Ukrainian Renewable Energy to Switch over to an Auction System

Published: 13.04.2018

In 2019, an auction system will come into operation in the Ukraine's wind power sector. Experts note that the decision will have a negative impact on the industry.

Ukrainian Renewable Energy to Switch over to an Auction System

Andriy Konechenkov, Chairman of the Board of the Ukrainian Wind Energy Association (UWEA) delineated on air at Hromadske Radio (the Ukrainian Public Radio) the prospects of switching the Ukrainian renewable energy over to an auction platform.

The switch over to auctions is consistent with the current European Union policy on renewable energy, as the EU Member States that have not switched over to auctions plan to do it in near future.  However, even EU countries are going to accomplish the energy market transformation no earlier than by 2020, with a three-year transition period, while the latest amendments to the Ukrainian legislation do not provide for any transition periods.  Now, since 2019, all new renewable energy generators have to win a bid in order to sell their energy.

Thus, according to the expert, the proposed changes may have a rather negative impact on the national investment climate. Besides, wind energy projects are formed for bidding processes in a way that makes bidders regard them as inherently unprofitable. In particular, wind farm capacity is limited to 10 MW, while the minimum capacity for a wind energy facility to be deemed profitable on the Ukrainian market is 50 MW.

Moreover, Ukraine has commitments to the European Energy Association to bring the RES share in its energy mix to 11% by 2020, while the expedited adoption of an auction jeopardizes the accomplishment of that objective. The new rules apply to solar and wind generating facilities only, which diminishes their competitive edge, as compared to other sources of energy.

According to Andriy Konechenkov, the legislative branch has developed controversial views on RES development in Ukraine: "On the one hand, this is a common global practice to grant benefits and preferences to alternative energy and to adopt laws aimed at developing and facilitating the industry functioning. Still, some Ukrainian PMs find the RES net consumer price in Ukraine too high. However, the tariff on generation of 1 kWh of wind energy amounts to 10.2 eurocents only, which is on the EU level, or lower.  The only thing that makes Ukrainian 'green' energy less profitable are bank interest rates. Ukrainian banks provide credits at 20-25%, while in Europe credits are available at 2-3%".

Mr Konechenkov mentioned on-air that the decision on the auction system adoption must be based exclusively on a wider dialogue of stakeholders:  "Policy-makers and the industry representative are already conducting a dialog, and I am optimistic about it. Striking a balance is a key factor here, as in 2017, the Ukrainian wind energy sector demonstrated growth for the first time after several years of stagnation. At the same time, the alternative energy capacity in Ukraine, in particular, the solar, wind and bio energy capacity, is huge, and its use and development may help lower our dependence on coal and carbohydrates."

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