What is missing for a real compromise between RES investors and the Government?
It seems like somebody is thinking that simple and quick solutions can be possible for all the problems of Ukrainian energy industry. But this complicated world requires complex and far-sighted solutions. For some reasons, the Memorandum between the Government and investors in RES and the relevant bills do not mention the bioenergy sector, which, even without changes in the terms of support, is still "lagging". But with the right approach, it can help the power system solve many of its problems. Small hydropower plants and energy storage systems have also escaped attention.
But medium and large solar stations will experience cuts in tariffs and worsened conditions for doing business. And in the final document, the changes were extended to small stations below 1 MW. Plus forcing the introduction of full liability for imbalances in two years. The commissioning of new solar projects is not prohibited in Bill 3658, but the reduction of the tariff by 50% actually makes these projects meaningless.
The well-known "carrots and sticks" system really works. But only if both components are implemented. The result of the prudent work of the government should be to solve the problems that the country faces today. But by creating new opportunities for development, and not by destroying innovative sectors of the economy and risking future courts against the state.
There are enough "sticks" for sure. This reduction in tariffs for renewable energy projects that can put many projects on the brink of bankruptcy and defaults on loans. Quick introduction of full responsibility for incorrect generation forecasting. Abolition of the green tariff for future solar and wind projects, in the development of which large funds have already been invested. And the surprise of the government bill is a 10% reduction in the tariff for small solar up to 1 MW.
The market itself has to offer options for "carrots".
The business community (European Business Association, American Chamber of Commerce, RES Associations), financial institutions (EBRD) and RES operators are asking to include an extension of the green tariff for 2 years into the bill. This is a logical step that would allow energy projects to adapt the terms of their loans now and remain profitable in the future. At the same time fulfilling the condition of reducing the financial burden on the energy market today. In addition, the business quite rightly considers current offers biased against investors in solar energy. Actually, that's why the changes did not receive the support of most of them.
On June 30, representatives of about 120 foreign and domestic companies-owners of SPP projects, including GS Engineering & Construction (South Korea), Norsk Solar and Scatec Solar (Norway), TIU Canada (Canada), United Green (UK), VR Capital (USA / Great Britain), as well as the Ukrainian Renewable Energy Association, signed a letter addressed to the President, as well as to the Chairman of the Verkhovna Rada Dmytro Razumkov, the Prime Minister Denis Shmygal and the Acting Minister of Energy Olga Buslavets. In it, they also ask the authorities to extend the green tariff for 2 years.
The signatories of the letter are owners of solar projects with a total capacity of about 3 GW, and have invested about EUR 3 billion.
Another active group of investors in solar energy has its own vision of the way out. In addition to extending the tariff for 2 years, they propose to solve the problem of balancing the energy system by stimulating the installation of energy storage systems directly at the SPPs.
It is proposed to keep the green tariff coefficients at the current level for SPPs and WPPs over 1 MW, which build energy storage systems with a capacity of at least 1 kW*h for every 6 kW of solar capacity, and which are put into operation from August 1, 2020. For SPPs and WPPs that do not install such systems, the green tariff will be reduced by 10% and 2.5%, respectively.
Whatever the details of the proposals, one problem remains critical now - non-payment to green energy producers and the financial deficit of Guaranteed Buyer. Neither the Memorandum nor the bills establish the state's obligations regarding specific dates and mechanisms for repaying debt to investors. If this is not done, the likelihood of numerous lawsuits against the state, failing businesses, and a decrease in Ukraine's investment attractiveness will be even higher.