New regulatory framework for renewables: what a market participant should know.

Workshop 21.05On 21th of May the workshop on New Legal and Regulatory Framework in Renewable Energy Sector was held by experts of IMEPOWER for the members of European-Ukrainian Energy Agency.

 Two main topics were discussed:

  • introduction of auctions for RES projects and reduction of FiT starting from 01 January 2020, in accordance with the Renewable Auction Law of Ukraine dated 25 April 2019 (the “Law”);
  • features of operation of the RES producers within the new model of the electricity market.        

Members of EUEA – market players were informed on main changes and steps needed for further effective operation at the electricity market.

Introduction of auctions. Since 2020, SPPs with capacity exceeding 1 MW and WPPs with capacity exceeding 5 MW (or 3 wind turbines regardless of installed capacity) are obliged to participate in auctions.

One of the issues of interest at the workshop concerned the total size of the annual quota of RES projects capacity to be offered at the auction. Allocation of annual quota between different RES types was also discussed. The Cabinet of Ministers of Ukraine will approve annual quotas each year until 01 December for the next 5 years.

The auctions will be held twice a year, before 01 April and 01 October, through Prozorro electronic auction platform.

The speakers clarified in detail the requirements for auction participants. Participants of the workshop were interested in the issue of bank guarantees to be provided for participation in the auction as well as for the fulfilment of obligations under the awarded contract. In particular, the participants of the workshop were interested in requirements for banking institutions entitled to issue bank guarantees. According to the explanations, requirements to banks will be established by the auction procedure (to be approved by the Cabinet of Ministers of Ukraine).

The bidder with the lowest price of production of 1 kWh of electricity will be selected as the successful bidder of the auction. In addition, the auction price cannot exceed the FiT.

 FiT decrease. Starting from 01 January 2020 the FiT will be reduced in the following way:

for SPPs - by 25%;

for WPPs - by 10%, while wind turbines with the installed capacity up to 2 MW will face a further annual decrease by 1.5% during 3 years starting from 2021.

Responsibility for imbalances. Full responsibility for imbalances for producers (both RES and at the auction price) will be imposed on the market participants commissioning the facilities after recognition of the intra-day market to be liquid (the Regulator shall decide on liquidity), from 2024 the latest.

Changes resulting from transition to the new market model. From 01 July 2019, the model of contractual relations will be changed. RES producers will sell electricity at FiT to the Guaranteed Buyer (the legal successor of SE “Energorynok”). By 01 July current producers shall re-conclude the PPA and those who intend to and construct the RES facilities shall re-conclude the pre-PPA. Attention of the participants of the workshop was drawn to the need to submit following documents for conclusion/re-conclusion of pre-PPA:

- documents confirming the right of ownership/use of the land plot;

- grid connection agreement;

- construction commencement permit.

Regulator’s by-laws on operation of RES producers within new market model shall be revised in accordance with the adopted Law and shall be brought into correspondence with other Regulator’s documents that are currently at the stage of active discussion.

IMEPOWER is Ukraine’s leading advisory group focused on energy sector since 1996; member of EUEA. IMEPOWER advisory practice focuses on developing of strategy, structuring and financing of investment projects, preparing of sector reports and forecasts, supporting companies operating on energy markets. IMEPOWER has been the accredited consultant for the Parliament Fuel and Energy Sector Committee for many years, having contributed to key pieces of legislation including the Energy Regulator Law, the Electricity Market Law, the Renewable Auction Law, etc.

 

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