction should reduce the total payments under the feed-in tariff in 2020 from UAH 42.5 billion. up to UAH 28.5 billion In the same letter from the leadership of the NEURC, addressed to the relevant committee of the Verkhovna Rada, it is indicated that the regulator does not support the bill on the restructuring of the “green tariff”, which is expected to be considered in the near future. We are talking about draft law No. 2543 ( https://w1.c1.rada.gov.ua/pls/zweb2/webproc4_1?pf3511=67559 ), which proposes voluntary restructuring of contracts for the purchase and sale of electricity under the “green tariff”. Thus, the state offers investors in exchange for the extension of the “green tariff” to voluntarily agree to its reduction. The bill also provides for a more favorable regime for the protection of foreign investment for those alternative energy facilities that agree to restructuring for up to 15 years.
The authors of the bill also propose to introduce the regulation of fines in case of deviations from the volume of electricity production according to the schedule by more than 15% (the so-called “imbalance”). The amount of the fine in this case will be 0% until 12/31/2020 and will increase by 20% every year until 01/01/2025. sales of electricity at the “green tariff”.
This draft law, which will allow Ukraine to avoid investment arbitrage and give way to the construction of new stations, is supported by many manufacturers and industry organizations. NEURC, for its part, does not support the scenario of restructuring the “green tariff” prescribed in the draft law No. 2543, offering its own version of the “green tariff” rates, which we discussed earlier (see above). The regulator proposes “the introduction of a more stringent restructuring of the support model for renewable energy producers, which would make it possible to solve and balance the financial and technical problems associated with the rapid increase in the complexity of renewable energy facilities” (read the document at the link “BusinessCensor”).
The government is also inclined to reduce the “green” rates. On the one hand, they say they do not plan to revise them retroactively, but on the other hand, they hint that they want to offer businesses to voluntarily reduce “green” prices. The government’s arguments include:
- there is no money in the budget for payment of tariffs;
- prices have dropped for equipment for “green” energy;
- imbalance in the market has led to the fact that the main “players” (large companies) receive excess profits;
- the high feed-in tariff creates an imbalance in the overall energy system.
Another fact that the issue of the “green tariff” in Ukraine is not simple is the initiative of 49 people’s deputies, who at the end of last year prepared an appeal to the Constitutional Court. In their appeal, they are going to ask the Constitutional Court to recognize the “green tariff” as unconstitutional and challenge the constitutionality of the provisions on “green tariffs” in the laws “On Alternative Energy Sources” and “On the Electricity Market”. This submission, at the time of writing, has not yet been sent to the Constitutional Court.
However, according to the statements of the Ministry of Energy and Environmental Protection, as reported by the publication ” Left Bank “, the government plans to develop alternative energy, but this development must be justified. According to their calculations, over the next 30 years, that is, approximately by 2050, the level of renewable energy in Ukraine should be about 70% (now the share of green power plants in Ukraine is 5%). For comparison, in the EU at the end of 2018, the share of energy received from RES was about 18%, and at the beginning of this year it approached 20%. By the way, in 2019 in Ukraine, the number of new alternative power plants operating on renewable energy increased significantly – the total capacity of the constructed power plants amounted to 4.5 GW, which is almost 2 times more than the capacity of all “green” power plants operating in the country at the beginning of last year.
According to Energy Minister Oleksiy Orzhel, Ukraine needs to stop “abuse in the field of alternative energy”, in particular, the payment of inflated “green tariffs” for energy produced from alternative sources. So far, even without the “green tariff”, investments in renewable energy are more profitable than in traditional ones.”
The questions of how events will develop in the future, until what year and to what extent the rates for private and industrial alternative installations will be extended or reduced, are still open.
And at this stage, the prospect makes investors a little tense and nervous. Thus, the Norwegian company Scatec Solar has recently suspended the implementation of a project for the construction of a solar power plant in the Kherson region due to the announced changes to the feed-in tariff system.
Also on January 16, the Verkhovna Rada of Ukraine nevertheless adopted the scandalous bill No. 1210 , which returns the payment of VAT on solar panels, which was not the case before. One of the amendments to this bill concerns law No. 9260, which has been in force since last year (which entered into force on January 1, 2019 http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_1?pf3511=64888 ). It provided for a tax exemption – electric vehicles, as well as photovoltaic cells, wind turbines and other equipment used for the construction of solar and wind power plants, were exempted from VAT. According to experts, this can lead to an increase in the cost of solar panels by at least 20%. At the time of this writing, this law has been submitted for signature to the President of Ukraine.
And yet, experts believe that despite all the changes, there is no reason to despair, and it is promising to build solar installations, especially up to 150 kW (they do not require licensing by the NERC). Another important point is the competition of the renewable energy industry in Ukraine. Due to the fact that in our country the “feed-in tariff” is considered the highest in Europe, foreign investors are actively attracted to us, who invest huge amounts of money in the development of industrial solar power plants. And therefore, new manufacturers of equipment and products for the construction and maintenance of solar power plants are striving to enter the domestic market. They are fighting for their potential client and, accordingly, the cost of equipment is reduced or its quality is increased. So today, in fact, the price of the “green tariff” is decreasing, but along with it, the cost of investing in a solar power plant is also decreasing. Therefore, you should not worry too much – changes in the market do not affect the overall situation. But at the same time, it is better not to delay. The faster the solar power plant starts to work, the faster it will pay off and bring passive income to its owner.
We will monitor the situation on the solar panels market and inform readers about changes.