Despite martial law, Ukraine has significantly advanced its renewable energy agenda over the last year. Ukraine’s trajectory in the renewable energy sector is not merely a response to challenges but a proactive and strategic approach to shaping a greener and more sustainable future.
In terms of numbers, in 2023, “green” energy capacities have increased by approximately 190 megawatts of wind power plants, 500 megawatts of solar power plants, and 100 megawatts of gas power plants. Given the temporary shortage of other generating capacities due to military actions, “green” generation significantly contributed to the power system’s stable operation.
In June 2023, Ukraine adopted the so-called Green Transformation Law, which provided the legal basis for implementing guarantees of origin registry, introduced a net billing scheme for self-consumption, and laid out directions for future renewable energy auctions. As a result, in its recent Implementation Report, the Energy Community praised Ukraine’s progress in approximating the national legislation to the Community’s acquis.
The system of guarantees of origin is a long-awaited development. The obligation to create a mechanism for issuing, using, and terminating guarantees of origin is envisaged by EU Directive 2018/2001, mandatory for implementation in Ukraine. Introducing this mechanism will allow Ukrainian businesses to comply with EU regulations regarding the climate goals of decarbonization, confirm corporate compliance with sustainable development goals, avoid additional costs when exporting goods to EU countries, and attract green financing.
A guarantee of origin issued for electricity will confirm the production of such electricity or its part from renewable sources. Thus, guarantees of origin will be able to verify that offered goods and services leave a smaller carbon footprint.
The National Energy and Regulatory Commission (NEURC) is designated as the issuing body for guarantees of origin for renewable electricity. NEURC is currently exploring possible registry options and is in the process of drafting secondary legislation.
The adoption of the Green Transformation Law also paves the way for market-based renewable support schemes through a feed-in-premium model. Currently, support for renewables capacities continues to operate under an administratively determined feed-in tariff. Under it, the guaranteed buyer – a specially designed state enterprise – is supposed to purchase all volumes of “green” energy eligible for the feed-in tariff. As a result, the guaranteed buyer ended up with significant debts to the energy-generating companies. While the debt has gradually been reduced during the last few years, it has significantly diminished business confidence in the feed-in tariff.
The newly introduced feed-in-premium mechanism allows energy producers to freely trade on the market, with the guaranteed buyer covering the difference between the awarded green tariff or the auction price and the market price. In turn, the producers are obliged to pay service costs once the market price exceeds the green tariff or auction price. The adoption of all relevant by-laws is still pending, yet the scheme is expected to be well-received by businesses.
Additionally, Ukraine is replacing feed-in tariffs for households with a net-billing mechanism. The latter will allow consumers to sell electricity produced by them from small-scale renewable installations to their suppliers. At the end of the billing month, the consumer and the supplier would set off their payments. If the cost of energy consumed from the network exceeds the cost of released energy, the difference is payable by the consumer in favor of the supplier. If the cost of energy supplied exceeds the cost of energy consumed, the difference is payable by the supplier to the active consumer. The net-billing mechanism is supposed to incentivize the installation of generating facilities by domestic and small commercial consumers.
As can be seen, Ukraine’s commitment to a greener and more sustainable energy future positions the country for continued progress in the renewable energy sector. The recent legislative initiatives do not simply address immediate challenges but also lay the foundation for a resilient and environmentally conscious energy landscape in the years to come.
By Maksym Maksymenko, Partner, and Yuliia Pidlisna, Managing Associate, Avellum
This article was originally published in Issue 11.3 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.
