On June 5th, 2020 a joint press conference of the Ukrainian Association of Renewable Energy, the Ukrainian Wind Energy Association, and the European-Ukrainian Energy Agency entitled “State raiding or a new investment policy for green energy?” took place.
The energy sector of Ukraine is experiencing an unprecedented crisis; it was the direct result of the launch of an ill-conceived market model, populist actions by the authorities, and lobbying of the interests of financial and industrial groups in legislative and executive authorities.
A series of decisions and actions that at first seemed scattered manifestations of incompetence, negligence, and corruption, now consists of a single system – the state raiding mechanism directed against investors in renewable energy.
Igor Tynnyi, co-founder of the Ukrainian Association of Renewable Energy, described in detail the work of this mechanism:
“At first, the state did everything to attract investments, creating the appearance of security and guarantees of return of funds. But later, an attempt was made to introduce forced retrospective changes to the existing RES conditions. At the same time, the state understood that this was a deliberately losing position; therefore, the appearance of investor consent was created for the impracticable conditions of restructuring.
Next up was the artificially created non-payment problem. Over the past three months, “green” stations have been paid less than 5% of the cost of energy produced, the total debt is 115 billion UAH.
All this is accompanied by a campaign to discredit the “green” energy, the thesis is spreading about its unacceptably high price for the country. The apotheosis of this story was made public by the mass media of the correspondence of the head of the relevant committee and member of the party “Servant of the People” Andrei Gerus with enchanting emphasis – “beat green”. ”
Within 9 months, industry associations and investors sought a solution to the situation, turning to the Government and President Volodymyr Zelenskyy. Letters were sent to international organizations and ambassadors of European countries, which supported the position of investors in renewable energy in the negotiations.
As was stated by Andriy Konechenkov, Chairman of the Board of the Ukrainian Wind Energy Association, market players had a feeling of closeness to the final stage – the coordination of a compromise memorandum between investors and the state.
“However, now, in a situation where Gerus is talking about the destruction of green energy, apart from the consequences for Ukraine, both on the part of investors and the international community, I would like to understand: who determines Ukraine’s policy regarding investors and investments? How are investments protected in Ukraine? I would like to know: who is responsible to the President of Ukraine for the implementation of his calls and position expressed to investors about the country’s attractiveness for investment? “, – Konechenkov emphasized.
He noted that in order to stabilize the situation in the energy sector and maintain Ukraine’s course towards decarbonizing the economy, investors are ready to cede UAH 80 billion, which will be lost upon the revision of green tariffs.
At the moment, the further development of the situation depends on the President of Ukraine. The Chairman of the UWEA Board expressed hope that Volodymyr Zelenskyy will make an unambiguous and immediate decision, supporting the memorandum between Ukraine and investors.
Karl Sturen, shareholder and CEO of the wind energy company Vindkraft Ukraina, a member of UWEA, spoke in the west on behalf of foreign investors.
“All 9 months, we, foreign investors, have been trying to find a compromise with the state, but we are not heard and even intimidated to force us to abandon our projects.
Due to the lack of settlements for green electricity, we cannot pay on loans. For almost 3 months the state has not been paying for green energy, while other types of generation do not have such a terrible situation with payments. Therefore, we and a number of other market players are planning to file claims against the Guaranteed Buyer next week,” Sturen said.
The unresolved issue of further development of renewable energy in Ukraine and the lack of consensus between investors and the government is also a factor that impedes the allocation of a loan for Ukraine from the IMF.
“The IMF board of directors may not approve the loan. An obstacle is the scandal over the situation with renewable energy sources. Since last fall, the authorities can not find a compromise with investors in the” green energy “, it came to the point that we were forced to write to the Fund.
The IMF has always supported institutional investors and is unlikely to disregard the attitude towards investors shown by legislative representative Gerus. There is a possibility that the allocation of the IMF loan may be delayed, “said Sturen.
Oleksandra Gumeniuk, Director of the European-Ukrainian Energy Agency, emphasized the importance of the state complying with the guarantees given to investors because investment protection is the basic principle for economic development and job creation. According to Ms. Gumeniuk, mistrust of investors will lead to the curtailment of projects not only in the renewable energy sector but also in other sectors of the economy.
In her speech, the director of the EUEA highlighted the importance of direct foreign investment in the renewable energy sector for the state:
– infrastructure investments: during the construction of a 1 MW renewable energy facility, the amount of investment in infrastructure (renovation or construction of networks, substations) reaches 30-70 thousand Euros;
– completed social programs: investors are actively involved in the development of regions in accordance with agreements with regional authorities; they build or repair roads, kindergartens, schools, medical facilities;
– employment: a new, rapidly growing renewable energy industry has created thousands of jobs in Ukraine, and these are highly qualified specialists whose experience and quality of work are growing every year;
– RES facilities are the newest and most modern generating facilities in the field of energy in Ukraine. In the next 10 years, most NPP and TPP units should be decommissioned, how will they be replaced, according to policy makers? Is it advisable to consider import as a replacement for the output units, losing the state’s energy independence, and crossing out the development of the industry in Ukraine?
– the development of the renewable energy sector contributes to the development of related industries, for example, the industrial production of equipment for renewable energy plants; and economic recovery after the current crisis will begin with industry.
Oleksandra Gumeniuk noted that investors have again prepared their proposals for the Memorandum of Understanding, and are still ready to give up a significant part of their future income to resolve the situation in the industry, however, insist that such proposals should be considered in the near future.