New Opportunities for Renewable Energy in Ukraine

The full-scale invasion and its longevity have changed attitudes toward “green” energy in Ukraine and forced the state to move actively toward increasing electricity generation from renewable energy sources (hereinafter – RES).

In particular, the state’s intention to develop RES is confirmed by the adoption of a number of strategic state documents that partially or entirely relate to the RES sector, namely: the National Energy and Climate Plan for the period until 2030 (hereinafter – NECP, Order of the CMU dated 25 June 2024 No. 587-r); the National Renewable Energy Action Plan for the period until 2030 and the action plan for its implementation (Order of the CMU dated 13 September 2024 No. 761-r); the Strategy for Distributed Generation Development for the period until 2035 and approval of the operational action plan for its implementation in 2024-2026 (Order of the CMU dated 18 July 2024 No. 713-r); the Concept for the Implementation of “Smart Grids” in Ukraine until 2035 (Order of the Cabinet of Ministers of Ukraine dated 14 October 2022 No. 908-r); the Roadmap for the Development of “Smart Grids” (approved on 19 May 2024 by the Ministry of Energy of Ukraine).

These documents in general establish an increase in RES generation capacity, recording, for example, that the total volume of electricity generation from RES will rise to 43 894 GWh in 2030 (7.2 GW of solar power plants and 5 GW of active consumers, 6.214 GW of wind generation and more than 1 GW of offshore generation, 876 MW of bio-generation, 40 MW of geothermal generation).

Accordingly, it is obvious that at the level of strategies and declarations, the development of RES generation does have prospects for rapid growth. This thesis is also confirmed by relevant legislative changes.

Regarding Solar Power Plants

The first and at present main incentive for the development of solar energy is the exemption from customs duty and VAT when importing equipment for solar power plants (Law of Ukraine On Amendments to Subsection 2 of Section XX ‘Transitional Provisions’ of the Tax Code of Ukraine on Exemption from VAT on Imports of Goods for the Production and/or Repair of Mechanized Demining Machines, No. 3853-IX of 16 July 2024; Law of Ukraine On Amendments to the Customs Code of Ukraine on Exemption from Import Duty on Goods for the Production and/or Repair of Mechanized Demining Machines, Goods that Contribute to the Restoration of Ukraine’s Energy Infrastructure, and on Certain Features of Customs Clearance of Goods Intended for Security and Defense Needs, No. 3854-IX of 16 July 2024).

The second factor for the development of solar energy and a certain “stabilization” of this technology is the legislative introduction of simplifications for the use of energy-storage installations (ESI) in combination with other generating units.

In particular, Article 71 of the Law of Ukraine On the Electricity Market provides for the installation of ESIs within an operating, for example, solar power plant without the need to obtain separate technical conditions and a storage license, subject to compliance with specified power and metering requirements. Producers entitled to the “green” tariff or who have received support through auctions may store electricity without losing their tariff or other support. Accordingly, the installation of ESIs will allow solar power plants to settle imbalances, enter the market regardless of daytime generation specifics, and significantly improve the project’s economic indicators.

A separate new vector for the development of solar energy may be the cable-pooling mechanism introduced by the Law of Ukraine On Amendments to Certain Laws of Ukraine in the Energy and Heat Supply Sectors to Improve Certain Provisions Related to Conducting Business Activities and the Operation of Martial Law in Ukraine, of 14 January 2025 No. 4213-IX (hereinafter – Law No. 4213). Under the idea of this mechanism, a prospective electricity producer can connect, at a single connection point, different electrical installations operating on different energy sources, even if their capacity exceeds the permitted connection capacity. At the same time, such a producer may feed into the grid only the capacity within the permitted limit, ensuring proper commercial metering for each type of installation. Applying this mechanism to solar power plants will make it possible to add another generating unit to an existing connection, thereby using that connection as efficiently as possible and stabilizing solar generation.

Regarding Wind Power Plants

One of the most promising areas within RES generation is the development of wind energy, as evidenced by the intensification of wind-power-plant (WPP) construction. Thus, in 2025, the implementation of several WPP projects began, in particular: over 80 MW – “Vitroparky Ukrainy”; 40 MW – Sokal WPP by “Eco-Optima”; 386 MW – Tiligul WPP. The OKKO Group has also announced an expansion of its wind-project portfolio.

Investments are being attracted to this sector, and in general it can be said that European investors are expressing great interest in Ukrainian wind-energy projects.

Among the latest legislative changes, aimed not at supporting the industry but rather at regulating it, capacity reservation established by Law No. 4213 can be singled out. In particular, if a customer plans to connect wind installations over 20 MW, they conclude a capacity-reservation agreement with the transmission-system operator (TSO). Under this agreement, a technical solution for the connection (power output) scheme is reserved for the customer for up to two years. During this period, the defined scheme may be adjusted at the customer’s initiative. The reservation cost is EUR 5 000 per 1 MW, transferred to an escrow account within 20 calendar days from the date of concluding the reservation agreement. If the customer applies for direct connection later, then the reservation amount is credited toward the connection cost; if no connection application is submitted, the funds are transferred to the TSO’s account.

At the same time, the wind-energy sector itself is generating the changes necessary for its development. In particular, the launch of a price guarantee fund is expected, which will make it possible to attract bank loans guaranteed by international financial institutions.

Biogas

Projects in the biomass/biogas sector are still critically few in Ukraine despite the country’s significant potential in this area.

In May 2024, Law No. 3613-IX amending the Customs Code of Ukraine regarding the customs clearance of biomethane was signed, intended to unblock exports, which are of interest to producers given the artificially restrained gas prices in Ukraine. After the bill was adopted, the main market players began to refine projects and Ukrainian biogas has already been exported.

Separate Investment Opportunities

The aggregation mechanism is at present an investment opportunity for producers of up to 20 MW and for other market players.

Aggregation is defined as the combination of electrical installations for the purpose of buying and selling electricity, providing ancillary services or balancing services on the electricity market. This activity increases the flexibility of the energy system, enabling it to respond more effectively to changes in electricity demand and supply, which is especially important in the transition to renewable energy sources. Essentially, an aggregator is a manager for the energy assets of other companies or consumers. Its task is to combine various electrical installations and manage them on the market, creating a single virtual generating unit for the transmission-system operator.

From a legislative standpoint, an aggregator is an entity responsible for the balance of electrical installations within its aggregated units (one region – one unit), entitled to buy and sell electricity on various market segments, including the day-ahead and intraday markets, and to provide balancing and ancillary services to the TSO. The aggregator is also obliged to comply with all regulatory requirements regarding information and cyber security, which is particularly important given the overall digitalization of energy processes.

Market Rules specify that the aggregator is responsible for compiling daily electricity schedules, managing electrical installations in accordance with TSO commands, and bears financial responsibility for electricity imbalances. The aggregator must also guarantee the technical ability to control every single electrical installation within the aggregated group individually.

The main regulatory document governing aggregator activities, in addition to the Law of Ukraine On the Electricity Market and the Market Rules, is the Licensing Conditions approved by NEURC Resolution No. 1909 of 18 October 2023. The Licensing Conditions impose restrictions on aggregators, in particular prohibiting them from engaging in electricity transmission or distribution activities, in order to minimize conflicts of interest and create fair competitive conditions for all market participants. Separate requirements are established for independent aggregators, who may not supply electricity to consumers and must not be affiliated with universal-service suppliers.

Another interesting investment mechanism in the RES sector is the construction of generating capacities adjacent to production facilities that need electricity supply and the corresponding sale of electricity under bilateral contracts.

This model of interaction not only provides the producer with a permanent consumer and the consumer with a lower price, but is also maximally simplified from a legal standpoint.

In particular, under Part 7 of Article 58-1 of the Law of Ukraine On the Electricity Market, a consumer has the right to connect to its own electricity networks generating installations belonging to third parties and intended for the production of electricity from alternative energy sources, as well as energy-storage installations, each with a rated capacity that does not exceed the permitted (contractual) capacity of the consumer’s electrical installations minus the rated capacity of the consumer’s own generating installations and storage installations, provided that the consumer purchases all the electricity produced by such third-party generating installations and buys/sells all electricity withdrawn/injected by such third-party storage installations.

Paragraph 2 of the foregoing clause provides that relations regarding the sale to the consumer of electricity produced by generating installations and/or released by storage installations belonging to third parties and connected to the consumer’s electrical networks are not considered electricity supply to the consumer within the meaning of this Law and do not require a license; the active consumer does not pay distribution or transmission fees for such electricity. The volume of such electricity is not taken into account for calculating tariffs and services for electricity transmission and distribution of the respective distribution-system operator and transmission-system operator.

Thus, interaction between the producer and the consumer is carried out under a bilateral agreement without obtaining a supply license. In this case, the installation can be connected to the consumer’s internal networks via a direct line, which, under Article 25 of the Law of Ukraine On the Electricity Market, does not need to be legalized with NEURC.

A separate support mechanism for all RES that currently exist in Ukraine, but is perceived by investors without enthusiasm, is the “green” auction mechanism (quota-distribution auctions).

However, a Draft Bill On Amendments to Certain Laws of Ukraine to Improve Competitive Conditions for Electricity Production from Alternative Energy Sources, (No. 13219 dated 28 April 2025) has been registered in the Verkhovna Rada, proposing a comprehensive update of the RES support model. This Draft Bill has the potential to change the logic of participation in “green” auctions, making them more accessible, predictable, and attractive to investors.

First, the draft proposes replacing the contract-for-difference (CfD) mechanism with a “pure” market premium until the end of 2029. This compromise solution retains RES attractiveness for creditors (thanks to guaranteed revenue) while not deviating from free-market logic. The premium covers the difference between the price at which the investor sells electricity and a defined reference value, without mandatory hedging through long-term contracts, meaning greater flexibility and less burden on the public sector.

Second, there is a proposal to extend the validity period of the auction model itself to 2034, with an updated quota-allocation mechanism among different types of renewable sources. There were no such timeframes in the past, which hindered planning new projects; now a clear horizon and more predictable support structure are established.

Third, the financial burden on auction participants is to be reduced. The bank guarantee is lowered from 15 to 10 EUR per kW, and the additional guarantee in the event of construction delays from 30 to 10 EUR. Alternative financial-security instruments not limited to bank guarantees are also provided, reducing barriers for small and medium-sized businesses.

Project implementation flexibility is also significantly expanded. This Draft Bill allows deviation of the actual capacity from that declared at auction within ±10%, while the connection-capacity requirement is at least 90% of the awarded quota. This addresses a common practical issue – the difference between the design and actual station configuration due to equipment changes or technical nuances. The need to obtain separate technical conditions for connection in the event of partial project implementation under an auction is canceled, and the period for concluding connection and land agreements is extended from 6 months to 12 months, which is important for investors in conditions of martial law. An additional 6-month construction period is provided if project commencement occurs during martial law.

A separate innovation of the draft is the refinement of the guarantee-of-origin mechanism for renewable electricity. Under a proposal by the NEURC, a circulation and administration system for such guarantees is created in line with EU requirements; a critical element that will allow Ukraine to integrate into the European certified “green” energy market.

Thus, it can be said that legislation in the RES field is developing rapidly, creating interesting investment opportunities for distributed generation. Of course, it should be noted that the electricity market still has certain problems, notably indebtedness. However, Law No. 4213 has proposed mechanisms for distributing revenues from the dispatch tariff and regulating the obligations of debtors. These mechanisms are intended to gradually resolve these issues.

A number of changes to harmonize Ukrainian legislation with European provisions are expected, including market integration, within which discrepancies in the regulation of the described mechanisms identified in practice will also be eliminated. Therefore, market participants are hoping for fresh impetus to the RES market in Ukraine and for new and ambitious projects.