The Parliament, Government and Energy Regulator are Taking Important Decisions for the Renewable Energy Sector During the Martial Law in Ukraine
In summer 2022 the Parliament of Ukraine, the Cabinet of Ministers of Ukraine, the Ministry of Energy and the National Energy and Utilities Regulatory Commission (Regulator) have taken several important decisions for the renewable energy sector, including on:
- sale of renewable energy at open markets
- introduction of virtual cPPAs
- resolving the situation with high imbalances invoices
- adopting licensing terms for energy storage systems
- development of the biomethane market
- amendments to the renewable energy auctions regulation
- Sale of Renewable Energy at Open Markets
On 29 July 2022 the Parliament of Ukraine adopted draft Law No.7427, which allows RES producers under the "green" tariff scheme to sell electricity at the Day-Ahead Market and/or Intra-Day Market and/or Bilateral Agreements Market and the Balancing Market. In such case, the sale of electricity is organized by the RES producer without assistance of the Guaranteed Buyer. RES producers who decide to use this right are temporary leaving the balancing group of the Guaranteed Buyer without losing the "green" tariff, and they may resume participation in the balancing group of the Guaranteed Buyer if they decide to come back to the "green" tariff scheme. The draft law is pending signing by the President of Ukraine. Adoption of this law has been a highly anticipated by the RES producers and should improve compensation for the produced electricity during the martial law.
- Introduction of Virtual cPPAs
Additionally, the draft Law No.7427 took the first step in introduction of virtual/financial corporate PPAs in Ukraine. The draft law provides for the possibility of concluding contracts for difference between RES producers and buyers of electricity from alternative energy sources, i.e., in nutshell, such draft law is not about concluding an agreement for the sale of electricity and its delivery to the buyer, but rather on fixing the price of electricity and hedging the risks of price fluctuations.
- Resolving the Situation with High Imbalances Invoices
On 26 July 2022 the Regulator by its Resolution No.821 amended the Resolution No.641, which provided for a procedure on purchase of renewable energy electricity by the Guaranteed Buyer. The changes introduced by the Resolution No.821 are aiming to resolve the situation with unreasonably high imbalances invoices to be paid by RES producers since the start of the war. One of the reasons for high imbalances invoices by the Guaranteed Buyer is that since the start of the war, there was a disruption in exchange of information between NPC "Ukrenergo" (Ukrenergo) and the Guaranteed Buyer on the volumes of curtailed electricity by RES producers. Consequently, lacking this information, the Guaranteed Buyer has calculated high imbalances for the RES producers. The main idea of the adopted changes is to allow the Guaranteed Buyer to adjust imbalances costs based on the corrected information on the curtailments.
The Regulator obliged Ukrenergo to transfer to the Guaranteed Buyer information on the curtailed electricity of RES producers for the period of February-June 2022 by 1 August 2022.
The Regulator instructed the following market participants to resolve all possible issues that emerged since the start of the martial law based on the changes to the Resolution No.641 by 31 December 2022:
- Ukrenergo and RES producers regarding curtailments and compensation for this service
- Ukrenergo and Guaranteed Buyer regarding exchange of information on curtailments by RES producers and relevant compensations to the RES producers
- Guaranteed Buyer and RES producers regarding compensation for imbalances
- Licensing Terms for Energy Storages Systems
On 22 July 2022 the Regulator adopted Licensing terms for carrying out energy storage business activities.
The licensing terms were developed to implement the Law of Ukraine "On the Electric Energy Market", taking into account the changes made by the Law of Ukraine No. 2046-IX "On Amendments to Certain Laws of Ukraine Regarding the Development of Energy Storage Installations", which entered into force on 16 June 2022.
The Licensing terms for carrying out energy storage business activities regulate the activities of energy storage licensees on the electricity market. They establish an exhaustive list of documents to be attached to the application for obtaining a license to carry out economic activity in energy storage, as well as determine an exhaustive list of requirements that must be fulfilled during the conduct of such activity.
- Development of the Biomethane Market
On 22 July 2022 the Cabinet of Ministers of Ukraine adopted Resolution No.823 governing the procedure for functioning of the biomethane register. Within 6 months, the State Agency on Energy Efficiency and Energy Saving should launch the biomethane register.
Additionally, on 2 August 2022 the Regulator adopted a Resolution to reduce the requirements for the molar part of oxygen in natural gas from 0.02 mol.% to 0.2 mol.% - which should allow access for biogas access to the gas transmission system (GTS) and up to 1.0 mol.% - for biogas access to gas distribution systems (GDS).
By this resolution, the Regulator made appropriate changes to the Gas Transportation System Code and the Gas Distribution Systems Code.
- Renewable Energy Auctions
On 2 August 2022 the Cabinet of Ministers of Ukraine adopted a resolution developed by the Ministry of Energy "On Amendments to Resolutions of the Cabinet of Ministers of Ukraine No. 420 of 23 May 2018 and No. 1175 of 27 December 2019", which regulator renewable energy auctions. The resolution has not been published yet.
According to the statement of the Ministry of energy, the changes improve the procedure for holding renewable energy auctions for the construction of renewable energy facilities, taking into account the European standards and practices. The auction procedure will become more flexible, transparent and efficient. It provides an opportunity to reduce the price of "green" electricity on a competitive market basis, allows the state to regulate the amount of introduction of new renewable energy capacities, their types (solar/wind/biomass) and locations in accordance with the capabilities and needs of the power system.
The resolution introduced the schedule of auctions for the next year and the establishment of indicative indicators of quotas for 4 years.
For further information, please contact Asters' Partner Yaroslav Petrov.
