Ukraine: Ukraine's Parliament To Consider The Draft Law On Auctions

Last Updated: 12 December 2018
Article by Svitlana Teush and Olexiy Soshenko

On 4 December 2018, Parliament's Committee on Energy and Fuel Complex, Nuclear Policy and Nuclear Safety considered and approved the key provisions of the revised draft law No. 8449-д, which contemplates the introduction of renewable energy auctions in Ukraine (the "Draft Law"). The Draft Law is expected to be considered by Parliament at first reading already in December 2018. The text of the Draft Law may be subject to change during further hearings at Parliament.

(a) Timing.  Auctions are scheduled to be launched from January 2020, and will be conducted twice a year, no later than 1 April and 1 October of each year. The auctions will be carried out until 31 December 2029. Pilot auctions are to be carried out in 2019.

(b) The "cut-off" date for signing  "pre-PPA"  to obtain the feed-in tariff.  The "cut-off" date for signing "pre-PPAs" (preliminary power purchase agreements) so as to be eligible for the feed-in tariff (the "FiT") is 31 December 2019. Producers will be exempt from auctions, provided that the commissioning (putting into operation) of a project occurs within two years following the signing of the "pre-PPA" for solar power projects, or within three years following the signing of the "pre-PPA" for wind power projects.

If a producer signs a "pre-PPA" before then, it will be entitled to the FiT and exempt from auctions, irrespective of the capacity of a project. Notably, the cut-off date has been extended by six months compared with the previous (main) draft law. 

To sign the "pre-PPA", it will be necessary to submit several documents including confirmation of the producer's land rights, a construction permit (or a declaration on commencement of construction works, as the case may be), as well as a grid connection agreement. This is in line with the Law of Ukraine "On Electricity Market", and marks a shift from the current approach, where a producer needs only submit its corporate documents, and can enter into a "pre-PPA" even before acquiring land rights and obtaining a construction permit.

(c) FiT. The FiT support mechanism, where applicable, will continue to be in effect until 2030, as contemplated by current legislation. However, the Draft Law incorporates a more frequent and aggressive step-down of the FiT for new projects, depending on the date of the commissioning of a project, as set out in the below table.

Reduction of the FiT rates based on Draft Law 8449-д (for the years 2019-2023):

Year

2019

2020

2021

2022

2023

Wind

€c/kWh

10.18

9.05

8.89

8.72

8.56

%, yoy*

-11.1%

-1.8%

-1.9%

-1.8%

Solar

€c/kWh

15.02

11.26

10.88

10.50

10.12

%, yoy*

-25%

-3.4%

-3.5%

3.6%

*Percentage of the FiT rate reduction compared with the relevant previous year (beginning from 2019).

Compared with the FiT in 2019 taken as the general reference basis, the FiT for solar will be reduced by 25% in 2020 (instead of a 11% reduction contemplated by current legislation), and then by 2,5% annually during the subsequent three-year period. The FIT for wind will be reduced by ca.11 % from 2020 (as contemplated by current legislation), and then by ca. 1,6% annually during the subsequent three-year period.

The reduction of the FiT for biogas, biomass and hydro power projects will stay as contemplated by current legislation.

No retroactive changes of the FiT will apply to projects already operating under the FiT or those which subsequently obtain the FiT. The FiT rates will remain intact and continue to apply until 2030 at the relevant rates initially established upon commissioning of the project. For example, if a wind power plant is commissioned by the end of 2019 and obtains the FiT at the rate of 10.18 eurocents, this rate will apply until 2030.

(d) Quotas.  The annual quotas to be offered at auctions will be approved by the Cabinet Ministers of Ukraine (the government) for a term of five years. The annual quota should be proposed by the Ministry of Energy and Coal Industry following consultations with the electricity transmission system operator (Ukrenergo) and the State Agency on Energy Efficiency and Energy Saving of Ukraine (SAEE).

One business entity (together with its affiliates owned by the same beneficial owner) cannot obtain more than 25% of the total amount of all Ukrainian quota auctioned in the relevant year.

(e) Eligibility, capacity thresholds and exemptions from auctions. Auctions will be required for all types of renewable energy technologies which have achieved a 15% share in the total volume of power production from renewable energy sources (the "RES"). To date, only wind power projects and solar projects have reached such a share.

Auctions will be required dependent on the type of a renewable energy source and the project capacity as set out in the below table. Projects with the capacity below the established thresholds will be exempt from auctions.

Year

Source of energy

Capacity,  MW

2020

Wind

> 20MW

Other types of RES

> 10MW

2021 and 2022

Wind

> 20MW

Other types of RES

> 5MW 

2023

Wind

> 3MW (including projects with one wind turbine)

Other types of RES

> 1MW

Auctions will be optional for all other power producers.

(f) Prequalification requirements. To be admitted to an auction, a participant should submit the documents confirming its rights to the land plots and the grid connection agreement.

(g) Bank guarantee. To be admitted to an auction, a participant should provide an irrevocable bank guarantee in the amount of EUR 5,000 per MW. The winner of an auction should provide an additional irrevocable bank guarantee of EUR 10,000 per MW, which will be returned to the producer upon commissioning of the project and commencement of electricity sales.

(h) Power purchase agreements and elements of state support. A power purchase agreement (the "PPA") concluded through an auction procedure will be valid for 20 years. The PPA will be concluded with the guaranteed buyer (offtaker). The guaranteed buyer cannot refuse to conclude the PPA with the winner of an auction and will be under obligation to buy the entire volume of electricity from a producer at an auction price and pay the local content bonus to a producer. The state support can be granted for not more than 80 per cent of the total capacity offered by all participants of an auction.

The Draft Law makes express reference to the right of сompanies with at least 10 per cent of foreign investment to opt for international commercial arbitration when entering into the PPA.

The PPAs will stipulate the obligation of a producer to commission a project within two years following the signing of the PPA for solar power projects, or within three years following the signing of the PPA for other types of RES projects.

(i)  Pricing and the local content bonus. The winner of an auction will be selected based on the lowest price bid. The maximum price at an auction cannot exceed the relevant FiT rate.

The winner of an auction will be eligible for a bonus for using local content, as envisaged by current legislation (a 5% increment to the FiT where the local content is at the level of 30% - 50%, or a 10% increment, where higher).

(j) Responsibility for imbalances.  Responsibility for imbalances will be introduced gradually as envisaged by current legislation (namely, starting from 1 January 2021 and increasing by 10% annually until it reaches 100% by 1 January 2030) for those renewable energy producers which commission projects under the FIT until 31 December 2023. Following the introduction of auctions, the same approach will apply to responsibility of those producers which will be awarded contracts for the state support in an auction procedure in respect of the projects commissioned before 31 December of the year in which the fully liquid intraday market will be established, but not later than 31 December 2023.

The full responsibility for imbalances will apply to (i) projects commissioned under the FiT since 1 January 2024, and (ii) projects which will be awarded contracts for the state support in an auction procedure in the year following establishment of the fully liquid intraday market, but not later than 1 January 2024. A decision on whether the intraday market is fully liquid will be taken by the Ukraine's energy regulator.

(k) Term of validity of technical conditions.  The technical conditions ("TU") for grid connection issued after the enactment of the Draft Law will have a limited term of validity, namely, two years for solar power plants, and three years for other types of RES projects (while currently TU are issued for an unlimited term). It will be necessary to commission (put into operation) a project during the relevant TU term of validity. The term of TU validity will be extended during the transition period, depending on the date of TU issuance and the source of energy.

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions