Ukraine to initiate downward revision of renewable power rates

Ukraine’s Energy Ministry has presented a solution to
fight excessively high rates for electricity produced by renewable sources,
Interfax-Ukraine reported on Feb. 27. In particular, the ministry offers to
decrease green tariffs for solar power plants by 15% for stations below 10 MW
capacity, 25% for over 50 MW and 20% for those in between. For wind stations,
the offered rate decrease will be 10%. Along with the decrease of rates, the
ministry offers to increase the duration of the feed-in tariffs for five years,
to the end of 2034. Alternatively, the producers could chose smaller rate
decreases (12.5% for solar and 5% for wind pants) without a five-year
prolongation. The measures are expected to be applied for renewable sources
commissioned after 2017.

Based on  current legislation, renewable energy
sources commissioned in 2017-2019 are eligible to get a feed-in tariff at the
level of EUR 150/MWh (solar) and up to EUR 102/MWh (wind). The tariff are fixed
in euro and are applicable till the end of 2029. With such generous rates,
installed capacity of solar and wind power stations in Ukraine reached 4.83 GW
as of end-January 2020, compared to 0.76  GW as of end-2016. The average
wholesale electricity price on the Ukrainian market was EUR 53/MWh in January.

Alexander Paraschiy: While the initiative to decrease feed-in tariffs does not look
friendly for investors into green energy, it looks like a forced move by the
government, taking into account that green rates are too high in Ukraine. The
high rates bring distortions to the wholesale market, so it is likely that the
ministry’s initiative will be supported by law makers. Also, we see that this
will be not the last attempt to decrease green rates in Ukraine. We see the
development as neutral for the bond of DTEK Renewables (DTEREN).