Ukrainian government initiates discussion of a draft law introducing feed-in premium system for renewable projects

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The Ministry of Energy has posted on its website a draft law regarding feed-in premium system of support for renewable projects (the “Draft Law”) for comments of interested parties (1-month deadline).

The Draft Law provides for the right of renewable energy producers to leave the balancing group of the Guaranteed Buyer and freely sell electricity on the market at market price with the possibility of receiving a so-called feed-in premium in the amount of the difference between the established "green" tariff and estimated market price for electricity. Also, all renewable energy auction winners will obtain support in the form of feed-in premium (the “FIP”).

In addition, the Draft Law provides some changes to the renewable energy auctions procedure.

In particular, the Draft Law envisaged the following:

All renewable energy producers will be splitted to the following categories:

  1. Members of  the Guaranteed Buyer (the “GB”) balancing group: “green” tariff producers
  2. Outsiders of the GB balancing group: Feed-in Premium producers entitled to “green” tariff compensation level; Feed-in Premium producers entitled to auction price compensation level.

Auction winners can access state or municipal property (roofs and / or facades of the buildings and other capital constructions) without an auction.

The Draft Law established the procedure for exit from the balancing group of the SE Guaranteed Buyer.

Curtailment compensation will apply only for the “green” tariff producers within the GB`s balancing group who signed the curtailment compensation agreement. At the same time the draft law suggests that curtailments shall not apply to projects that switched to FIP.

The Draft Law underlined that 31 December 2022 will be a cut-off date for Pre-PPA “green” tariff projects (however, that is also not new because pre-PPAs cannot exist beyond this deadline).

Auction-awarded tariffs will apply for a 15 years period instead of 20 years period (i.e., the term of auction-based PPAs will be shortened from 20 years to 15 years).

Feed-in Premium producers will be able to sell electricity on the following markets: (1) bilateral contracts market; (2) day-ahead market; (3) intraday market; (4) balancing market.

Feed-in Premium compensation will be funded by GB by way of paying for the RE generator’s service on incentivising production of energy from renewable energy sources (“FIP compensation”). The model agreement on provision of the services of incentivising production of energy from renewable energy sources will be established by the Regulator.

Most importantly – it will be the Regulator that shall further determine the detailed mechanism for calculation of the estimated market price for the purposes of the GB’s FIP compensation (i.e., whether it would be fixed, or sliding, whether technology specific or not, etc).

If the determined amount of the estimated market price in the established period is equal to or exceeds the amount of the "green" tariff or the auction price, the GB’s FIP compensation shall not be paid.

The FIP compensation will be calculated on the net metering basis.