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Ukraine’s regulatory progress in renewable energy: looking back at 2022

This article was originally published on the Black Sea Energy Week‘s website and reshared with permission. The original report on the European-Ukrainian Energy Agency’s website can be found here.

Despite a challenging year of battles for survival, Ukraine has been progressing in the
implementation of EU-oriented legal framework and integration regulations. The major
breakthrough was a successful connection to ENTSO-E in March, which later in the summer,
together with the launch of energy exports, played a critical role in financing RES producers. This was followed by obtaining the EU candidate status, which opens up a new perspective, sets standards for energy sector regulations and creates a shorter timeline for their implementation. In its annual Implementation report 2022, the Energy Community supported the efforts of Ukraine to keep up with the timeline for implementation of renewable energy regulations and pointed out a number of key regulations that should be considered.

A critical point, raised in the report, which also is a priority for the RES producers, is the financial stabilisation of the guaranteed buyer and the implementation of a functional market-based support scheme. While NEURC tries to balance between the preservation of the industry from higher tariffs and overseeing fulfilment of FIT obligations, such strategy results in systematic underfunding of the guaranteed buyer. It is time to think about proper mechanisms for the provision of funds to support FIT and fulfil arrears obligations to RES producers, assuming that there will be no extra funds from exports of electricity next year. Preserving existing investors’ interests will be critical for new investments in the post-war economy.

Several important regulations moved forward in 2022. The passing of a law allowing for virtual PPA contracts is a big step forward for the development of the new market model. The law will allow producers to sell directly to business consumers and enter into long-term agreements. A draft law on the guarantees of origin was prepared by the Ministry of Energy and submitted to the Parliament for review in September. Guarantees of origins could provide a fast track for additional income for RES producers under a new market model, which would be possible via the launch of domestic GO market. According to the Energy Community Implementation report 2022, the registry of GOs for Ukraine has been already created and the agreement provided to the respective officials for signing. Pending the passing of the proper legislation, Ukraine could promptly launch its GO registry. Notably, in December 2022, Georgia became the first county to start using the GO registry, provided by Energy Community, hence launching a market for Energy Community participating countries. We sincerely hope that the topic of GO will be on top of the priorities list
of lawmakers in 2023.

Summing up, I want to support the efforts of the Ministry of Energy of Ukraine in keeping up the timeline for submission of the renewable sector related law drafts. I strongly hope that the lawmakers will put these law drafts in priority order and the regulator will address the critical issue of underfunding of the guaranteed buyer. The next step would be the creation of a clear strategy for the development of renewable energy in Ukraine. Currently, there are only some high-level targets, presented in the National Recovery Plan by the government at the Lugano conference in July. These targets for the growth of renewables do not address concrete actions for the transition from the existing market model to a new one while preserving the trust of the existing investors.

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