Executive Summary
Renewable energy generation is one of the key priorities for the Ukrainian energy sector. Ukraine has also set a goal of sourcing 25% of its total energy mix from renewables by 2035. Yet, the current share of energy generated from renewable energy sources (RES) wind, solar, biomass, biogas and small hydro including big hydropower projects over 10MW is comparatively small. In the beginning of 2020, the share of renewables in energy reached 11 percent and by the end of the year reached 12.4 percent. The current feed-in tariff or “Green Tariffs” will expire on January 1, 2030.
Please see table below:
Source: ExPro Consulting LLC
There are five main regions in southern Ukraine where about 66 percent of all renewable generation is located, namely Odesa, Zaporizhzhia, Mykolaiv, Kherson and Dnipro regions. Those regions have the best wind resources and highest solar insolation.
Current Market Needs
With the increase of renewable generation from solar and wind resources in the last few years, the grid is increasingly in need of balancing capacities. In this regard the new market has provided opportunities for the evolution of a completely new segment of balancing services and auxiliary services.
According to the Ukrainian government, stability of the grid can be ensured by implementing the following measures: installing highly maneuverable “peak” generation, such as gas-fired power plants; implementing advanced demand management systems; and building energy storage. It is estimated that the grid would require around 2GW of new peak-covering capacity and about 500MW of energy storage by 2025.
Recent Market Trends
In addition to already installed RES, key Ukrainian industry players are suggesting changes and presented convincing arguments to the existing Ukrainian legislation to facilitate investments in offshore wind energy and production of “green” hydrogen aiming to reach Ukraine’s obligations of electricity production from renewables by 2035 and decarbonization of the Ukrainian economy.
Market Entry
Partnering with a local company to develop your business strategy would be the most beneficial way for market entry. Commercial Service in Ukraine can assist with the evaluation of potential business partners.
Technical Barriers & Tariffs
The Green Tariff in Ukraine is currently the main state support mechanism for RPPs. The Green Tariff was introduced on 1 April 2009 as a special preferential price for electricity produced from RES, to be paid until 1 January 2030. It is set by the regulator separately for each RPP and for each technology. While Ukraine still has one of the highest, the situation with non-payments to renewable energy producers by the Guaranteed Buyer remains critical.
On July 1, 2019, Ukraine launched a New Liberalized Electricity Market in compliance with the Third Energy Package of the European Union. The former electricity market, organized under the single-buyer model, was divided into several new sub-markets: the bilateral contracts market; the day-ahead market; the intraday market; the balancing market; the market for ancillary services; and the retail market.
The renewable power producers (RPP) mainly operate on the bilateral contracts market, selling their output at the Green Tariff directly to the Guaranteed Buyer. The latter then re-sells the electricity on the day-ahead and intraday markets. The difference between the Green Tariff and the price of electricity sold at the day-ahead and intraday markets is reimbursed to the Guaranteed Buyer by the Ukrainian transmission system operator Ukrenergo, as a payment for the Guaranteed Buyer’s services for the increase of the share of electricity generated from RES.
RPPs selling electricity at the feed-in tariff must also enter the special balancing group where the Guaranteed Buyer (as the party responsible for balancing on behalf of all such RPPs) must settle imbalances emerging within the balancing group. In turn, RPPs must reimburse to the Guaranteed Buyer costs associated with the settlement of imbalances. The share of this compensation will gradually increase from 10% in 2021 to 100% by 2030. Should the Law implementing changes of the Green Tariff support scheme be adopted, the rules for liability for imbalances will change as described above.
Important: The Green Tariff may not be lower than a set minimum rate, which is fixed in EUR according to the UAH-EUR exchange rate as of 1 January 2009. Therefore, currency fluctuations of the Ukrainian hryvnia do not have an adverse effect on the payouts to RPPs.
U.S. Commercial Service Information
For more information please contact Commercial Specialist, Myroslava Myrtsalo at: Myroslava.Myrtsalo@trade.gov
