Green tariff for solar energy: practical legal

aspects and legislative barriers

ROUND TABLE «UKRAINIAN SOLAR ENERGY MARKET: REMOVING BARRIERS

FOR GROWTH»March 29, 2011

Content

• Legislative incentives for development of solar energy in Ukraine

• Rates of “green” tariff for solar energy

• Rates change/decrease in the future

• Ukrainian component for “green” tariff projects

• Procedure and main requirements/conditions for getting “green” tariff

• Main legislative barriers and possible ways for their solution

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Incentives for development of solar energy in Ukraine

• Tax incentives under the Tax Code• NEW! exemption of profit derived from sales of

electricity produced from solar energy from CPT

• Possibility to use JI under Kyoto Protocol for solar power projects

• Feed-in tariff scheme or “green” tariff (GT)

Actual statisticsIn the middle of 2009 the core legislation on the current feed-in tariff scheme (GT) was enacted

GT is currently approved for 6 companies operating solar power plants (SPPs)

– 5 companies operate SPPs on ground surface– 1 company operates SPP on the roof of a building with

power capacity of up to 100 kW

Even though the legislation establishes quite good minimal rates for “green” tariff for SPPs in comparison with other RES power plants !?

Minimal fixed GT ratesType of energy Power station capacity and other factors

influencing the rate of GTRate of the

tariff (€ / kW)

Windless 600 kW 0,0646

600-2000 kW 0,0754

more 2000 kW 0,1131

Solar energy  

Power plants on ground surface 0,4653

Power plants on the roofs of buildings with power capacity exceeding 100 kW

 0,4459

Power plants on the roofs of buildings with power capacity of up to 100 kW

0,4265

BiomassShould be at least partially of plant origin to be eligible

0,1239

Small hydropower plants

not more than 10000 kW 0,0775

Change/Decrease of GT in the future• GT is established until 2030 (grounds for termination are also

established by a Decree of NERC)

• Its rates are not tied to retail rates or average rates for producers of electricity

• They are fixed as of January 1, 2009 in EUR and linked to EUR/UAH exchange rate (if more than 10.86 )

• The State guarantees GT application to commissioned SPPs

• Decrease of the current rates of “green” tariff for SPPs commissioned (significantly upgraded) after:

– 2014 – by 10%– 2019 – by 20%– 2024 – by 30%

Purchase of electricity at GT rates• Wholesale Electricity Market of Ukraine (WEM)

represented by State Enterprise “Energorynok”– Principle of purchase of all electricity produced under

“green” tariff by SPPs

• Direct sales of electricity to consumers – Legislative limitations– Absence of economic and administrative incentives

Ukrainian componentrequirement• The share of the Ukrainian component (materials, works, services)

in the total value of SPP construction shall be at least – since 2012– 30 %– since 2014– 50 %

• For SPPs the Ukrainian component (materials) in production of solar modules must be at least 30 % since 2012 (additional requirement for SPPs)

• It is unclear whether the requirement is deemed to be fulfilled on the commissioning date or date of GT approval

• The procedure on determination of the share of the Ukrainian component is still absent

Approval of GT

Rates of GT shall be approved by NERC for each producerafter filling the application and the required package of documents regarding the constructed and commissioned SPP

Term for passing a decision by NERC:– Consideration of documents package– 30 calendar days– Approval by NERC’s meeting– 15 calendar days

Documentation of “green” tariff (stipulated by the respective NERC’s Decree)

GOOD NEWS! Approval fee is absent

Conditions for Implementation of GT Projects

• Set up a company• Electricity producer license • Connection to the grid (compensation of

expenses related to grid connection)• Participation in WEM and signing WEM

Agreement• Conclusion of agreement for sales of

electricity with State Enterprise “Energorynok”

• Execution of documentation for power plants construction (documents on the use of land plots, project documentation, commissioning etc.)

Legislative barriers

Main legislative barriers for development of solar power projects under the GT

– state guarantee

– Ukrainian component requirement

– connection to the grid

State guarantee

Effective legislation

State guarantees that the current feed-in tariff scheme will apply to SPPs only from the date of their commissioning

Proposed changes

Guarantee should apply either from

1.the date of the receipt of respective permissions for construction or commissioning whichever earlier occurs, or

2.the date of receiving approval from an authorized state agency

Ukrainian component

Effective legislation

1. Ukrainian component (materials, equipment, works, services) in the construction of SPPs:

•since 2012 – 30%

•since 2014 – 50%

2. Ukrainian component in the value of materials for production of solar modules

•since 2012- 30%

3. The procedure on determination of the Ukrainian component is still absent

Proposed changes

Possible solutions:

1.Repeal the requirements

2. Decrease the shares or postpone dates of the entry into force of the requirements

3. Stipulate that the requirements are fulfilled on the date of commissioning rather than on the date of GT approval

4. Adopt the procedure on the calculation of the Ukrainian component

Connection to the grid

Effective legislation

1.The unified procedure on connection to the grid is absent

2. The procedure on compensation of expenses for construction (upgrading) networks and other objects to be transferred to transmission and distribution grid operators is absent

Suggested changes

1. Elaborate and adopt the procedure on connection to the grid and procedure on compensation of expenses

2. Establish for SPPs and other RES power plants the maximum reasonable term for compensation by law (according to the drafts of the procedure it is up to 25 years)

Thank you for your attention!

PARITET law firm

Maksym Sysoiev, LL.M. – lawyer with PARITET law firm working energy, commercial and corporate law.

T +38 044 207 08 98 (direct number118)E maksym.sysoiev@paritet.ua