Zelensky backs cutting prices for renewable energy

Ukrainian President Zelensky believes prices for
electricity produced from renewable sources should be reduced in Ukraine, he
told journalists during a press marathon on Oct. 10. He complained that the
rates for green energy in Ukraine are “the highest in Europe.” The
government will initiate a dialogue with current renewable producers that have
invested a lot of money in these projects in recent years, he said.

The high rates for renewable energy have attracted a
lot of investments into green energy projects in Ukraine, according to Concorde
Capital estimates. Just in 3Q19, 956 MW of green power were commissioned, or 6x
more yoy. Total green power capacity increased 2.2x year-to-date to 4.6 GW, as
of end-September. In July 2019, green sources produced 546 GWh of electricity
in Ukraine (or 4.7% of the total), which was 2.4x more yoy and 1.6x more than
the Energy Ministry’s forecast drafted in September 2018.

The energy committee of Ukraine’s parliament is
considering changes to the regulation of green energy projects in Ukraine, it
reported on Sept. 8. Among the adjustments are rates for green energy sites to
be commissioned since 2020, additional taxation of existing green energy sites
and even a retroactive downward revision of rates for existing green energy
sources (indicating that this is the least preferable option). The committee
also stated that regulatory changes may affect green energy projects
commissioned in 2017-2019 (the later launched, the higher the potential
burden).

Alexander Paraschiy: Ukraine’s accelerating green energy capacities, which are exceeding all
previous expectations, have become a problem for the energy system as they
create significant upward pressure on average electricity prices. Therefore, it
comes as little surprise that the government is concerned about excessive green
power rates. The idea to revise the rates for existing producers (fixed by law
through the end of 2030) looks risky for Ukraine’s investment case, so there is
some chance that changes, if any, won’t affect already commissioned projects.
At the same time, it’s obvious that the government will implement some measures
to demotivate the construction of new green capacities.