Active negotiations with the state on reaching a compromise in the sector of electricity production from renewable energy sources (RES) have been going on since October 2019. In December 2019, the European-Ukrainian Energy Agency (EUEA) together with Ukrainian Wind Energy Association (UWEA) initiated mediation with the participation of the Energy Community Secretariat. Since then, the market situation has only become more complicated every month. Ukraine is on the verge of complete destruction of the industry. To avoid a total catastrophe, on June 10, 2020, the EUEA and UWEA signed a compromise memorandum with the Government of Ukraine.
Signing the Memorandum is responsible, albeit forced, step on the part of a group of investors. Awareness of responsibility for the overall context of the sector, as well as the support of the majority of the association members, allowed EUEA to co-sign the memorandum.
The terms of the signed Memorandum provide the reduction of the “green” tariff for solar power plants (SPP) built in 2015-2019 by 15%, for wind power plants (WPP) built in 2015-2019 – by 7.5%; introduction of solar pre-PPA “cut off” date being July 31, 2020; reduction of the green tariff by 2.5% for WPP and SPP, which will be commissioned from January 1, 2020. The most important are the state guarantees to ensure full current payment for RES by the Guaranteed Buyer, as well as the approved schedule of debt repayment to electricity producers from RES.
“The state and time played against investors, and this greatly weakened their negotiating position. In a situation of 90% non-payment from the “Guaranteed Buyer” for several months, many investors simply cannot afford to wait until the fall. Until then, they will simply go bankrupt. Not everyone will have the resources to support their business for three to four years until they receive compensation through arbitration. The member companies of the EUEA faced a difficult choice. And everyone made their own choice, based on the understanding that it would do less harm to his / her company and the sector as a whole,” said Yuri Kubrushko, a member of the EUEA Board.
Despite the fact that the terms of the Memorandum significantly reduce the profitability of RES power plants, the EUEA notes that the current Government has made significant efforts to reach a compromise. But the solution to the artificial crisis in the renewable energy sector, caused by the irresponsible policy of the previous Governments, the inaction of the Regulator, and further negative impact of quarantine, dictated the need for decisive action.
During the voting for the signing of the Memorandum, certain members of the association did not agree to its terms or abstained in the voting. However, most of the EUEA members supported the Memorandum, so the association decided to join in its signing. Therefore, the Memorandum was signed to reflect the position of those members who supported its terms, but under no circumstances obliges other members to anything.
“The Memorandum does not oblige any of our members to specific actions. Companies, especially those that do not agree with the terms of this document, will independently decide on their next steps. The EUEA Board will do everything possible to ensure that our companies support the sustainable development of the renewable energy industry and Ukraine’s transition to clean energy sources in the future,” stressed Olena Rybak, Vice-Chair of EUEA.
The European-Ukrainian Energy Agency recognizes challenges related to Memorandum. The Agency will continue to support all its members, in particular those that have not agreed on a Memorandum, and their actions aimed at ensuring an appropriate regulatory environment for their power plants.
“The Memorandum is not the final, but rather the starting point for power plant workers to get paid, for investors to continue operating their facilities, serve the communities, complete the construction of their projects. The EUEA will work with the Government and the Parliament to implement the provisions of the Memorandum and, if possible, achieve more to address open concerns of all our members,” said Mats Lundin, Chairman of the Board of EUEA.
We would like to emphasize that according to the Memorandum, the state has made clear commitments that should stabilize the sector’s work in a few months. This applies, in particular, ensuring full and timely payment for generated electricity and the return of accumulated debts of UAH 14 billion over the next 1.5 years. The Memorandum should also become the basis for the corresponding draft law, which will be registered in the Parliament in the near future. The signing of the Memorandum is a chance for Ukraine to stabilize the energy sector and secure an investment future. The expectations of market players and the international community for responsible government actions to stabilize the situation in the renewable energy sector are now even higher.
The European-Ukrainian Energy Agency is willing to assist in negotiations and search of compromises for our members that, for various reasons, could not support the terms of the Memorandum.