Parliament approves bill reducing green energy rates

Ukraine’s parliament approved on July 21 a bill in the
second reading to reduce and restructure the state-mandated electricity prices
from green energy. Most notably, the bill didn’t include a proposed two-year
delay for reducing green energy prices, as had been requested by the industry.
It also keeps the current operating restrictions for solar power stations
producing under one MW. Yet it retroactively changes the conditions of stations
operating above 1 MW that were launched as of 2015, reducing prices between 15%
to 50% for solar-produced electricity and by 7.5% for wind-produced
electricity. Parliamentary Energy Committee Head Andriy Gerus justified these
cuts by stressing that prices for green energy in Ukraine are double or even
triple that of other European countries. “It’s not catastrophic at all for
market participants,” he said. The bill also halts all constructions of solar
power stations and allows for the completion of wind power stations already
begun.

The bill drew 288 votes with the backing of the
majority of MPs from all five factions, including 248 MPs from The People’s
Servant (compared to the 226 votes that are necessary). It was also backed by
the President’s Office. Three amendments to the legislation were also approved.
It was heavily criticized by the Ukrainian Association for Renewable Energy,
which estimated the legislation would cost the state UAH 60 bln in profit tax
revenue through 2029.

With its vote, parliament ignored the concerns raised
by foreign ambassadors and business after attempts mediation, particularly
regarding retroactive changes to contracts, the association’s co-founder, Ihor
Tynniy, said on his Facebook page. “It’s not understood why we were tortured
with working groups, discussions and meeting with experts when everything is
decided in one office behind closed doors,” he said. Foreign companies are sure
to file lawsuits, possibly resulting in rulings that cost the state any revenue
gains from the measure. “The country’s investment image has been dealt
irreparable damage, which will require quite a number of years for the West to
forget this betrayal,” Tynniy said. He later added, “The conclusion is that no
serious projects in Ukraine are worth launching, unless you have Dnipro
oligarchs as your partners. The remainder of investors are in a risk zone.”

Zenon Zawada: It’s ironic that this legislation – which could harm Ukraine’s green
energy investment reputation as making unreasonable demands on business – was
approved the same day as the bill creating investment nannies, which is aimed
at encouraging foreign investment. This is merely the latest example of the
overall inconsistency and lack of strategy in the Zelensky administration.
While playing the role of Robin Hood in correcting past wrongs and appearing to
redistributing the gains is always popular politically (with this measure
drawing support from the majority of all five factions), retroactively
adjusting business deals is among the worst nightmares of an entrepreneur.