Ukraine’s Ministry of Energy has developed a bill that would change how Ukraine’s green energy tariff works, the ministry’s press service announced on Aug. 27.
Right now, state company Guaranteed Buyer purchases all renewable electricity for a fixed feed-in tariff. The new bill would replace that with a “feed-in-premium” model.
Green energy producers would be allowed to sell electricity on the market. The government would then reward them with a premium — the difference between the market rate and the feed-in tariff amount.
This model is supposed to lighten the load on the state budget and compensate the government’s massive debts to green energy producers. The state has accrued roughly $600 million (Hr 16 billion) in debt for 2020, but has paid $238 million (Hr 6.4 billion) since the beginning of 2021, according to energy expert Yuriy Kubrushko.
The government has struggled to pay the renewable feed-in tariffs for close to two years, attracting criticism from investors and Western partners.
”These producers will have the right to receive compensation from the guaranteed buyer in the form of the difference between the established ‘green’ tariff or auction price and the market price, ” Yuriy Vlasenko, first deputy minister of energy wrote.
Long-running standoff
The standoff between green energy developers and the state has dragged on since September 2019.
The tariffs were originally introduced in 2008 to encourage renewable energy investment, with a goal of making 25% of Ukraine’s energy production come from renewable sources by 2035.
The tariffs attracted about $10 billion in renewable energy projects since they were put in place, according to Kosatka.media. Under the new system, state company Guaranteed Buyer was supposed to buy all renewable energy.
Billions of dollars of investment in 2018 and 2019 raised renewables’ share of Ukraine’s energy mix from just over 2% to more than 10% in a very short time.
However, the amount of new renewable projects introduced in 2019 and early 2020 exceeded the amount for which the government budgeted.
Electricity transmission fees, which were supposed to pay for the feed-in tariff proved insufficient. Many industrial consumers failed to pay their fees, including huge government enterprises, as well as oligarch Ihor Kolomoisky’s Privat group of companies.
The arrival of the COVID-19 pandemic further hurt Guaranteed Buyer’s ability to cover its debts.
On June 10, 2020, the government and numerous renewable producers approved a memorandum to lower the feed-in tariff in exchange for the government’s promise to pay back its debts. Many companies refused to support the memorandum, instead opting to begin international arbitration to recoup lost profits.
