The Verkhovna Rada has updated the competitive conditions for the development of renewable energy

Among the main changes are:

FiP instead of CfD

The Law introduces a feed in premiums (FiP) mechanism for winners of green auctions instead of the contract for difference (CfD) model for the period until 31 December 2029.

How the previous model (CfD) worked:

• The state effectively guaranteed a fixed price.
• If the market price was lower, the difference was compensated.
• If the market price was higher, the producer returned the surplus.

How the new model (FiP) will work:

• The producer sells electricity at market price.
• Additionally, it receives a fixed premium if the auction price is higher than the market price.
• If the auction price is lower than the market price, the state does not have to pay the premium to the producer.

Thus, unlike the CfD model, FiP does not provide a complete guarantee of the producer’s income, but guarantees a minimum level of income at the auction price. The producer retains the opportunity to receive additional income in the event of an increase in market prices, while being protected from their fall, which encourages more active integration into the competitive electricity market.

It should be noted that the CfD model applies only to auctions held under the previous support regime, while the FiP mechanism is used for new auctions until 31 December 2029.

Continuation of green auctions

Green auctions have also been extended from 31 December 2029 to 31 December 2034. Extending the auction period to 2034 creates favourable conditions for planning the next cycles of design and construction of renewable energy stations and demonstrates the readiness of legislation to ensure the sustainable development of the industry.

Reduction of bank guarantees

The law provides for a reduction in the amount of the bank guarantee for winners of green auctions.

From now on, the guarantee when concluding a contract is reduced from EUR 15 to EUR 10 per kilowatt of capacity, and in the event of an extension of the construction period, from EUR 30 to EUR 10 per kilowatt.

At the same time, the security for participation in the auction remains unchanged and, as before, amounts to EUR 5 per 1 kW of capacity, in the form of an unconditional and irrevocable bank guarantee or financial security.

Thus, the law does not lower the requirements at the auction entry stage, but significantly reduces the financial burden on investors after winning, thereby lowering the risks of project implementation, facilitating their financing, and lowering the barrier to market entry.

Introduction of a new financial instrument to guarantee implementation

In addition, the Law introduces an alternative financial instrument for guaranteeing project implementation. 

In addition to a bank guarantee, it is possible to provide financial security in favour of a guaranteed buyer, which will facilitate the implementation of projects while keeping the terms of the agreement unchanged.

Increased competition between technologies

To increase competition between technologies, the Law provides for a more flexible approach to quotas for supporting renewable energy sources. The minimum share of participants in certain technologies – in particular solar, wind, bioenergy, and others – is reduced from the previous 10% to 5%. This means that a lower barrier of 5% has now been set for each type of generation, which expands the opportunities for small and local projects to participate. Previously, the 10% rule was a mandatory share of the total quota at auction, but now it has effectively been halved for all major green technologies. 

It is important to note that there is also an exception: solar power plants with energy storage facilities, where the minimum share of 10% remains in place. 

Harmonisation with EU practices

The system of guarantees of origin (GoO) has been improved: its validity is limited to 12 months (instead of the current 18). These changes are aimed at harmonising the regulatory and technical framework and creating the conditions for mutual recognition of guarantees of origin and integration of registries, subject to further compliance with EU standards and international procedures.

Integration of energy-intensive facilities

The Law provides for the possibility of integrating energy-intensive energy storage facilities (BESS) into the cable pooling mechanism. This means that at a single connection point to the electricity grid, it is permissible to locate generating and energy storage facilities simultaneously, provided the maximum capacity agreed with the distribution or transmission system operator is observed.

In other words, generation and BESS can share one network infrastructure and one permitted capacity without the need for a separate connection for each facility.

Previously, such a combination of generation and storage facilities was not regulated by law, but now it opens up new prospects for the development of the electricity storage market in Ukraine.

Support and development of environmental infrastructure

It is also envisaged that local authorities will be able to provide free work on laying cable lines from transformer substations (TP/KTP) to the locations of electric charging stations with a capacity of up to 200 kW, as well as developing the necessary design and engineering documentation for such connections. The relevant changes are aimed at supporting and developing environmental infrastructure.

Flexibility regarding installed capacity

The law provides for a permissible deviation of the actual installed capacity of the facility within 10% of the capacity for which the producer has acquired the right to state support based on the results of the “green” auction. This means that in the event of a slight excess or shortfall in installed capacity within such a deviation, the right to support is retained and does not require a repeat auction procedure. 

Clear time frame for the application of the market premium

The law establishes time and term limits on the Guaranteed Buyer’s obligation to purchase electricity based on the results of auctions using the market premium mechanism. In particular, incentive support shall only apply during specific time intervals: from 04:00 to 23:00 during the period from 1 April to 31 October and from 06:00 to 21:00 during the period from 1 November to 31 March, with the exception of electricity supplied from energy storage facilities within the relevant generation facility.

At the same time, it is envisaged that the Cabinet of Ministers of Ukraine may additionally determine daily time intervals for generation to which state support applies for individual auctions.

The adoption of Law No. 13219 creates an updated, more market-oriented and competitive model for the development of renewable energy in Ukraine. The introduction of the FiP mechanism instead of CfD strengthens the role of market incentives and at the same time increases the responsibility of producers for price risks, while the continuation of “green” auctions until 2034, the reduction of financial guarantees, the improvement of guarantees of origin, and the integration of energy storage systems create more predictable conditions for investors and open up additional opportunities for the technological development of the sector in line with European standards.