newsComments to the draft law prepared by EUEA member company Arzinger law firm

On Wednesday, July 4, the Verkhovna Rada of Ukraine adopted at the first reading the Law No. 10183 “On Amendments to the Law of Ukraine “On Electric Power Industry” (on promotion of electricity generation from biogas).

The draft law envisages 2.7 coefficient for the electricity produced from biogas derived from biomass of plant or animal origin and 3.0 coefficient – for the electricity produced from domestic waste.

It also provides for decrease of the coefficients for the solar energy:

– surface power facilities – 3.5 (4.8 – as currently applied);
– power facilities fixed on roofs, rated capacity ˃ 100 KW – 3.6 (4.6 – as currently applied);
– power facilities fixed on roofs, rated capacity ˂ 100 KW, objects fixed on facades – 3.7 (4.4 – as currently applied).

The document introduces differentiation of small hydro power stations in accordance with their installed capacity and provides for the increase of the coefficients for the electricity produced by small hydro power plants (1.2 – as currently applied):

– micro hydro power station (installed capacity < 200 kW) – 2.0;
– mini hydro power station (installed capacity > 200 kW, < 1MW) – 1.6;
– small hydro power station (installed capacity > 1MW) – 1.2.

Taking into account state guarantees for stability of conditions of carrying out investment activity and the general principle, stipulated in the Constitution, that laws and other regulatory legal acts shall have no retroactive force, the legislator shall clearly stipulate that such amendments in coefficients shall not be applied to the objects, construction of which had begun before this draft law came into effect.

In addition, the definition of biomass for the purposes of “green” tariff establishment according to the draft law comprises bio-degradable matter with both plant and animal origin.

Important innovation stipulated by the document is the “green” tariff for individuals. The document states:

“For the electricity, produced from the solar energy by the power facilities fixed on roofs of the private houses, rated capacity < 16 kW, in volumes exceeding consumption by such households, the “green” tariff shall be awarded. Production of such electricity may be carried out without the proper license. NERC shall define the order of purchase of such electricity (which shall be done by energy supply companies) and payments for it.”

The “local content” requirement has been also amended.

 

THE LOCAL CONTENT REQUIREMENT

 

Current version of the Law “On Electric Power Industry

Draft Law No. 10183

Local content requirement – share of feedstock, materials, fixed assets, works and services of Ukrainian origin in the cost of construction of respective electrical power facilities producing electricity with use of alternative energy sources

Local content requirement – share of hardware, feedstock, works and services of Ukrainian origin in the cost of power industry object’s construction.

15% for the objects construction of which to be completed before 01.01.2013

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30% for the objects being commissioned after 01.01.2013

for the objects producing electricity from solar and wind energy being commissioned after 01.01.2013

for the objects producing electricity from biomass, biogas and for small hydro power stations being commissioned after 01.01.2013

                     30%

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50% for the objects being commissioned after 01.01.2014

50% for the objects producing electricity from solar and wind energy being commissioned after 01.01.2014

50% for the objects producing electricity from biomass, biogas[1] and for small hydro power stations being commissioned after 01.01.2015

Additional  solar module requirement in hardware:

commissioned after 01.01.2013 – 30%;

commissioned after 01.01.2014 – 50%.

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[1] On the basis of literal interpretation of the draft law’s text, the legislator doesn’t foresee the local content requirement for the objects, producing electricity from domestic waste. But taking into account that the final product of domestic waste’s processing is also biogas, we assume that the local content requirement is applied to the objects producing electricity from domestic waste as well as to the objects, producing electricity from biogas derived from biomass of plant or animal origin.

Considering that the biogas sector can implement up to 70% of the local content requirement, it appears illogical as to why these regulations take affect merely 2015.

Should the Law be adopted at the second reading and consequently signed by the President, it would come into effect on 01.01.2013.