Re­new­ables will bring en­ergy in­de­pen­dence to Ukraine

Kyiv Post Legal Quarterly - - Contents - BY NATALIA DATSKEVYCH [email protected]

En­ergy moved higher se­cu­rity on and the in­de­pen­dence agenda in Ukraine have since Rus­sia launched its war in the Don­bas four years ago. Be­fore 2014, Ukraine re­lied heav­ily on Rus­sia as a gas sup­plier. But the war and the an­nex­a­tion of Crimea has turned Ukraine away from Moscow and to­ward friend­lier, but pricier sup­pli­ers, like Hun­gary and Poland. Ukraine hasn’t im­ported any gas from Rus­sia for its own needs for more than twoand-half years now. How­ever, it still im­ports Rus­sian gas that it tran­sits on to Rus­sian gas com­pany Gazprom’s cus­tomers to the west. Now the con­struc­tion of Nord Stream 2 — a pipe­line that will trans­port gas from Rus­sia to Ger­many via the Baltic Sea — has raised doubts about Ukraine’s con­tin­ued sta­tus as a ma­jor tran­sit coun­try for Rus­sian

gas, en­ergy which se­cu­rity. in turn raises doubts about its To some the an­swer is clear: bol­ster re­new­able en­ergy. While the share of en­ergy Ukraine gets from re­new­able sources is still quite low, at 1.2 per­cent in 2017 (2.086 mil­lion kilo­watts), the mar­ket is grow­ing rapidly. Op­ti­mistic fore­casts see Ukraine ob­tain­ing nearly all of its power from re­new­able sources by mid-cen­tury. But this “revo­lu­tion­ary sce­nario” would re­quire sig­nif­i­cant in­vest­ment and de­vel­op­ment of in­fra­struc­ture.

In­vest­ment and in­cen­tives

Ukraine’s cur­rent en­ergy gen­er­a­tion mix is heav­ily tilted to fos­sil fuel and nu­clear, with coal- and gas-fired power plants and nu­clear power ac­count­ing for up to 92 per­cent of the en­ergy gen­er­ated. But that mix has been chang­ing — slowly. Since 2014, $550 mil­lion has been in­vested in Ukrainian re­new­ables, ac­cord­ing to Ukraine’s Na­tional In­vest­ment Coun­cil. That’s a frac­tion of what Ukraine’s neigh­bors have in­vested over the same amount of time. Hun­gary, not known for its green poli­cies, pumped $649 mil­lion into re­new­ables in tor tion Ukrainian All 2017 is tripled the grow­ing alone. As­so­ci­a­tion same, from fast: 2012 Ukraine’s of to Re­new­able Re­new­able 2017, re­new­able ac­cord­ing pro­duc- En­ergy. sec- to a good One rea­son busi­ness for in this Ukraine, is that say re­new­ables pro­po­nents. are “It’s an ab­so­lutely trans­par­ent busi­ness, which can bring project pay­back in one to six years,” said Yuriy Podolyak, the com­mer­cial di­rec­tor of IK NET, an en­ergy project man­age­ment com­pany in Ukraine. An­other rea­son is Ukraine’s green tar­iff sys­tem, set up in 2009, which of­fers a higher rate to pro­duc­ers of re­new­able en­ergy on Ukraine’s na­tional en­ergy mar­ket — a rate that’s fixed for a pro­ducer when they en­ter the mar­ket. Add to that other fa­vor­able fac­tors, such as Ukraine’s large land area and cli­mate, good for both wind and so­lar power plants, and new­able “A there re­new­able en­ergy are ideal mar­ket mar­ket con­di­tions to is de­velop. not just for the a cool rething to have,” Mats Lundin, act­ing chair­man of the Euro­pean-ukrainian En­ergy Agency and founder of wind-power com­pany Vind­kraft Ukraina, told the Kyiv Post. “If you look world­wide to­day, the re­new­able mar­ket is the only (part of the en­ergy mar­ket) that is re­ally de­vel­op­ing.” Lundin says non-nu­clear re­new­ables will soon be Ukraine’s cheap­est en­ergy op­tion, given the so­cial costs of coal power. “The cost for so­ci­ety to keep coal-fired power plants will be much more ex­pen­sive than sim­ply going for re­new­ables. So, it’s bet­ter to close (coal-fired power plants) and start build­ing more re­new­ables,” he said. Re­search by Ukraine’s Na­tional Acad­emy of Sciences sug­gests that, with proper in­vest­ment, 90 per­cent of Ukraine’s en­ergy could come from re­new­ables.

Wind and so­lar power

What sources of re­new­able en­ergy will prove the most prof­itable, how­ever, is a dif­fer­ent ques­tion. The con­stant, steady winds in the south of Ukraine makes wind-power prospects there good. Wind en­ergy ac­counted for 47 per­cent of Ukraine’s re­new­able elec­tric­ity gen­er­a­tion last year, or 970.5 mil­lion kwh. Sixty-five per­cent of that en­ergy was gen­er­ated by a sin­gle com­pany: DTEK, owned by oli­garch Ri­nat Akhme­tov. The com­pany op­er­ates the big­gest wind power sta­tion in Ukraine — Botievo Wind Farm in Za­por­izhzhya Oblast, with a ca­pac­ity of 200 megawatts. That ca­pac­ity will soon dou­ble, as DTEK has part­nered with Gen­eral Elec­tric to build a sec­ond plant in Za­por­izhzhya Oblast. The first stage of con­struc­tion, a $150 mil­lion in­vest­ment, is pro­jected to be com­pleted in 2019. Af­ter wind comes so­lar power, ac­count­ing for 35 per­cent of Ukraine’s re­new­able elec­tric­ity lion kwh. pro­duc­tion in 2017–710.7 milJust re­cently Ukrainian so­lar power com­pany UDP Re­new­ables an­nounced a largescale part­ner­ship with the Span­ish com­pany Ac­ciona En­er­gia Global, a global leader in green gen­er­a­tion. The plan is to op­er­ate a so­lar plant with an an­nual ca­pac­ity of 57.6 megawatts in Kyiv Oblast. “We plan to reach a ca­pac­ity port­fo­lio of 100 megawatts in Jan­uary 2019,” said Sergiy Yev­tushenko, man­ag­ing part­ner of UDP Re­new­ables. An­other large for­eign com­pany in­ter­ested in so­lar power in­vest­ments in Ukraine is TIU Canada, which last year built a 10.5 megawatt sta­tion in the city of Nikopol in Dnipropetro­vsk Oblast. “Now we’re plan­ning about four more projects in Ukraine,” said Va­len­tyna Beli­akova, di­rec­tor TIU Canada.

Bio­gas projects

Af­ter wind and so­lar power comes bio­gas, ac­count­ing for 194.8 megawatts of Ukraine’s power gen­er­a­tion ca­pac­ity.

Bio­gas, gen­er­ated mostly by by-prod­ucts of live­stock farm­ing, has a lower fail­ure rate than so­lar and wind power en­ter­prises, says Podolyak. “We see the least num­ber of all fail­ures in the bio­gas and biomass projects, as th­ese projects are ini­tially eval­u­ated as com­plex, and so are ap­proached more care­fully. In terms of doc­u­men­ta­tion, so­lar power plants are the most dif­fi­cult.” Bio­gas is most ef­fec­tive at a smaller scale: 1 megawatt, says Yuriy Ep­stein, di­rec­tor of the con­sult­ing com­pany Ac­cord. His opinion is that bio­gas projects are the most at­trac­tive long term, as they don’t de­pend on weather con­di­tions and pro­duce fer­til­iz­ers for the agri­cul­tural sec­tor.

Risks

Ukraine’s green tar­iff prom­ises prof­its, but the coun­try’s busi­ness cli­mate re­mains less is­la­tion coun­try. in July On the than 1 the Verkhovna next and wel­com­ing leg­isla­tive year, sparse Rada new credit ow­ing side, pro­poses so­lar a to op­tions new power shift­ing that, draft in plants from leg- law the over 20 at auc­tions, megawatts 10 megawatts as will op­posed have and to wind to ben­e­fit­ting sell projects their power from over the Though green tar­iff. such auc­tions have been suc­cess­ful in other coun­tries, in­vestors said this law, as well as other changes to the leg­is­la­tion, makes plan­ning their busi­ness dif­fi­cult. “In­vestors al­ways look for a cer­tain amount of sta­bil­ity in or­der to pre­dict their ac­tions for a long time. But in Ukraine it’s a never end­ing process. The Ukrainian mar­ket can change for var­i­ous un­pre­dictable rea­sons,” said Lundin. “We have just started work with the green tar­iff, chang­ing tors,” said and the Beli­akova. now rules they’re of the cut­ting game it for off inves- and tions Lundin for green says the en­ergy idea arose of switch­ing be­cause to of auc- the great in­ter­est in re­new­able en­ergy projects. But he cau­tions that such auc­tions have failed else­where. “Look at the Turk­ish mar­ket… be­cause the tar­iff is so low, (in­vestors) will have to sit and wait for 5 to 10 years be­fore equip­ment is cheap enough (for their costs) to match the tar­iff,” said Lundin. An­other risk is the peren­ni­ally shaky fi­nan­cial mar­ket in Ukraine, where banks will rarely give long-term credit, and, if they do, pro­vide it at in­ter­est rates from three to four per­cent higher than in Europe. In­vestors who fail to get a loan from Ukr­gas­bank, Oschad­band, or other such Ukrainian banks will have to go to the Euro­pean Bank for Re­con­struc­tion and De­vel­op­ment for credit.

Ukrainian com­pany UDP Re­new­ables plans to in­vest $200 mil­lion in the Ukrainian re­new­able in­dus­try and build so­lar power plants in Za­por­izhzhya, Kyiv, Odesa, and Kher­son. (Kostyan­tyn Ch­er­nichkin)

Source: Ukrainian As­so­ci­a­tion of Re­new­able En­ergy

The prospects for wind power plants are very promis­ing in Ukraine, as the south­ern re­gions of the coun­try have light, con­stant winds, the best kind for elec­tric­ity pro­duc­tion. (Yu­liana Ro­manyshyn)

Va­len­tyna Beli­akova, di­rec­tor of en­ergy com­pany TIU Canada in Ukraine, speaks to the Kyiv Post on May 13. (Kostyan­tyn Ch­er­nichkin)

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