New Procedure for State Support of RES Producers Registered with the Ukrainian Parliament

On 7 June 2018, several members of the Ukrainian Parliament registered a draft Law No. 8449 on Amending Certain Laws of Ukraine related to Ensuring Competitive Conditions for Production of Electricity from Renewable Energy Sources (the "Draft Law"). 

The Draft Law introduces a new auction procedure for provision of state support to certain renewable energy producers beginning 1 July 2019, however, the first countrywide auction will be for 2020. The auction procedure will apply to solar power stations with capacity over 10 MW, and to wind power stations with capacity over 20 MW. Although, developers of smaller projects may opt to participate in auctions as well. 

According to the Draft Law "feed-in (green)" tariff will continue to be applicable until 2030 in either of the following cases:

(i) a power station is commissioned before 1 July 2019;

(ii) pre-PPA is executed before 1 July 2019, provided that terms of Article 71 part 4 of the Law of Ukraine "On Electricity Market" are satisfied, i.e. land rights, grid connection and construction permit are secured;

(iii) the capacity of power stations to be commissioned after 1 July 2019 is up to 10 MW (for solar energy) and up to 20 MW (for wind energy). 

Although, the Draft Law envisages cut of the "feed-in (green)" tariff for solar power stations by 30% from 2020, not 10%, as stipulated by the current legislation. 

Under the new auction procedure the state support envisages a guaranteed buy-back of the total amount of electricity from RES producers by a Guaranteed Buyer and compensation of the difference between the price awarded at auctions and the price set on the day-ahead market. 

The auction winner enters into a model PPA and contract for difference to be adopted by the Regulator. 

Auctions will be held until 2029. Each auction winner will be eligible for 20 years of state support. 

The auction allocates the state support quota for the relevant year. Auction participants will bid for lots of 1 MW. There will be 2 auctions per year, but not later than 1 May and 1 October. The size of the countrywide auction quota for the next year shall be approved not later than 1 December of the preceding year. 

The Draft Law defines the auction winner as a bidder, with the lowest electricity price proposed. 

Bidders shall provide an irrevocable bank bond of USD 50,000 per 1 MW of capacity. The guaranteed buyer should maintain the bond as a guarantee of obligations performance under agreements to be concluded with the auction winner. In other cases, the bond should be returned. 

In cases where 3 years upon the date of signing agreements concluded based on auction results, the facility has not been commissioned and does not release electricity into the energy system, the above agreements lose effect, while the funds under the bank bond are not returned. 

It should be noted that the draft Law is not final and is subject to further discussion among market participants and relevant stakeholders. 

For further information please contact Asters' partner Yaroslav Petrov, associate Serhii Yaroshenko or associate Olena Yasentiuk.

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