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12.03.2020

NPC UKRENERGO INTENTIONALLY LENGTHEN PROCESS OF DEVELOPING CURTAILMENT COMPENSATION METHODOLOGY

Due to the expanding trend of curtailment of the “green” electricity generation in Ukraine, in January 2020 a Working Group was established at the NPC UKRENERGO to develop a methodology of RES electricity curtailment compensation.

This Working Group included representatives of the NPC UKRENERGO, the National Electricity and Utilities Regulatory Commission (“Regulator”), the SE "Guaranteed Buyer", members of industry associations and the RES producers.

The methodology shall address three key issues:

1. How to calculate the amount of “green” generation being cut by the grid operator?

2. Who is responsible for compensation for these curtailments?

3. What is the legal regime of compensation for curtailments?

The meeting of the Working Group that took place on March 11, 2020 has revealed the following problems:

1. A representative from NPC UKRENERGO, chairing the Working Group, is not authorized by the NEC UKRENERGO management to develop and initiate system solutions. He works solely within his “narrow” mandate.

2. Despite the fact that the Working Group members have already drafted a methodology for calculating curtailments compensation and amendments to the relevant regulatory acts and proposed it to NPC UKRENERRGO for consideration, the last disseminated by emails a fundamentally new draft methodology (UKREGERGO’s draft methodology) on March 6, 2020 at 10:28 pm. During the above-mentioned meeting of the Working Group dated 11 March 2020, the RES producers constructively criticized UKRENERGO’s draft methodology.

Changes in the regulatory framework developed by RES producers were of a systemic nature and when adopted by the Regulator, they would have triggered part 5 of Article 68 of the Law of Ukraine “On Electricity Market”, which provides for full compensation to RES producers for curtailment of RES electricity generation.

The UKRENERGO’s draft methodology e-mailed to the Working Group members before the long weekend, tackles the issue that is already within the scope of official duties of the NPC UKRENERGO’s representatives - members of the Working Group.

3. During the meeting of the Working Group, UKRENERGO’s representatives claimed the lack of solutions from the RES producers to the above-mentioned problems including dispatching of the Integrated Power System of Ukraine, which is within the area of responsibility of NPC UKRENERGO.

Discussions at the meeting of the Working Group lead the RES market players to conclude that the process of approval of the curtailment compensation methodology as well as amendments to the relevant regulation acts are being intentionally delayed by NPC UKRENERGO.

“Absence of a solutions creates a threat of not receiving funds by RES producers, which in the long term will disturb the stability of payments made to the loans for construction of Renewable power plants. This will entail significant deterioration of the investment climate of Ukraine and undermine confidence placed in Ukraine by international and national financial institutions”, Andriy Konechenkov, Vice-President of the WWEA and Chairman of the UWEA Board commented.