An electricity law, passed on Nov. 20 by Ukraine's parliament, increases the so-called “local content requirement” to 50 percent for wind farms, a move that could hurt foreign investors in the sector.
The “local content” requirement is the
amount of domestic goods and services used to build renewable plants in order
to qualify for the highly subsidized green tariffs for electricity generated
from renewable energy sources.
Initially, numerous foreign investors in
the wind power generating sector in Ukraine expressed
concern about the 50 percent local content rule, saying it will make it
impossible for them to work in Ukraine and could push them out of the country.
In an Oct.
16 interview with the Kyiv Post, Mykola Romaniuk, the pro-presidential
Party of Regions lawmaker who proposed the law, argued the bill would stimulate
the development of the renewable energy sector in Ukraine.
But the draft law was amended before the
second reading. Initially, the law stipulated that all wind farms launched
after Jan. 1, 2013 will have to have 30 percent of local content and those
launched from Jan. 1, 2014 should have at least 50 percent of domestic goods
and services used to develop their facilities.
The version approved by parliament,
however, notes that the 30 percent local content rule will apply only to those
wind farms whose construction started after Jan. 1, 2012 and that will be
launched after July 1, 2013.
Meanwhile, the 50 percent local content
rule will be applied to those power generating facilities, whose construction
started after Jan. 1, 2012 and that will be commissioned after July 1, 2014.
Yuri Kubrushko, co-chair of Wind Working
Group of the European Ukrainian Energy Agency, which represents numerous
foreign investors in the sector, says this legislation did not address foreign
investors’ earlier concerns about the law.
“The international community had a negative
attitude towards these proposals. I am sure there will be many letters sent by
international financial institutions and associations to President in the
coming days asking for veto,” he said.
As many as 280 out of 450 lawmakers voted
in favor of the law in the second reading. The legislation was overwhelmingly
supported by the pro-presidential Party of Regions, the communists and the
Reforms for the Future parliamentary group. A handful of opposition lawmakers
also voted in favor of the law.
President Viktor Yanukovych now has two
weeks to sign the bill for the legislation to take effect.
At present, DTEK, Activ Solar and
Donetsk-based Wind Parks of Ukraine are the most active market participants.
DTEK, which recently launched a 60 megawatt capacity wind park, is owned by
Ukrainian billionaire and President Yanukovych ally Rinat Akhmetov.
Solar energy developer Activ
Solar is allegedly connected to Ukraine’s Security and Defense Council Head
Andriy Klyuyev, a claim the company has repeatedly denied. In recent years it
launched some of Europe’s biggest solar farms for a total capacity of 270
megawatts.
Wind Parks of Ukraine reportedly has ties
to Anatoliy Blyzniuk, minister of building and housing, an allegation the
company’s management denies. Wind Parks of Ukraine has a 200 megawatt wind
power electricity generating capacity.
Kyiv
Post staff writer Yuriy Onyshkiv can be reached at [email protected].
