Photo from UNIAN
If approved, the new rules would be devastating to many Ukrainians.
President Volodymyr Zelensky has reportedly refused to endorse a draft memorandum between government and businesses on reducing the "green" feed-in tariff, sources told a Ukrainian media outlet.
Two interlocutors involved in the negotiations on the part of businesses told LIGA.net that Zelensky said he would not support the conditions laid down in the draft memo, branding them "too soft." A source in the energy ministry has echoed the same claim, speaking with BusinessCensor.
Memo's Key Terms
On May 22, Prime Minister Denys Shmyhal presented the memorandum to President Volodymyr Zelensky. The energy ministry outlined on 17 pages a business-friendly model for voluntary reduction of the "green" feed-in tariff. According to the proposals put forward, as early as this fall, preferential prices for 100 kW in people's electricity bills would be canceled. Meanwhile, electricity price for industrial consumers would be raised by 20%. The parties agreed to reduce the maximum government subsidy by 52%, to 22 eurocents per kWh. The tariff would be reduced for renewable generation and, along with the reduction, while responsibility for imbalances in power grid would increase 50% over the next two years each, until a 100% responsibility coming in 2022. The government, for its part, promised to pay the "green" tariff on time from July 1, 2020, cover all debts to investors before the end of 2021, refrain from reviewing the terms of support, and launch "green" auctions.
Among other conditions, financial stability of the state-owned Guaranteed Buyer Company, which buys electricity from renewable generation operators, was supposed to be provided by raising electricity prices for businesses to UAH 1.55 per kWh and canceling from October 2020 the preferential price for the households for the first 100 kWh used (90 kopiykas per kWh).
"Green" feed-in tariff in Ukraine
The Ukrainian tariff for "green" energy is now one of the world's highest. Already today, green energy, standing at only 8% of the market, takes almost a quarter of all money from it. Nuclear-generated kilowatt costs only 67 kopiykas, while that generated by solar is UAH 4.25, and wind – up to UAH 3.5.
Last year was a breakthrough for alternative energy in Ukraine. According to the energy ministry, over a year, more than 4.3 GW of renewable capacities were commissioned, while by May 2020, the total installed capacity of alternative generation increased to almost 7 GW, which is 71% more than in 2018.
The state-owned Guaranteed Buyer purchases all renewable energy in the country. It subsidizes renewable energy operators at the expense of the two components – compensation of Ukrenergo grid operator and resale of cheap nuclear and hydroelectric power at the market price.
Payments to "green" generation are growing faster than output volumes. According to estimates by the energy regulator, by May this year, alternative generation, occupying only 8.6% of the market, began to take up to 26% of the cash flow. According to the energy ministry, in 2020, "green" electricity will cost the Guaranteed Buyer UAH 52 billion. This is UAH 26 billion more than the GB is able to cover throughout the year, the ministry said.
Due to financial problems, GB has not been fully paying generation operators for more than three months already. The total debt of under the "green" tariff is UAH 9 billion, as calculated by the ministry.
Redistribution on electricity market
Global changes on Ukraine's electricity market began along with the start of nationwide quarantine. Production volumes of the cheapest nuclear energy started declining steadily in mid-March, while more expensive thermal energy compensated for the drop in the overall balance.
As UNIAN wrote earlier, due to the plunge in electricity consumption caused by quarantine and record generation from renewable sources, the government decided to limit operations at nuclear power plants generating the cheapest electricity in the country at 56 kopiykas per kWh. Instead, the market is seeing more energy generated at thermal stations at a price of UAH 1.56 per kWh and "green" energy – at UAH 4-5 per kWh.
As acting energy minister Olha Buslavets assumed office in mid-April, the situation on the market further escalated. Media reports claim Buslavets is affiliated with Rinat Akhmetov, who is, in fact, a thermal energy monopolist.
Coal generation is now on a rapid rise, while nuclear generation keeps falling. This leads to the fact that the weighted average cost of electricity for non-household consumers becomes higher.