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The Parliament of Ukraine Has Taken the First Step for Introduction of Renewable Energy Auctions

On 20 December 2018 the Ukrainian Parliament adopted in the first reading the draft Law "On Amendments to Some Laws of Ukraine on Ensuring Competitive Conditions for the Production of Electricity from Alternative Energy Sources" No. 8449-d (the "Draft Law"). 

The Draft Law introduces auctions from 01 January 2020 and foresees that the new incentive regime will be effective for 20 years. 

The new auctions system shall apply to the following:

  • in 2020 for wind power plants (WPP) above 20 MW; for other renewable energy sources (RES) above 10 MW,
  • in 2021 and 2022 for WPP above 20 MW, for other RES above 5 MW,
  • starting from 01 January 2023 - for WPP above 3 MW (or one wind turbine), for other RES above 1 MW.

The above facilities will receive the right of state support at auctions for the allocation of quotas. 

Projects commissioned before 31 December 2019, or projects which by 31 December 2019 will have concluded preliminary PPA (according to the new model form approved by the Regulator and provided that the company will have land rights, grid connection agreement and construction permit) will remain in the "green" tariff system. 

Each year, before 01 December, the government shall approve a nationwide state support quota for the next 5 years, which will be sold for each RES (wind, solar power, biomass, biogas, hydro, geothermal). Unallocated quotas may be used by other RES quotas for distribution at the next auction. 

The first auction is expected to be held for the distribution of the 2020 national quota. 

To participate in the auction the bidders are required to submit an irrevocable bank guarantee in the amount of 15,000 Euros per 1 MW, 5,000 Euro / 1 MW of which is required for participation in the auction and 10,000 Euro / 1 MW shall be extra paid in the event of winning the auction as a security for the performance of the obligations. To be qualified for the auction, bidders shall also submit executed and registered land lease agreement or land sale and purchase agreement of the land plot, concluded grid connection agreement and information on their ultimate beneficial owner(s). 

The bidders who have offered the lowest price within the corresponding type of RES quota are recognized as the winners of the auction of the declared capacity. 

The auction winner undertakes to construct and commission a renewable energy facility within 2 years for the SPP and 3 years for other RES facilities from the date of agreements execution based on the auction results. Otherwise, such agreements shall be cancelled and the irrevocable bank guarantee shall be transferred in favour of the guaranteed buyer as a security for the performance of the obligations by the auction winner. 

For further information please contact Asters' partner Yaroslav Petrov or senior associate Marta Halabala.

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