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Green energy stakeholders fear the destruction of Ukraine’s renewables industry

The Ukrainian Wind Energy Association together with other renewables industry associations in Ukraine called on the government to resolve the critical situation with the calculations for the produced electricity to prevent mass defaults of producers and the destruction of the national renewable energy industry.

“The renewables industry is a priority for the European energy policy, and preserve the trust of those investors who remain loyal to Ukraine and seek to develop the economy of Ukraine after the war,” says the statement of the Ukrainian Wind Energy Association.

On behalf of Ukrainian and international investors, the associations appealed to cancel the order of the Ministry of Energy issued on 28 March, which limits the level of payments to the RES producers to only 15-16 per cent, which is barely enough to cover the critical costs of the RES stations themselves. Green energy stakeholders ask the government to ensure current payments to producers of renewables are in excess of 30-35 per cent.

With regards to the complexity of the situation in the energy sector, the RES stakeholder decided not to appeal to the court to avoid further destabilisation of the energy market in Ukraine during war times.

However, they point out that as of the end of May, Ukraine’s State Enterprise Guaranteed Buyer has earned sufficient funds by selling electricity produced on the market to provide payments to the RES producers in the amount exceeding 30-35 per cent.

“According to our preliminary estimates, by the end of the year SE Guaranteed Buyer and NPC Ukrenergo, will retain income of 3.2 billion hryvnias (104.4 million euros) and 12.7 billion hryvnias (414.5 million euros) respectively, which is enough to significantly increase the level of payments to the RES producers,” says the joint letter of the stakeholders.

They estimate that by the end of the year the electricity market will face a deficit in the amount of 35 billion hryvnias (1.1 billion euros), a significant part of which will be covered by non-payment for the green electricity deliveries under the government order.

According to the associations, the government intends to compensate for the deficit in the electricity market and cover the operating costs of the state nuclear company, Energoatom at the expense of the RES producers.

“Investors have emphasised their readiness to contribute to the Ukrainian economy and accelerate a promising sector of the economy but this requires an attractive business climate and investor confidence,” concludes the joint letter of the associations.

To avoid the bankruptcy of the renewables sector, the stakeholder associations asked the government to abolish the order that restricted payments, to ensure payments to RES producers at the highest possible level by available funds generated from the trading activity of SE Guaranteed Buyer and the activity of NPC Ukrenergo.

They also asked the government to ensure consistent legislation regarding the RES support system, gradual debts repayment and adherence to existing guarantees provided to the investors at the legislative level.

The renewable energy sector in Ukraine is still small, but it shows plenty of potentials. By the end of 2020, the share of renewables in energy reached 12.4 per cent and the country stated its objective to source a quarter of its energy from renewables by 2035.

Map of wind farms generating electricity at the “green” tariff, 2021 Source: The Ukrainian Wind Energy Association

However, the war has clearly rendered energy security consideration a top priority. In addition, the optimal areas for wind and solar are located in the Southern part of the country, where the war is centred.

The five main regions in Southern Ukraine, namely Odesa, Zaporizhzhia, Mykolaiv, Kherson and Dnipro house about 66 per cent of all renewable generation, which means that the vast majority of Ukraine’s RES assets are also exposed to serious risk, and repairs can become very expensive.

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