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A new green tariff stage of the solar energy market development to begin in CEE

In the first half of 2021, a new market segment started to emerge in the field of solar energy in Central and Eastern Europe and – in particular – in Ukraine, the basis of which was the economic model of projects with no green tariff involved, as well as the rapid rise in the price of electricity for commercial and private consumers. The new format of industry brisk growth horizon is expected to be 5-6 years.

This forecast was made by the CEO of IB Center and co-founder of CISOLAR Vitaliy Daviy, while he was opening CISOLAR 2021, 10th Solar Energy Conference and Trade Show and IBES 2021, the Energy Storage Conference and Trade Show of Central and Eastern Europe. The event took place on 6-8 July and brought together more than 1,400 participants, 70 speakers and 60 companies from 29 countries.

According to Vitaliy Daviy, the new EU requirements for the production of goods on green energy, which come into force in 2023, will be a powerful driver for the construction of solar power plants by industrial companies.

“There is simply no way back for industrial enterprises because there is much tension around the issue: either you build your green energy generation, or close production and every single year the screws are tightened more and more,” said the head of IB Center.

It is worth noting that in mid-July, Ferrexpo company put into operation a solar power plant with a capacity of 5 megawatts (MW) to meet the needs of its industrial enterprises. By the end of the year, Ferrexpo is going to build new power plants with a total capacity of at least 20 MW. Other large industrial companies, whose economy depends mainly on exports, have similar plans.

According to the IB Center, new solar power plants with a total capacity of about 4.5 gigawatts (GW) will be built in the region of Central and Eastern Europe by the end of 2022 for the consumption of domestic industrial companies without using the green tariff model. In Ukraine, during the same period, new solar power plant with a total capacity of over 1.1 GW can be built.

According to the green tariff model, solar power plants with a total capacity of more than 700 MW can be built in Ukraine by the end of 2022, of which more than 400 MW will be residential solar farms.

In contrast, according to the State Agency on Energy Efficiency and Energy Saving of Ukraine, in the first half of 2021 in Ukraine in the segment of large commercial solar power plants, 258 MW was installed, while in the segment of residential solar farms – 154 MW.

As of July 1, 2021, the total capacity of solar power plants in Ukraine exceeded 7,284 MW, of which 933 MW were residential solar farms.

The development of distributed generation at the level of private consumers is a significant global trend today.

“Over the last 10 years, the cost of equipment for solar power plants has decreased by almost 90 per cent,” said Yuliya Berezovska, co-founder of IB Center and New Age Lab, during the CISOLAR 2021 Conference. “Electricity generated by solar energy has long been cheaper than any traditional source electricity, so any speculations over expensive green energy are not based on any economic or strategic facts. More than that, solar energy can solve the problem of energy poverty – providing cheap electricity to socially vulnerable groups,” underlined Ms Berezovska.

However, according to key players in the Ukrainian renewable energy market, a number of legislative and infrastructural issues need to be addressed to begin a new phase in the development of the industry in Ukraine.

DTEK Renewables CEO Maris Kunickis noted that the main problems of the Ukrainian renewable energy market are the imbalance in the system, the lack of legislative incentives for mass construction of energy accumulation systems and the lack of electricity supply capacity to EU countries.

“From a technological point of view, Ukraine needs to develop energy storage systems and the state should support energy storage projects, as it is the case in other countries,” Mr Kunickis underlined adding that it’s also necessary to provide a better connection with Central Europe via N100E networks, to create more trading capacities to reduce restrictions.

According to Vsevolod Kovalchuk, former chairman of NPC Ukrenergo board, there is still no strategic vision of energy development in Ukraine at the state level.

“I would advise industry players to focus on small projects that would meet the needs of increasing energy efficiency, reducing the cost of electricity for specific industries, in my view this is the only prospect we have for the next 2-3 years,” noted Mr Kovalchuk.

During his speech, the head of the Agency on Energy Efficiency and Energy Saving of Ukraine Kostiantyn Hura reminded that Ukraine pays 7.5 billion US dollars each year for energy imports. The energy intensity of the Ukrainian economy is three times higher than the energy intensity of the European economy. According to the national energy strategy, by 2035 Ukraine should have 25 per cent of renewable generation in its total energy balance.

“In my opinion, the first task for the state is to solve the problem of debt at a green tariff to companies and restore investor confidence in Ukraine,” said Mr Hura. “It is also important to solve the problem of balancing the grid, to finally launch green auctions and move to new methods of stimulating the further development of green generation.” According to Mr Hura the first step to achieve this is Net Energy Metering – providing the opportunity to build a new generation in order to consume energy for their own needs and giving the excess energy to the grid – and to start issuing certificates of origin.

The head of SE “Energorynok” Yurii Gnatyuk emphasised that the Ukrainian energy industry needs a clear strategy and action plan that would take into account both global trends and Ukrainian realities.

“Unfortunately, we have a problem not only in solar energy. The issue of energy accumulation as a balancing tool is relevant for all energy sectors,” he underlined.

Oleksii Riabchyn, adviser to NJSC Naftogaz of Ukraine reminded that in order to meet the global requirements for reducing CO2, Ukraine needs to spend about 100 billion US dollars in domestic and foreign investment on decarbonisation in ten years.

According to industry experts, the future of Ukrainian energy lies in ENTSO-E (the European Association for the Cooperation of Transmission System Operators for electricity). This step can become a powerful technological driver for Ukraine.

However, before joining the European energy system, Ukraine needs to demonstrate its autonomy, without the Russian and Belarusian energy systems. Renewable energy can be the technological basis for this transformation.

“As for the next few years’ perspectives, I think that the most important trend is the future unification of the Ukrainian energy system with the European energy system and preparation for it,” noted Olha Buslavets, former head of the Ministry of Energy of Ukraine, during her speech at CISOLAR 2021.

According to Executive Director of Clear Energy company – and former head of the State Agency on Energy Efficiency – Serhii Savchuk the possibilities of decarbonising the Ukrainian economy can be significantly expanded if a number of changes are made in the legislation concerning the financial sector. He also emphasised the need for Ukraine to immediately establish a decarbonisation agency mandated to act in all areas that make it possible to reduce CO2 emissions.

According to EDS Group founder Oleksandr Zapyshnyi, the economic performance of renewable energy projects in Ukraine is deteriorating due to lower green tariffs, as well as higher costs for equipment and components.

“Now Ukraine’s renewable energy is stagnating. There are several factors here that affect this situation: systemic failure to honour commitments by the state, problematic connection to the grid, unpredictable income and payback due to constant changes in the rules of the game and lack of competition,” warned Mr Zapyshnyi. However, he noted that the segment of own consumption plants is actively developing, which opens new opportunities for market players. It is also extremely necessary to create a legal basis in Ukraine for the construction of energy accumulation systems.

“Energy storage is the element that solves the problem of imbalances and at the same time the state has problems with the legislation,” said Nadiia Petruchenko, Director of SPP Development Ukraine. “Today, our company develops a 27 MW energy storage project. Energy storage is not only the accumulation and transmission of electricity, it is also a technology to improve the quality of electricity. The European directive speaks about reducing electricity consumption, not by reducing production capacity, but by increasing the technological level, which is simply impossible without the development of energy storage,” highlighted Ms Petruchenko.

ETL Group Development Director Andrii Vavilin spoke about the rapid development of electric charging infrastructure for electric vehicles. He underlined that compared to Europe, Ukraine does not lag behind. He highlighted that the development of electric charging infrastructure is one of the biggest contributions to decarbonisation.

Serhii Kravchuk, Director of KNESS ENERGY stated that for most Ukrainian companies, about 30 per cent of their own electricity consumption can be replaced by their own generation source.

“In the market, storage devices that work for the consumer will be economically viable. An important step that will make it possible to replace about 90-100 per cent of the amount of electricity that a consumer need is prosumerism and the creation of balancing groups,” underlined Mr Kravchuk.

These days, key players on the market of technological solutions for renewable energy are ready to offer comprehensive solutions for storage systems for both large facilities and household consumers. The interconnection of digital technologies, storage systems, solar power plants, and power electronics can accelerate the energy revolution and achieve carbon neutrality.

CISOLAR is the main business and think-tank platform for the solar energy industry in Central and Eastern Europe, as well as the second-largest industry event in Europe. CISOLAR is one of the main events for entering the solar business, a business platform that has brought together investors, entrepreneurs and outstanding innovators over the past decade and serves the ultimate goal – to bring affordable cheap energy to every household, as well as to make the market transparent, fair and competitive.

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