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New Support regime for renewables

On June 07, 2018 group of deputies of Verkhovna Rada of Ukraine registered Draft Law No. 8449 “On amending of some laws of Ukraine about ensuring competitive conditions for the production of electric energy from alternative energy sources”.

We would like to draw your attention to the fact that during 20-22 of June, six alternative draft laws were registered in Verkhovna Rada of Ukraine, namely:

• 20th June, 2018: Draft Laws №8449-1 and №8449-2;
• 21st June, 2018: Draft Law №8449-3;
• 22nd June, 2018: Draft Laws №8449-4, №8449-5 and №8449-6.

The Draft Laws prescribe introduction of auctions system according to which “green” energy producers will be entitled to the state support. Such auctions will be held in electronic trade system in accordance with the regulation on holding auctions for quotas on state support. The main aim of introducing such stimulating method for “green” energy production is establishing of competitive mechanism for winning state support for projects on construction of medium and big objects of renewable energy and ensuring further development of alternative energy sector.

The basic conditions of auctions introduction under Draft Law No. 8449 are as follows:

  • participation in auctions is obligatory for producers of solar energy on objects with capacity of 10 MW or more and for producers of wind energy on objects with capacity of 20 MW or more;
  • producers of electric energy from other alternative sources (including biomass and biogas) regardless to capacities as well as producers of solar and wind energy of smaller capacities than indicated above also have the right to participate in auctions at their discretion;
  • auctions shall be held during 10 years starting from July 01, 2019;
  • auction winners will be eligible for 20 years of state support;
  • premium to the “green” tariff and auction price will constitute from 5% to 15%, depending on the level of using equipment of Ukrainian production;
  • each entity willing to participate in auction is obliged to grant an irrevocable bank guarantee in the amount of USD 50 000 for each 1 MW of capacity, issued in the name of guaranteed buyer. Sum of irrevocable bank guarantee shall be given back to all participants who did not win the right of state support within 5 business days after determination of auction winner;
  • following the results of auction guaranteed buyer shall sign with the auction winner within 10 business days the PPA and agreement on difference in prices. PPA shall – provide a condition under which during 3 years from the date of its signature, the winner of auction is obliged to commission the station, otherwise such agreement looses its validity and irrevocable bank guarantee shall be executed in favor of guaranteed buyer on his demand;
  • the “green” tariff for solar power plants will be decreased by 30% from 2020;
  • the “green” tariff shall remain in force till December 31, 2029 for such categories of producers:

– producers of electric energy on objects with any capacity which are commissioned before July 01, 2019;
– business entities which have the intention to produce electric energy from alternative sources on objects with any capacity and which have entered into pre-PPA under “green” tariff before July 01, 2019;
– business entities which produce electric energy from alternative sources on objects with capacity less than 10 MW – for producers of solar energy or less than 20 MW – for producers of wind energy which are commissioned after July 01, 2019 and for which the auctions procedure is not applicable.

Pending and very important question is on which stage of construction or preparing for construction of power plant the right of producers to participate in auctions becomes applicable.

Max Lebedev

Max Lebedev

Partner, Head of Corporate Law and M&A practice, Attorney at law

  • Recognitions
  • Best Lawyers in Ukraine 2021
  • The Legal 500 EMEA 2020
  • Ukrainian Law firms. A Handbook for Foreign Clients 2019

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