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20.05.2019

GREEN AUCTIONS IN UKRAINE

On May 18, 2019, President of Ukraine Petro Poroshenko signed the Law of Ukraine “On Introducing Certain Changes to Laws of Ukraine Regarding Ensuring Competitive Conditions for Generation of Electricity from Alternative Energy Sources” No. 2712-VIII (the “Law”) adopted on 25 April 2019 by the Verkhovna Rada of Ukraine.

In order to establish a transparent, market-based pricing mechanism for “green” electricity, the law provides for the introducing RE auctions in the country from 1 July 2019. The winners of the auction will be determined by the lowest price offered. Therefore, today we can confidently say that the introduction of the auctions will reduce the price of electricity generated from RES, which, in turn, will lead to a decrease in electricity prices on the national market.

The auctions will be conducted twice a year until 31 December 2029, no later than the 1st of April and the 1st of October of the corresponding year. The pilot auction should be held no later than 31 December 2019, and the first auction - in the spring of 2020.

The Cabinet of Ministers of Ukraine at the proposal of the Ministry of Energy and Coal Industry of Ukraine in coordination with the State Agency on Energy Efficiency and Energy Saving of Ukraine and transmission system operator will set annual quotas for the next 5 years no later than 1 December. The first annual quotas for the next 5 years should be established before 1 December 2019. The annual quota is distributed equally between each type of RES, namely, for the sun - at least 15%, for wind - at least 15%, for other renewable energy sources - also at least 15%.

The level of fulfilment of Ukraine’s international obligations for the development of renewable energy, the Energy Strategy of Ukraine, Generating Capacities Compliance Assessment (Sufficiency) Report and the Transmission System Development Plan will be considered while determining quotas.

Long-term support for generating “green” electricity will be granted to the winners of the auctions in the form of the guaranteed purchase of the entire volume of electricity supplied by a wind generator on the basis of a 20-year power purchase agreement (PPA) concluded between such wind generator and a guaranteed buyer.

RE auctions will be mandatory for wind farms with installed capacity exceeding 5 MW.

At the same time, wind farms with installed capacity of 5 MW or less or comprising of 3 wind turbines (regardless of the installed capacity of such wind turbines) are eligible for “green” tariff.

Moreover, wind farms commissioned before 1 January 2020 or having concluded PPA until 31 December 2019 are also eligible for “green” tariff. The last ones should be commissioned within 3 years of signing such PPA.

The law enters into force on the day following its official publication in the newspaper “Uryadovy Courier”.

Text of the Law No 2712-VIII from 25 April 2019 (in Ukrainian) is available at: https://zakon.rada.gov.ua/laws/show/2712-19