Ukrenergo and EUEA members meeting

Ukrenergo 3

Summary of the meeting of EUEA members and NEC Ukrenergo

On December, 10, NEC Ukrenergo and members and partners of the European-Ukrainian Energy Agency met. Maxym Zorin, Director of the Department for the Development of Renewable Energy Sources and connection to the grid of new RES objects, took part in the meeting on behalf of Ukrenergo. Among the EUEA members that took part were: Imepower, Scatec Solar, Acciona, Ukr Wind Investments, iC consulenten Ukraine, as well as a partner of European Energy Agency - Eurocape.

During two hours there was a lively discussion about the actual connection issues, the coordination of the feasibility study, the cooperation between oblenergo and Ukrenergo, and also the balancing of the energy system of Ukraine and prospects after achieving a critical mass of 3000 MW of RES in the grid.

In connection with the fact that in the Draft Law 8449-d it is written that responsibility for the imbalance is not carried by participants of the RES, until the market of RES is not recognized as a liquid by NKREKP, but no later than 2024. Until then, NEC Ukrenergo will be responsible for the imbalance. That is why Ukrenergo initiated the imposition of liability for the imbalance earlier, but their proposals were not included to the Draft Law.

The cooperation between NEC Ukrenergo and the oblenergos is based on regulatory documents and bilaterial agreements. According to regulation acts, oblenergos conform with Ukrenergo all connection feasibility studies which are over 20 MW, and according bilaterial agreements between Ukrenergo and oblenergo, projects over 1 MW has to be agreed by Ukrenergo.

In general, Ukrenergo initiates a reduction of the threshold for the coordination of RES projects to connect from 20 MB to 1 MB, and this has two reasons: first, it is directly related to the norms of the design of the Ukrainian energy system and technical solutions, and secondly, according to the Law "On the Market of Electricity ", the responsibility for the imbalance lies on NEC Ukrenergo.

Such coordination is already being carried out in 90% of projects on the basis of bilateral contractual relations between Ukrenergo and oblenergos. Undoubtedly, the harmonization of the feasibility study of the RES project should take place at the stage before the signing of the connection agreement, but unfortunately, in practice, this is not quite the case. Recently, applicants for the connection are in a hurry, even equipment is purchased in advance to the agreement of the project connection, which leads to additional losses of the applicants themselves in the future. And when connecting to main grids, it is not necessary to appeal to oblenergos in general, but only directly to Ukrenergo.

The participants also asked about the long-established specifications, which have not been used yet, whether Ukrenergo does something with those, so Maxym Zorin replied that there are about 50 contracts in all, where Ukrenergo is a party, and for those projects where there is nothing done for a long time, Ukrenergo initiates the signing of amendment agreements for the dissolution of the old ones. And where oblenergo is the party, unfortunately, such activity does not occur. In general, as of today, technical conditions has been issued for 9 GW of power, the actual possibility to accept it without additional balancing capacity of 3 GW, while 2 has already been built and put into operation. There was no decision to stop the issuance of technical conditions, and in 2019 it is expected to be implemented about 1 GW.

In case of excessive possibility of acceptance into the grid of energy in objects of RES, the parties will be guided by Article 68 of the Law "On the Electricity Market". Where restrictions on the production of energy from renewable sources are foreseen, if demanded by the daily consumption schedule. However, how exactly this will take place, until the end is not clear yet, and the mechanism itself is also debated. Maybe restrictions will be used to other energy generating objects.

It was interesting to discuss the transfer of the newly built substation owner of which is business entity to the balance of Ukrenergo and the obligation to pay VAT. The Ukrenergo representative said that during internal consultations with accountants, there was no obligation to pay Ukrenergo's VAT, but business representatives indicated that they already had a precedent, when transferring from one balance  to another, leads to  VAT payment that had to be compensated by business entity. Maxim Zorin highlighted this issue for an additional solution to Ukrenergo. The goal is to provide a cost-free transfer mechanism of newly built substations from balance to balance.

The growth of state quotas when the system of auctions will be implemented is possible only with the change of daily consumption and provided the development of balancing capacities.

With regard to the methodology for calculating the cost of connecting objects RES to the grid, the basis of calculations the feasibility study of the project, which made by applicants – business entities.

So summing up the meeting, the participants agreed to stay in touch, and continue to conduct a dialogue on grid connection and further development of RES, and that any disagreements and disputes should be resolved by addressing to State Reugulator.