Round Table «Investment attractiveness of balancing RES in Ukraine"

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On July 23, 2019, the European-Ukrainian Energy Agency (EUEA) held a Round Table «Investment attractiveness of balancing RES in Ukraine".

Partners of the event was Indian Solar, Guris та Wärtsilä.

Speaker’s presentations:

Olga Buslavets Ministry of Energy and Coal Industry of Ukraine

Konstiantyn Gura SAEE

Igor Petryk Wärtsilä

Oleh Zahnitko Integrites

Agenda

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Among the participants of the round table were representatives of the Board and management of the EUEA, members of  EUEA: IMEPOWER, Indian Solar, Guris, Scatec Solar, Acciona, DTEK, Smart Energy, GOLAW, iC consulenten and other RES market players; representatives of the Ministry of energy and coal industry of Ukraine, of the Parliament, the State Agency on Energy Efficiency, NEC "Ukrenergo", Guaranteed buyer, Energoatom, Ukrhydroenergo, financial institutions "Ukrgasbank", EBRD, Green Fund For Growth, representatives of the European Commission in Ukraine, diplomatic missions of Austria, Kazakhstan, Norway, Finland, many businessmen and experts.

The purpose of the round table was to examine the issue of balancing and development of the power system of Ukraine, comparing the investment attractiveness of various balancing technologies, legislative mechanisms for supporting investments in balancing capacities and their role in the further development of RES production and the integration of RES producers into the grid.

Another goal was to exchange best practices for ensuring the reliability of balancing and their market mechanisms, as a way to increase the volume of future quotas for new renewable energy projects in the future auction system.

Olena Rybak, Deputy Chairwoman of the EUEA, Executive Director of iC consulenten noted in his speech that for 10 years, EUEA has been informing about the benefits of sustainable development, the vital need to introduce energy efficient technologies and diversifying energy resources through the introduction of renewable energy sources. All these years, the aim of the EUEA is to support energy sector reforms that will encourage investment in our difficult energy market, which requires clear laws, transparent business conditions, competent partners, and legislators who are engaging in dialogue.
Ms. Olena highlighted three priority tasks for discussion in a professional expert environment:
1. possible next steps towards the development of the electricity market, in terms of further increasing the share of RES with the simultaneous introduction of measures to increase the flexibility of the grid;
2. creation of a market for energy storage and the development of appropriate technologies;
3. exchange of best practices for their application in the energy grid of Ukraine.

Oleksandra Gumeniuk, Director of EUEA, opened the round table emphasizing the professionalism of the meeting participants, adding that Association "European-Ukrainian Energy Agency" (EUEA) nowadays is the circle of companies, investors from Ukraine, Austria, Belgium, Great Britain, Spain, Norway, the United States of America, Turkey, Switzerland, etc. with a total investment of more than 1.5 billion Euros in construction of more than 1 GW of energy generation capacities from the renewable energy sources such as the sun, wind and biomass/biogas. Ms. Gumeniuk also emphasized the strategic importance of a round table for energy policy and a favorable business climate.

Olga Buslavets, Director General of Energy Markets Directorate of Ministry of Energy and coal of Ukraine, stressed the urgency of the topic, since that already in 2020, the deficit of balancing power will be 500 MW, and by 2025 it will grow to 2 GW.

Also, Ms. Buslavets made a presentation of the Order for conducting a competition for the construction of generating capacity and the implementation of demand response measures, which was recently adopted by the Cabinet of Ministers of Ukraine. The official text of the Order is not published yet.

In accordance with the Order, the decision to the problem of balance reliability of the power system of Ukraine is to develop on a competitive basis of high-maneuverable generation with definite characteristics, demand response measures and the development of industrial systems for the accumulation of electric energy (requires separate legislative regulation). The first competition will take place in 2020.

An important precondition for future announcement of a competition for the construction of new capacity is estimation of the generation and balancing capacities that Ukraine will need made on basis of the Report on the conformity assessment (sufficiency) of generating capacity, prepared by the NPC Ukrenergo. That Report has to be approved by NEURC, but remains unapproved.

Konstiantyn Gura, Advisor on international cooperation of the Head of State Agency on Energy Efficiency and Energy Saving of Ukraine (SAEE), reported that as for July 2019 more than 3 billion euros have been invested in the renewable energy sector of Ukraine. He also recalled that, according to the National Renewable Energy Action Plan for the period up to 2020, the share of renewable energy in the total final energy consumption should be 11%, and according to the Energy Strategy of Ukraine for the period up to 2035, the share of energy from renewable sources in the primary energy supply structure should be 25%. This requires attracting not only large volumes of investments (approximately 30 billion euros according to the SAEE), but also the development of balancing tools and increased flexibility of the power system of Ukraine.

Konstantyn Gura said that the SAEE continues it’s work with international financial institutions on financing projects in Ukraine, including the prospects of investing in energy storage and maneuvering facilities after the adoption of the necessary regulatory acts.

Maksym Zorin, Head of Department of the Development of the Transmission System, NPS "Ukrenergo", highlighted the fact that for the second year in a row, according to the legislation, Ukrenergo is preparing Report on the conformity assessment (sufficiency) of generating capacity, but it has not been approved.

In addition, he informed that due to the suspension of the decisions of the NEURC, which set tariffs for NPC Ukrenergo, because of a court decision, Ukrenergo is unable to perform all the functions entrusted to it as a result of the introduction of a new electricity market. In particular, to provide compensation to the SE “Guaranteed Buyer” for compensation between the "green" tariff and the price of sale of electricity from renewable energy sources.

Also, Maksym Zorin noted that the requirements for balancing capacities are prescribed in the Code of the transmission system. After the legislative regulation of industrial systems for the accumulation of electric energy, would be considered the possibility of implementing joint projects of SPP/WPP plus storage.

Igor Petryk, Business Development Director at Wärtsilä Energy Business in Eastern Europe, told why Ukraine should actively develop renewable energy as a matter of urgency, introduce a flexible generation, share global experience of balancing RES and draw conclusions about the possibility of transferring such experience to Ukraine.

According to Wärtsilä modeling by the end of 2020, the generation of RES in Ukraine can be about 7.5 GW. Such growth without the introduction of maneuvering capacities will lead to restrictions of the production of RES or nuclear generation. The real volume of restrictions can be up to one third of the total electric energy production of RES, which will be unused, but still paid to producers.

As the expert said, sources of flexibility can be TPP, hydroelectric power station; flows between countries with synchronized power systems, the concept of Smart Grid; Demand Response; technology of accumulation. Each of these species has its advantages and disadvantages. However, among all maneuverable flexible capacities, Igor Petryk called gas-piston stations the most profitable and efficient ones.

Oleh Zahnitko, PhD, Lawyer, Partner of Integrites International Law Firm, said that in accordance with the Law of Ukraine "On the Electricity Market", there are mechanisms for supporting investments in generating capacities: modernization of the combined heat and power plant and the construction of a new generating capacity or the introduction of a demand response measures. Than he stopped on the forms of support for the two mechanisms.

At the same time, the expert stressed that the start of the new electricity market, unfortunately, has not yet provided adequate investment signals for the construction of maneuverable generation. Therefore, lawmakers should create mechanisms to encourage such investments in order to meet the needs of the system in a timely manner for reliable and timely supply of electricity.

After the speeches of the main speakers, a discussion took place with the participation of a wide range of participants.

Konstantin Petrykovets, director of the SE "Guaranteed buyer", told about the main functions performed by the Guaranteed buyer in accordance with the law and informed the market participants that on July 15 the first payment in July was already paid to electricity producers under the feed-in tariff.

Answering the questions from market participants, Mr. Petrykovets dwelt on the peculiarities of the work of the Guaranty buyer, and provided comments on signing contracts, regarding the forecasting RES production and stressed that the first analysis of their work could be done by the results of the month.

In addition, Konstantin Petrykovets emphasized that the source of performance of the  duties of Guaranteed buyer to electricity producers under the feed-in tariff is the tariff of the NPC "Ukrenergo", the situation around which has not yet been resolved.

EUEA reports that on 22.07 a new lawsuit was filed by the Nikopol Ferroalloy Plant on the recognition of the illegal decision of the NEURC on setting the tariff for SE "NPC" Ukrenergo" for electricity transmission services and tariff for services of dispatching (operational-technological) management from August 1, 2019.

Loic Lerminiaux, a representative of the company Guris, promoting that investors in the RES sector are concerned not only with the current situation in the electricity market, namely, the lawsuits on Ukrenergo's tariffs and future risks associated with it, but also with the independence of the State Regulator for Energy Policy (NEURC) in connection with the recent decision of the Constitutional Court of Ukraine.

However, despite the issues, the Guris representative has supported the Guaranteed buyer that there is a need to increase the accuracy of generation forecast from RES producers since there is now a significant difference between forecasts and actual generation volumes. Mr. Loic also emphasized the need for accurate balances pricing, since the auction system is ahead, where a bidder should prepare a financial model in which the cost of balancing is unknown. Therefore, market participants need exact prices for balancing costs and forecasted volumes of the balancing market.

Ruta Baltause, an expert of the European Commission, said that the European Union in its regulation of the energy market has already gone a long way. Generation is far from being the main player in the electricity balancing market. All market participants connected to the power grid should be flexible, all involved in balancing. 

Summing up the meeting, some issues remains open and EUEA will continue to monitor them in order to further dialogue with key stakeholders:

  1. official publication on the website of the Cabinet of Ministers of the text of the Procedure for conducting a competition for the construction of generating capacity and implementation of demand response measures;
  2. approval by NEURC the Report on the conformity assessment (sufficiency) of generating capacity of NEC Ukrenergo;
  3. issues of estimation of generation and balancing capacities, which will be required power system of Ukraine in the near future, and investment incentives contained in the above-mentioned Procedure;
  4. legislative regulation of industrial systems for the accumulation of electric energy;
  5. results of the first month of operation of the new electricity market, balancing market, its price indicators; volumes and cost of imbalance.

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