Energy potential of Ukraine and the role of legal support in the development of the industry

How would you characterize the current trends in legal support in the energy sector?

— The development of the legal market in the energy sector of Ukraine is influenced by the transformation of the energy sector itself, European integration processes, as well as environmental safety requirements and global trends in sustainable development. Thus, the main trends include:

• first, the implementation of European legislation. This is an important part of the European integration process carried out under the Association Agreement with the EU and membership in the Energy Community. Law firms can provide significant assistance in the implementation of European legislation, in particular for companies, government agencies and certain sectors of the economy;
• second, the development of renewable energy. Everyone knows that Ukraine has a great potential for developing renewable energy, and over time, this sector could become a key component of the country’s energy system. Ukraine could potentially become the center of green energy in Europe. Given the rapidly changing regulatory compliance of the energy industry, legal support for projects is indispensable. I predict that client demand will continue to shift in favor of companies such as GOLAW, which are able to provide comprehensive services to investors, have not only first-class legal but also technical expertise, and can be a one-stop shop for investors, leading a turnkey investment project;
• third, tariff regulation and licensing. The issues of tariff setting, licensing of activities and working conditions in the energy sector are complex and are regulated by the National Energy and Utilities Regulatory Commission. Legal services are aimed at helping energy companies comply with the regulator’s requirements, prepare for inspections, obtain and renew licenses, and resolve disputes with regulatory authorities;
• fourthly, stimulating energy efficiency. Against the backdrop of rising energy costs and stricter energy efficiency requirements for infrastructure modernization projects and energy certification of buildings, the demand for energy efficiency project support is growing significantly. Many projects are implemented with the support of international financial institutions and involve the participation of lawyers in financing agreements;
• and fifth, investment protection. Given the political and economic risks caused by the war, protecting foreign and domestic investments is a priority. The lawyers help companies structure transactions to minimize risks and provide support in international arbitrations to resolve energy-related disputes.

In the energy sector, the transition to renewable energy sources and the implementation of EU regulations have had a significant impact on the legal landscape. Law firms are increasingly being engaged to advise on compliance with EU directives, facilitate investments in renewable energy projects, and navigate complex energy market regulation.  

Not so long ago, the long-awaited launch of the register of guarantees of the origin of electricity from renewable sources took place. Does your company provide services for obtaining the status of a user of this register?

— Yes, of course. We have been keeping our finger on the pulse during the long process of implementing this mechanism and now have clear knowledge of the issue of guarantees of origin of electricity from renewable energy sources (RES). This fall, the first RES auctions were held, launching a new market for Ukraine. Given the experience of European countries, it can be concluded that the introduction of guarantees of origin is not only about metering electricity and confirming its production from renewable sources. It is a way to attract investment, increase transparency and efficiency of the energy sector and the country’s economy as a whole.

You mentioned that GOLAW provides turnkey projects. Could you describe this process in more detail?

— I can describe it on the example of a solar power plant project, which is the most popular industry among renewable energy sources. This process requires the involvement of many experts from different fields: construction, technical, etc. 

The first stage is the acquisition of rights to a land plot for construction. There are several options here: setting up a company, which is most often in the form of an LLC, finding a land plot and obtaining the relevant rights to it. Or you can buy a company with ready-made rights to a land plot. In this case, you can purchase the corporate rights of a legal entity. Later, you can perform the necessary actions with respect to the land plot: change of designated purpose, merger/division, which requires the development of a land management project, sometimes public hearings, obtaining a decision from local authorities, preparation/amendment of a detailed plan of the territory and amendments to the State Land Cadastre, etc. For both options, due diligence of the land plots is an important aspect, and the second option additionally involves due diligence of the company.

The next step is to obtain urban planning conditions, restrictions and technical conditions for accession. To do this, the necessary packages of documents are submitted to the relevant authorities. 

The third is the development of project documentation. It is important to conclude a quality contract with the design organization, especially paying attention to the transfer of intellectual property rights to the design documentation. If necessary, an environmental impact assessment report is also prepared.

Next, the project documentation is examined, except in cases specified by the legislation of Ukraine.

After the project development is completed, investments can be attracted, if necessary. Another important aspect is the availability of a pre-PPA, as it is necessary to confirm the payback of the project for investors. Then we start the most interesting part – construction. At the construction stage, the issue of obtaining/registering the necessary permits arises (the list is not exhaustive): a declaration of the start of preparatory work, a declaration of the start of construction work, a construction permit, a declaration of construction readiness for operation, a permit to perform high-risk work and operate (use) high-risk equipment, etc. It is also necessary to resolve the issue of concluding EPC contracts, which differ in their structure, in particular, whether or not the supply of equipment is included. And, of course, you need legal support in the event of any force majeure circumstances.

We finish by obtaining the Electricity Generation License, which includes submitting the necessary package of documents to the relevant authority, and connecting the facility to the grid. The last stage involves joining the relevant energy market. 

Therefore, the construction of a solar power plant is an interesting but complex process that requires professional assistance.

As for other types of alternative energy sources, the processes are even more complicated. For example, the construction of wind farms requires additional expertise on land plots, additional approvals due to the height, more complex technical infrastructure to maintain grid stability, etc. This is a really complicated process where lawyers are indispensable.

So there is definitely enough work for lawyers in this area?

— Absolutely. In my opinion, energy is one of the most promising sectors of Ukraine’s economy. The “green transition” is the next global industrial revolution. It is a global step of humanity towards a different life in the context of high technology, artificial intelligence, rapid development and transformation. All this requires energy. According to research conducted by the WEF, the demand for electricity consumption in the world will grow steadily by at least 3% annually until 2030. Despite the war, the volume of foreign direct investment in Ukraine’s economy is also gradually increasing. And of course, the main area of such investments is energy ($1.2 billion). We have recently seen that Ukrainian investors are investing in the energy sector, which is new to them. The market has a large capacity and potential. 

So we are confidently moving forward, and under no circumstances should we slow down. And innovation is always a request for legal expertise.

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