EUEA applied to Energy Community Secretariat Dispute Resolution Center for the support for the negotiations with the Government.
The Energy Community has registered a dispute between the Ministry of Energy and Environmental Protection and the European-Ukrainian Energy Agency (EUEA) and the Ukrainian Wind Energy Association (UWEA) over upcoming changes to the existing system of guaranteed feed-in tariffs (FIT) in Ukraine, stabilization measures and possible solutions to the crisis of the Ukrainian renewable energy sector (RES).
What EUEA expects from the mediation: reasonable solution for both sides of the market stabilization in the sector of RES with a clear action plan with timeline and responsibilities of the Government, taking into account the readiness of investors for the voluntary compromises.
Major points of EUEA, which were the reason to apply the Energy Community:
Guaranteed Buyer deficit is not caused by renewables, but rather by change of electricity market model in July 2019 and historical lack of reforms in some areas (household subsidies, CHPs, etc.)
Model of Guaranteed Buyer flows is very volatile as reflects complicated Public Service Obligation mechanism. Every decision of the Parliament, the Government or the Regulator can send deficit up/down by 3-5 UAH billion that we observed several times during past month
Therefore, solution of the Guaranteed Buyer deficit lies within the competence and authority of the state, but we as industry are ready to make our contribution and go for voluntarily FIT restructuring
The Government has two choices: (1) sit down with the industry and work on the compromise solution acceptable for both sides, then we go for voluntarily restructuring; (2) go for any changes not agreed with the industry that will be retroactive and lead to arbitrations
We had good working process with the Ministry of Energy to assess Guaranteed Buyer deficit for 2 months and shape the compromise solution. Unfortunately, the Ministry’s published Draft Law did not reflect such solution
Therefore, we had to initiate separate piece of legislation (Draft Law 2543) and got support from the Parliament Members to register that
We did not go to the Parliament Energy Committee as since 27 September, when there was meeting organized to discuss RES sector, there was not a single gathering of the working group that was announced by Mr. Gerus on that meeting
There are many misperceptions about RES sector in Ukraine. First, it is not controlled by oligarchs. There are around 500 owners of RES power plants as of now with dozens of foreign investors, many of them are signatories of the joint letter
Second, that it is possible to hold successful options, while in parallel attacking existing investors who work base on FIT system. Competition at the auctions will depend on number of participants. And the price at the auctions will depend on perception of risks by participants and cost of capital. The way how Ukraine will handle now conflict with existing investors will have extensive influence on auctions and any future attempts to attract financing for other areas (battery storage, flexible generation, etc.)
Third, renewable sector is not responsible for balancing problem in the energy system. Pace of RES development is in line with the Energy Strategy 2035, Energy Community Treaty and other official documents. The problem is that implementation of any other measures needed to ensure stable operation of the energy system (network reinforcement, addition of storage and peak capacities) was delayed or never happened. So the focus of the Government should be on removing those bottlenecks rather than blocking RES development.