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Instability of renewable energy market in Ukraine


The world is changing. Trends of the clean energy development by using renewable energy sources (RES) and information technologies are merged together; areas of decentralized smart distributed generation grids based on a harmony instead of a fight against natural powers and diversity are formed.

A bright example that speaks for itself: the world famous Google Company is building a new data center on the site of an old closed coal-fired power station. The new data center will get its energy supply from RES. This is a part of the global company’s goal – 100% clean energy supply.

Is this way real for Ukraine? Do we need to change at all?

The Paris Climate Agreement signed by governments of 135 leading developing countries is a clear direction of the human development from the carbon, costly and environmentally harmful energy to the renewable one.

Ukraine also signed this Agreement and thereby declared its intention and determined the direction. But what is the status of the RES development in reality? It is a complicated question, which raises a wide range of unsolved problems hindering the process started.

The “round table” on “The status of implementation of the National Action Plan for renewable energy for the period until 2020: parliamentary control” held on May 16 in the parliamentary Committee on Fuel and Energy Complex had to give the answer to this question.

Analysts and experts agreed on a significant gap between real figures and the ones specified in the Plan. Moreover, considering the need to adjust this Plan in accordance with the requirements of the Climate Agreement in the near future, this gap can be called catastrophic. RES generate about 25 % of energy in the world, in Ukraine – 1.2%.

While the world’s capacity commissioning rates are up to 8% per year, in Ukraine, for example, in 2015, only 0.5% of new RES capacities were introduced. These rates make us to speak about the progress reversion instead of achievements.

There are also situational factors: loss of control over Donbass coal mines and resources as a result of the Russian aggression and significant dependence of the nuclear fuel cycle on the Russian Federation clearly orient the development vector of the Ukrainian energy system towards RES, energy saving, decentralized or so called distributed generation and “smart grids”.

Is it possible to imagine that RES represented by “a drop in the ocean” yet – 1.2% of overall generation – hold at least a prominent and potentially crucial place in the energy system of Ukraine? To my mind, it is possible.

Inexhaustible energy sources and the RES development-related infrastructure, science and engineering, technological innovations, energy independence, security, the nation’s health, clean environment are only some prospects on this way.

However, now, even very moderate rates prescribed by the Plan are not provided by a unified balanced and predictable state policy for support and development (as defined under the law on electric power industry). This sector has long been in a dual and very unstable situation: positive factors of government incentive measures are combined with ill-advised and unpredictable decisions of the government’s bodies resulting in the significant slowdown and even suspension of the sector’s development, especially in 2015.

Introducing emergency measures in the energy market along with a simultaneous decrease of “green” tariffs, non-revised tariffs previously approved for RES projects with already attracted investments, unresolved problems with their network connection* and, finally, ignoring specifics of the domestic RES sector while planning the global reform of the Ukrainian electric power industry – all these factors keep investment capitals away from the sector.

There are also some achievements, which can serve as an example of fruitful cooperation between legislators, the government and the business community. “Technical” proposals for the legislation are jointly worked out; some very effective incentive rules are successfully introduced in the legislative field as a result of a compromise.

An important achievement was the adoption of the Law #514 “On amendments to certain laws of Ukraine to ensure competitive conditions for production of electricity from alternative energy sources” on June 4, 2015. This law provided for introducing “green” tariffs for electrical power at mutually acceptable levels based on the EU countries’ experience and as a result of balancing the expenditures of electricity consumers in Ukraine and stabilizing the RES sector.

Today, another two important draft laws are registered in the Verkhovna Rada of Ukraine: “On amendments to certain law of Ukraine regarding the improvement of the mechanism to stimulate production of electricity from alternative energy sources (technical)” (registered as #3447) and on simplification of land allocation for RES projects.

But this is not enough – the main factor for the development of this industry in our country is providing an adequate state policy aimed at the complete restoration of electric power sector in general and moving from “costly” carbon energy principles to “smart” and “clean” production and energy saving technologies.

In addition to the above, of course, the most important factor is a stable political and economic situation. Any forms of “hand” regulation in the industry, including unpredictable and inconsistent decisions of government’s bodies, which are in conflict with the current legislation, the planning of such major reforms as market liberalization without taking into consideration the specifics of RES generators (not to speak of the fact that it can be done without taking into account the priority of their development), frequent changes in the leadership of the executive branch, unstable financial situation and, as a result, high capital risks and costs are the factors that cause the uncertainty of investors.

Only one thing provides confidence and optimism: while there is a declining trend in the coal and nuclear power industry, the RES potential is inexhaustible, benefits of its implementation are countless and will grow with every passing day and their cost will decrease; Ukraine’s potential for “green” energy sources is several times more than today’s gross consumption.

So, we can conclude: the ongoing energy development requires new environmentally and human friendly ways of its production, and it is necessary to make every effort to create a powerful RES sector in Ukraine “almost from the scratch”.

* The network connection procedure is almost the most complicated and regulated now and requires to be revised completely and immediately. And not only for RES, but also for the business in general.

Ukraine takes the 137th place among 189 countries in terms of “Network connection” in the World Bank Doing Business 2015 ranking. Duration is 263 days, the number of procedures – five.

These are major tasks and their solution requires to make amendments to the Law “On Electric Power Industry” and the works with the legislator in this area are conducted. However, there are much more unsolved problems yet than achievements and developments in this area.