Ukraine: Kinstellar Energy Digest: Ukraine September 2018 In Review

Last Updated: 12 October 2018
Article by Olena Kuchynska

RENEWABLE ENERGY: Ukraine promotes the construction of renewable energy facilities

On 4 September 2018, the Ukrainian parliament passed law No. 2517-VIII On Amendments to Certain Legislative Acts of Ukraine On the Investment Attractiveness of the Construction of Renewable Energy Facilities (the "RE Law"), which simplifies the process of building renewable energy ("RE") facilities. The RE Law will come into force on 4 October 2018.

The RE Law changes the approach in Ukraine to the classification of construction objects by the so-called "class of consequence", such that RE facilities can now be classified as having the lowest consequence class (СС1). From a practical standpoint, the amendments allow for the construction of certain types of RE facilities under a simplified procedure.

Currently in Ukraine, construction objects whose failure would result in a material loss exceeding 2,500 minimum wages (about UAH 9.3 million in 2018; approximately EUR 285,000), or objects that require an Environmental Impact Assessment (EIA) cannot be classified as a CC1 object. Following the enactment of the Law of Ukraine On Environmental Impact Assessment on 18 December 2017, an EIA is mandatory for wind farms with at least two wind turbines or a height of 50 meters or more.

According to the RE Law, the criterion on loss due to the failure of the object does not apply unless the project is financed with state or municipal funds or guarantees. In addition, in the case of a positive finding of the EIA report, wind farms can also be classified as CC1 objects.

These changes may also apply retrospectively to previous projects. If an RE facility previously classified under category III was subsequently transformed to a CC2 class due to changes in legislation, the RE Law allows to assign CC1 class to such a facility.

It should be noted that these changes do not eliminate the possibility of an RE facility being classified under a higher consequence class, since a number of other criteria should be taken into account to determine the proper classification of the object. Nevertheless, it is expected that the RE Law will significantly simplify the construction of solar and wind power plants in Ukraine.

TRANSPARENCY: Parliament passes law implementing the EITI standard

On 18 September 2018, the Ukrainian parliament adopted the Law of Ukraine On Transparency in Extractive Industries, which will come into force 30 days after its publication. As of 3 October 2018, the law is pending the signature of the president.

The new law introduces a mandatory standard for disclosure — the Extractive Industries Transparency Initiative (the "EITI") — and establishes liability for breach of the disclosure requirements.

The EITI law will provide for access to data on revenues generated from subsoil use and the beneficiary owners of subsoil use and also will enable the identification of "dormant" subsoil licences.

An overview of the law can be found in the March Kinstellar Energy Digest. The latest EITI report is available here.

DIRECT LINE: Regulator introduces new regulations for the approval of direct power lines

On 4 September 2018, Ukraine's National Energy and Utilities Regulatory Commission (the "Regulator") introduced a new procedure to grant approvals for the construction and operation of a direct power line between a power plant and end-user (the "Regulations"). The Regulations will come into effect the day following their publication.

According to the Law of Ukraine On the Electricity Market, consumers or a producer's own premises can be connected directly to a power plant via a direct line, the construction and operation of which is carried out upon prior approval of the Regulator.

The Regulations specify three types of a direct-line connection:

  • for power plants: connection of the power plant's own or its subsidiary's electrical installations (premises);
  • for consumers: connection of electrical installations of a consumer who was denied a grid connection due to lack of capacity;
  • for other applicants: in cases of proved economic advantages of connection by a direct line instead of normal procedures for a grid connection.

The Regulations specify different requirements and procedures to obtain approval for the construction of a direct-line connection, depending on the type of connection.

The Regulations also eliminate the need to obtain the Regulator's approval for the construction of a direct line to a power plant's own electrical installations (premises), if the power plant and such objects are located on the same land plot.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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