• Igor Dykunskyy

    LL.M., Managing Partner, DLF Attorneys-at-Law

  • Yaroslav Anikeev

    Associate, Insolvency Administrator, DLF Attorneys-at-Law

DLF Attorneys-at-Law

ADDRESS:

IQ Business Centre,

13-15 Bolsunovska Street,

Kyiv, 01014, Ukraine

Tel.: +380 44 384 2454

E-mail: info@DLF.ua

Web-site: www.DLF.ua

DLF Attorney-at-Law is a Ukrainian law firm that provides consultancy services to mainly English-speaking and German-speaking clients on various matters of doing business in Ukraine. We have vast expertise of corporate, M&A, insolvency, antitrust, labor, competition, IP, renewable energy law, advertising law, privatization, agriculture, real estate and tax law as well as in litigation and dispute resolution.

Our core customers are SMEs from various fields. We offer them tailor-made, economically viable solutions. We are also a reliable business partner for a number of listed corporations and their subsidiaries in Ukraine. We represent our clients in a wide range of industries: IT, engineering, agriculture, life sciences and healthcare, renewable energy, foodstuffs, pharmaceuticals and chemicals, management consulting as well as home appliances.

Our multilingual team is led by Igor Dykunskyy, LL.M., managing partner, who has over 15 years of experience in consulting foreign businesses. Most of our lawyers graduated from Ukrainian law universities and successfully continued their studies abroad, particularly in England and Germany. Our experts are held in high esteem in professional circles thanks to their expertise on the special features of doing business in Ukraine.

Our attorneys understand not only the needs of clients, but also their business philosophy and the specific needs of their respective business models.

We have a close working relationship with various business associations in Ukraine. We also come recommended by an array of foreign embassies in Ukraine.

 

Renewable Energy in Ukraine

The feed-in tariff has been one of the major drivers of massive growth in the renewable energy sector in recent years. It has contributed to creating a competitive market in Ukraine with a strong presence of foreign investors. However, Ukraine is on the brink of significant changes, with the feed-in tariff set to be replaced with ’green’ auctions.

Seeing about EUR 3.7 billion in investment and 4500 MW of installed capacity (according to the Ukrainian State Agency on Energy Efficiency), 2019 was — and will probably remain — the peak year in terms of investment volumes and construction of new renewable energy objects in Ukraine. At the same time, 2019 will be remembered for the addition of the uncertainty factor to the picture, as a result of the Ukrainian government’s attempts to retrospectively review the green tariff rate. This prompted some investors to consider turning to international arbitration courts to protect their interests as well as those of their creditors. As of the first quarter of 2020, ongoing negotiations between major investors and the Ukrainian government had not brought any solution that would satisfy both parties.

Currently, the renewable energy sector is facing a slowdown, as many investors who aimed to expand their presence on the market, have postponed development of new objects. Instead, they have focused on projects with established financing that are under construction to ensure their timely commissioning, and thus, to secure the higher rate of the feed-in tariff.

 

Feed-in Tariff Rates

The feed-in tariff is fixed in EUR until 2030, however, it is paid in UAH, the national currency. In Ukraine, renewable power producers sell all generated electricity, except for electricity for personal use, to the State Enterprise Guaranteed Buyer (the sole buyer of ’green’ electricity), which is obliged to off-take ’green’ electricity generated under the feed-in tariff, regardless of the installed capacity. It should be noted that as of March 2020, the mentioned state enterprise owes billions of hryvnias to ’green’ energy producers due to its increasing deficit.

The amount of the feed-in tariff depends on the date of commissioning of the electricity generating facility. The feed-in tariffs applicable to different sources of renewable energy are shown below:

 

Additional Incentives

The government encourages investors to use equipment of Ukrainian origin by adding a relevant premium (up to 10%) to the feed-in tariff throughout the entire period of the feed-in tariff, provided that electricity generating facilities are commissioned by 31 December 2024. However, the premium to the feed-in tariff does not apply to renewable energy installations set up by private households. Renewable energy installations with a capacity of up to 30 kW may be set up by private households for the purpose of producing electricity for their own use and for selling excess solar or wind generated electricity to the grid at feed-in tariff rates.

 

Green Auctions

With effect from 1 January 2020, the promotion of companies intending to generate electricity from wind or solar energy is only possible subject to their participation in the auctions for quota allocation and winning the auction. In its Resolution as of 31 January 2020, the Cabinet of Ministers of Ukraine established the detailed procedure for holding the auctions for quota allocation and the selection of the bidding platform. However, the quotas for 2020 are yet to be determined, both nationally and for separate regions.

The capacity requirements for renewable energy facilities to participate in the auctions are as follows:

– wind energy facilities with a capacity of more than 5 MW (the limitation does not apply to facilities with one wind turbine);

– solar power plants with a capacity of more than 1 MW.

Other business entities intending to generate electricity from renewable energy sources, regardless of the facility’s installed capacity and the renewable energy source, can participate in the auctions voluntarily. The advantage of the new green auctions over the existing feed-in tariff system lies in the longer support period (20 years after commissioning of the renewable energy facility). The auctions will be conducted until 31 December 2029 and shall be held twice a year.

The existing feed-in tariff scheme is guaranteed until 2030 and applied to:

– producers, already receiving the feed-in tariff;

– economic entities, which signed a pre-PPA under a feed-in tariff with the SE Guaranteed Buyer before 31 December 2019 and which will construct and commission the respective facilities within 2 years (for solar power plants) or 3 years (for facilities generating electricity from other renewable energy sources);

– economic entities that will construct renewable energy facilities after 1 January 2020, where the installed capacity is less than the capacity for which the auctions are mandatory;

– electricity consumers, including energy cooperatives, having installed energy-generating installations with a capacity of up to 150 KW and selling surplus electricity at a feed-in tariff rate once they use the energy for their own needs.

A yearly quota (a capacity of renewable energy facilities for the respective year, within the limits of which the economic entities will be provided with state support) shall be allocated through the auctions. To ensure fair competition among bidders, Ukrainian law stipulates that bidders have to submit an irrevocable bank guarantee to participate in the auction (EUR 5 per 1 KW) and an additional bank guarantee on top in the event of winning the auction (EUR 15 per 1 KW) as a performance bond to secure the obligations under the contract concluded with the guaranteed buyer.