Extension of pre-PPA and technical conditions: changes in the renewable energy market
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In June 2023, the Parliament adopted two laws that, although different from each other, are aimed at solving one of the most important problems in the RES sector. This problem concerns the extension of electricity purchase and sale agreements under the feed-in tariff that were concluded before 31 December 2019 (pre-PPA), and technical conditions for grid connection (TC):
At the end of 2022, due to the russian aggression, the "green" generation companies faced the problem of the expiration of the deadline for commissioning "green" power plants (except for solar power plants) for which pre-PPAs were concluded before 31 December 2019. In addition, the technical conditions for grid connection for such facilities expired on 31 December 2022. Draft laws to address this issue were registered at the end of last year, but were not adopted.
How does the Law propose to solve this problem?
Although the laws are aimed at solving the same problem, they do so in different ways.
Law on REMIT
The Law extends the pre-PPA for one more year. In this context, we want to emphasise that such agreements are not extended until 31 December 2023, but for one year. After all, some of them expired earlier than 31 December last year. As for the technical conditions, they are extended until 31 December 2024, that is for two years.
The extension of the pre-PPA and technical conditions affects the feed-in tariff coefficient, which will be reduced as follows:
- 82 euro cents per kWh for companies that produce electricity from wind farms commissioned from 1 January 2020 to 30 June 2023;
Unfortunately, the Law does not explain how pre-PPAs will be re-concluded or extended and new PPAs will be extended or issued TC on the old terms. This shortcoming may lead to problems that may arise in practice.
Law on Green Transformation
In this law, the pre-PPAs are extended explicitly until 31 December 2023, instead of one year. The technical conditions are extended until 31 December 2024, with the possibility of extending them for another year until 31 December 2025. The requirements for such an extension are as follows:
- the pre-PPA and the technical conditions were valid as of 24 February 2022;
- the customer has no unfulfilled obligations under the connection agreement and it should have been valid as of 24 February 2022.
The Green Transformation Law details the process of such an extension, which provides for:
- Conclusion of a new agreement or an additional agreement to the existing pre-PPA on the same terms and conditions, except for the requirements for:
- construction/commissioning of the facility
- sanctions in case of failure to complete the facility within the new timeframe provided for in the new version of the Law of Ukraine "On the Electricity Market". The exception is the period that has expired between the date of the previous agreement and the date of the new agreement.
- Conclusion of an additional agreement to the connection agreements that were valid as of 24 February 2022, which should contain the following provisions:
- issuance of new technical conditions on the terms and conditions that were valid until 24 February 2022, considering the fulfilled obligations under the old connection agreement, which will be valid until 31 December 2024.
- issuance of new technical conditions on the terms and conditions that were valid until 24 February 2022, which will be valid until 31 December 2025, considering the fulfilled obligations under the old connection agreement with a reasonable revision of the cost of connection services as of the day following the cancellation of martial law.
The exception for the extension of technical conditions is the following technical conditions for solar power generation facilities and facilities located in the temporarily occupied territory.
The Law on REMIT came into force on 2 July 2023. The Law on Green Transformation is currently awaiting President's signature. If it is signed and comes into force, its provisions on the extension of the pre-PPA and technical conditions will apply.
For more information, please contact Asters Partner Yaroslav Petrov and Junior Associate Marko Malinovskyi.
