New requirements for connecting prePPA wind projects to the grid
The Ukrainian Regulator plans that pre-PPA wind projects shall submit valid technical conditions for grid connection or documents for grid connection. New prePPA wind projects in Ukraine will have to renew their grid connection to receive feed-in tariff.
On June 22, 2021 National Commission on State Regulation in Energy and Utilities Spheres (the “Regulator”) placed at its website Draft Resolution On Introduction of Changes to the Procedure on Establishment, Review and Termination of “Green” Tariff for Electricity for Business Entities, Consumers, in particular Energy Cooperatives, and Households, which Generation Installation Produce Electricity from Alternative Energy Sources (the “Draft Resolution”) available in Ukrainian at http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_1?pf3511=70993. The last public hearings regarding the Draft Resolution took place on 10 August 2021.
According to the Draft Resolution introduces the new requirement to the list of documents to be submitted in order to obtain “green” tariff. If the technical conditions for grid connection expired by virtue of law on the date of the submission of the application, the applicant will have to submit in respect of its generating facility either:
- copy of the act on rendering the service on grid connection or
- copy of the notification on rendering services on grid connection of the power plant or its section
If the Draft Resolution is adopted the applicants for “green” tariff will be obliged either:
- to commission their power plants (without completion of the grid connection) and apply for “green” tariff before expiry of technical conditions for grid connection; or
- to connect their power plants to the grid if they submit an application for “green” tariff after the expiry of technical conditions for grid connection.
Another option potentially could be to extend the grid connection agreement and obtain new technical conditions from the respective grid owner. However, it is unclear whether such approach will be supported by the respective grid owners, whether the applicant wouldn’t get new cumbersome requirements for grid connection under new technical conditions and whether it would not create risks for its pre-PPA (if the applicant implements the project under pre-PPA).
The Draft Resolution will affect mostly wind projects under pre-PPA, which are currently under construction and most likely will be completed very close to the expiry of technical conditions for gird connection. Thus, the expected changes shall be seriously taken into account by the respective investors in planning a roadmap for their wind project implementation.
As informed earlier, on 15 July 2021, the Supreme Rada of Ukraine adopted the Draft Law of Ukraine “On Amendments to Certain Legal Acts of Ukraine related to Simplification of Grid Connection” No. 5009 dated 03 February 2021 (the “Draft Law”) available in Ukrainian at http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_1?pf3511=70993 in the second reading. In order to come into force this Draft Law still needs to be signed by the President of Ukraine and be officially published. Most provisions will enter into force on the date of its publication with certain exceptions.
Among other changes, the Draft Law introduces changes to the term of validity of technical conditions for grid connection. In accordance with effective Law of Ukraine No. 2712-VIII dated 25 April 2019 (“Law No. 2712-VIII”) technical conditions to grid connection agreements shall be valid for 2 years for solar power plants and 3 years for all other power plants (apparently from the date of their issue). The Law No. 2712-VIII provides for two exceptions to this general rule, namely:
- technical conditions for winners of the auctions will last for the period of construction (for solar farms – 2 years and for wind farms and other power plants – 3 years, with possible extension for 1 year subject to issuing an additional bank guarantee, from the date of the agreement);
- technical conditions issued before the entry into force of the Law shall be valid for solar farms not more than 2 years and for wind farms and other RES power plants not more than 3 years from the date when the Law No. 2712-VIII entered into force (22 May 2019).
The Draft Law provides for another exception. If technical conditions are issued for grid connection of projects under pre-PPAs and such pre-PPAs were concluded prior to 31 December 2019, then such technical conditions, except for technical conditions for solar power plants, shall be valid until 31 December 2022. Given that mostly developers of solar and wind projects executed pre-PPAs, the amendment is purported to give the extension of technical conditions by law for all wind projects subject to pre-PPA. In the absence of the above change, the wind developers would face the situation when they would still have a valid pre-PPA, but their grid connection agreement would have expired and they would not be able to get connected.
Therefore, if both the Draft Law and Draft Resolution will enter into force, the investors in wind projects under pre-PPA shall consider to complete construction of wind farms (without grid connection completion) and apply for “green” tariff before 31 December 2022 or complete both construction of wind farms and grid connection and apply for “green” tariff after 31 December 2022.