Ukrainian Parliament adopted law aimed at feed-in tariff reduction
On 31 July 2020, the President of Ukraine signed the Law no. 810-IX "On Amending Certain Laws of Ukraine to Improve Support of the Production of Electric Power from Renewable Energy Sources". This law was adopted by the Parliament on 21 July 2020. It will come into force on the day following the date of its official publication (except for certain clauses relating to the balancing market, which will be enacted on 1 January 2021). The law largely stems from the undertakings of the government before renewable energy producers under the Memorandum from 10 June 2020, which was aimed at solving existing problems in the market.
While significantly amending the feed-in tariff (FiT) pricing, the law also focuses on transitioning to the auction system and further changes in the renewable energy regulation.
Reduction of FiT rates
The law sets out rates (coefficients) by which the FiT for existing power plants, and those that are yet to be commissioned, will be reduced. In particular, for green power plants commissioned before 30 June 2015 the FiT will be capped at the level of so-called "maximum" FiT equal to the FiT for solar power plants with a capacity of over 10 MW commissioned before 31 March 2013, additionally reduced by 5% (this maximum FiT will not be applicable to power plants having lower rates than such maximum FiT).
The table below summarizes coefficients by which the FiT rates will be reduced for green power plants commissioned after 30 June 2015.
Wind power plants
| Date of commissioning | FiT reduction rate | Power plant capacity |
| 1 July 2015 – 31 December 2019 | 7.5% | 2000 kW and higher |
| From 1 January 2020 and onwards | 2.5% | - |
Solar power plants
| Date of commissioning | FiT reduction rate | Power plant capacity |
| 1 July 2015 – 31 December 2019 | 15% | 1 MW and higher |
| 1 January 2020 – 31 October 2020 | 2.5% | 1 MW and higher |
| From 1 November 2020 and onwards | 60% | 75 MW and higher |
| 1 November 2020 – 31 March 2021 | 30% | 1 MW- 75 MW |
| From 1 April 2021 and onwards | 60% | 1 MW- 75 MW |
| 1 July 2015 – 31 December 2019 | 7.5% | Lower than 1 MW |
| From 1 January 2020 and onwards | 2.5% | Lower than 1 MW |
Local content premium
The law also sets out new premium rates for the applicable FiT and price determined through a green auction (auction price) for power plants commissioned on or after 1 July 2015 and until 31 December 2024, which will depend on the share of Ukrainian equipment used in green energy generation. In particular:
| Premium rate | Share of local equipment |
| 5% | 30 - 50% |
| 10% | 50 - 70% |
| 20%* | 70 - 100% |
* In relation to power plants supplying energy at an auction price such premium will be lowered to 10% after six years from power plant commissioning date.
Financial liability for imbalances
The law introduces the below financial liabilities for deviations in the proposed generation subject to the tolerance margin for imbalances liability should be 5% for solar power plants and 10 % for wind power plants:
- For projects with capacity exceeding 1 MW:
- 50% from 1 January 2021; and
- 100% from 1 January 2022.
- For projects with capacity of up to 1 MW liability for imbalances will be increasing gradually – starting with 10% applicable from 1 January 2021 and increasing annually by 10% until reaching 100% by 1 January 2030.
Curtailment
The law also introduces "load decrease services" aimed at providing the transmission system operator (TSO) with the right to instruct renewable energy producers outside the balancing group to decrease their output load.
TSO should compensate the cost of such load decrease services to the relevant producer at the level of applicable FiT, or the auction price, except for cases where system constraints are triggered by force majeure event. To get compensation, the relevant producer should provide TSO with a proposal on the amount of load decrease services subject to the daily generation schedule. Otherwise, the renewable energy producer should provide similar services in the balancing market under the market rules.
The energy regulator should develop a methodology for calculation of curtailed electricity and compensation procedures within one month from the date of commencement of the law.
State guarantees
The law provides for a stabilization clause being included in the Law of Ukraine "On Foreign Investment Regime", whereby the State guarantees not to amend legislation applicable to renewable energy producers, which is effective as of the date when the law becomes effective, except for legislation relating to defense, national security, tax, public order and environmental protection.
The State also guarantees that the FiT rates will not be changed or cancelled, and that the decreasing coefficients will not be changed or applied in a way that may cause losses, damages or non-receipt of renewable energy producers’ legitimately expected revenues until 31 December 2029.
Green auctions
The law sets out the maximum bid amount in an auction, depending on the type of energy source and the year of power plant commissioning.
Any generation facility proposed for an auction, should be commissioned and connected to the grid - this should be evidenced by a relevant contract for provision of the grid connection services between the producer and the grid company.
