On 22 May 2019, law No 2712-VIII introducing and regulating competitive renewable energy auctions in Ukraine became effective. The law provides:
(a) Timing and quotas. The first annual quota should be established by the Cabinet Ministers of Ukraine (the "Government") for the year 2020. 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).
The quotas should be established for a five-year term. Until 1 December 2019, the Government should approve the amount of the quota for the next five-year term. Not less than 15% of annual quota will be introduced for each of (i) solar, (ii) wind and, cumulatively, (iii) other types of renewable energy sources, while the remaining quota will be allocated amongst different sources by the Government.
State support can be granted for no more than 80% of the total capacity offered by all participants of the auction.
One business entity (individually or together with other business entities owned by the same beneficial owner) may not obtain more than 25% of the annual quota auctioned in the relevant year.
Auctions 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 within six (6) months of the Law coming into effect i.e. 22 November 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 (2) years following the signing of the "pre-PPA" for solar power projects, or within three (3) years following the signing of the "pre-PPA" for all other sources of energy.
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.
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 of the 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 the Electricity Market", and marks a shift from the current approach, where a producer need 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 remain in effect until 2030, as contemplated by current legislation. The FiT for new wind projects commissioned in 2020 will be reduced by approximately 10%, and then further reduced for projects commissioned in 2025 as provided for by current legislation.
The Law provides for a greater reduction of the FiT for solar power plants compared with the previous legislation. With the current 2019 FiT taken as the general reference basis, the FiT is to be reduced by 25% for solar power projects which will be commissioned in 2020 (instead of a 10% reduction previously contemplated).During the next four (4) years – 2021-2024 – the FiT will be reduced by 2.5% annually compared with the initial 2019 FiT reference basis, or by ca. 3.4 %-3.8 %