Ukrainian solar business in 2020: per aspera ad astra
Solar energy in Ukraine has been the most dynamic sector of the national energy industry, as well as the whole economy. More than 70% of all renewable capacities as of the end of 2020 are solar PV stations. It is estimated that investments in solar projects in Ukraine reached 5.7 billion Euros. But 2020 is universally recognized as negative in terms of Ukrainian energy industry and economy.
During several years dozens of companies have been created specializing in construction of solar projects in Ukraine. GetMarket platform has found out how they lived through 2020, and what future they imagine for themselves and the industry. We thank IKNET, EDS, Unisolar, Voltage Group, US Solar, KNESS Group, and Helios Strategia for honest and interesting conversations.
Our survey revealed that over the previous year demand for construction of solar PV and other services fell by an average of 80 percent. State agency for energy efficiency shows similar numbers. In 2019 in Ukraine a little over 3500 MW of solar PV has been commissioned. An estimated figure for 2020 is 1200 MW, or almost 70 percent lower.
Such events would obviously impact the companies and make them adapt to the new business conditions. Depending on how deeply specialized a company is, such a drastic fall in the demand can even kill some businesses.
What doesn’t kill you, makes you stronger
The companies point out that the pandemic has not impacted them as hard as the legislative changes, political decisions of the state, and pressure on the industry they have created. Low feed-in tariff payments to the projects in operation forced many investors also to put many new solar projects in Ukraine on pause.
Most of the actions to protect and support employees during the pandemic have been related to working in the offices and production areas: moving to remote work, supply of masks and antiseptics, free testing, self-isolation after visits to the construction sites. The quarantine didn’t have a great negative effect on the equipment supplies and commission dates of the projects.
In some aspects, these changes made companies look for the ways to become more effective and the tools for it.
Ups and downs
The demand went down for practically all services, although with some exceptions. Construction and design of middle and large solar projects experienced the biggest fall. The same sector that attracted the most of investment in the previous years. Similarly, equipment supply volumes have fallen drastically.
Small off-grid industrial solar projects, service and monitoring of the stations, forecasting of the generation saw some growth. Also, small ground mounted solar projects, as they still can receive a feed-in tariff under the new legislation.
Important to note that investors looking for acquisition of operational solar plants have activated a new niche for Ukrainian companies - technical due diligence.
In general, a long-term strategy hasn’t changed for most companies. Many players anticipated slowing down of the market growth. However, new conditions stimulated them to adapt their tactics and change faster.
Companies who had managed to diversify their business before the crisis, broaden the scope of their services and presence, went through the year more easily than their more specialized colleagues.
Feed-in tariffs cuts made companies look for optimizing their stations’ performance. So technical due diligence, drone inspections, monitoring and dispatching became popular. Full responsibility for generation imbalances opens up a market for the generation forecasting.
The companies started to pay more attention to the requests they previously could ignore. They include tenders for the grid modernizations, small solar projects, feasibility study, etc.
Manufacturing companies moved to production of building constructions or high voltage electrical equipment for the industry.
Businesses start to develop expertise and offers in the energy storage, although this industry has not formed in Ukraine yet.
Companies planning or already present on foreign energy markets have been more active there. It is a natural reaction to the turbulence on Ukrainian market. It is true for the manufacturing companies, because European EPC, development and designing markets are usually very saturated.
Future is hopeful
Still, Ukrainian solar companies believe in the domestic renewables market. Everybody agrees that advent of clean energy technologies is inevitable. And that Ukraine has to create conditions which let them come to reality. Development of clean energy does not really depend on the state policies anymore, but on economic dynamics. Economic development, new companies and jobs creation, growth of demand for energy, and the income will define the development of renewable energy. And vice versa, economic stagnation won’t let the industry flourish, no matter what the state does.
The directions such as energy storage, solar plus storage hybrid systems, and self-consumption of electricity are seen as the most promising.
At the same time, Ukrainian energy grid requires a deep modernization. So equipment manufacturing, design and construction of the power lines and substations, developing EV infrastructure will also be in demand.
Full inclusion of environmental externalities in the costs of products and services of Ukrainian businesses is also inevitable. So we have to prepare for the introduction of the fair GHG emissions taxes, and the Carbon Border Adjustment Mechanism by the EU.
The companies hope Ukrainian government introduces legislation soon, which will allow the industry to restart.
Many market participants support decreasing of the state’s influence in the regulation of the sector. They offer to introduce corporate PPAs, support self-consumption of energy with net metering, and engage the citizens in the energy transition with small distributed generation and energy cooperatives.