Recent Trends in the Energy Sector
Author: Yaroslav Petrov
Source: CEE Legal Matters. – November 2018

The main trend of 2017-2018 in Ukraine is the booming development of the renewable energy sector. The Ukrainian Government is also taking steps to increase domestic oil & gas production.

Renewable Energy

Ukraine has one of the highest feed-in tariffs (the Ukrainian name is "green" tariff) in Europe. The current "green" tariff is 0.15 EUR/kWh for solar and 0.10 EUR/kWh for wind. The "green" tariff is effective until 2030. The statutory scheduled reduction of the "green" tariff in 2020 has urged many developers to expedite the development and implementation of projects before 2020. As of Q3 2018, the installed capacity is 1,803 MW, which consists of 1,096 MW solar, 522 MW wind, 96 MW small hydro, and 85 MW biomass and biogas. By the end of 2018, installed capacity will exceed 2,000 MW.

In September 2017 and January 2018, the National Energy and Utilities Regulatory Commission of Ukraine (the "Regulator") revised the PPA to improve its bankability. Because the latest changes were not acceptable to the offtaker — SE "Energorynok" — all market participants signed the September 2017 version. The Regulator is working on the new model PPA, which should be adopted before 2019. The new PPA is required by Electricity Market Law No. 2019-VIII, designed to launch the new electricity market model on July 1, 2019.

In September 2018, the Parliament adopted changes which significantly simplified the development and construction of wind projects. In addition, in 2017-2018 the Parliament introduced some new procedures in relation to the environmental impact assessment which influences the project development process.

Since late 2017, there have been discussions about introducing renewable energy auctions, which should help to secure a sustainable regime for renewable energy projects in Ukraine. In June 2018, Bill No. 8449 and seven alternative bills were registered in the Parliament. In summer 2018, the Parliament held a number of public consultations with major stakeholders and market participants aiming to improve the Bill. In accordance with the Bill, the auction regime should be introduced in July 2019 with first auctions to be conducted in 2020. Bill No. 8449 provides for a transition period for projects under development to make sure they will continue to enjoy the "green" tariff.

Electricity Market Reform

On March 14, 2018, the Regulator adopted several regulations necessary for the efficient operation of Ukraine's new electricity market, which will start on July 1, 2019. This marks another significant milestone in implementing Electricity Market Law No. 2019-VIII, dated April 13, 2017, and involves the enactment of the following secondary legislation: Market Rules; Day-ahead and Intraday Market Rules; Transmission System Code; Distribution System Code; and Retail Market Rules. The Regulator adopted new Licensing Rules for various activities under the new electricity market model.

Gas Market

Since the end of 2017, Ukraine has not taken significant steps to finish the unbundling of its GTS Operator.

The introduction of daily balancing, originally planned for August 1, 2018, was rescheduled for December 2018.

Oil & Gas Production

On March 1, 2018, the Ukrainian Parliament adopted a law that improves the procedure for allocating land for the purposes of exploration, construction, and maintenance of pipeline transport facilities, and which facilitates other licensing procedures for the oil and gas industry. Subsequently, on April 25, 2018 the Ukrainian Government adopted Resolution No.333, which improves the procedure for conducting auctions for the sale of subsoil use permits/licences and improves the regulation on the subsoil use permits. After these changes, new auctions for subsoil use were scheduled for autumn 2018. Moreover, the State Service for Geology and Mineral Resources of Ukraine announced pilot electronic auctions for the sale of subsoil licences.

On March 28, 2018, the State Service for Geology and Mineral Resources of Ukraine completed the digitization of and the arrangement of access to geological maps of Ukraine at a scale of 1:200,000.

In October 2018, UkrGasVydobuvannya, a Ukrainian state-owned oil & gas production company, announced a pilot project focused on the launching of Production Enhancement Contracts.

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