Renewable energy in Ukraine

Renewable energy generation is one of the key priorities for the Ukrainian energy sector and national economy. Due to the above, before the war (24 February 2022), the renewable energy sector has shown huge growth in installed generation capacity. At the beginning of 2022, the total installed Renewable Energy Sources («RES») capacity reached 9.5 GW (excluding 0.6 GW of RES capacities located in Donetsk and Luhansk region temporarily occupied by russia before 24 February, 2022) 1 . Nowadays, 2.5 GW (25%) of RES facilities are under occupation and under 6% of the total installed RES capacity has been destroyed or damaged (please see Infographic below) by russia. 

According to the presentation “Ukrainian Energy: from 2023 to 2050” presented by the Government of Ukraine on 21 July 2023 at the Ukraine Recovery Conference (URC 2023) 2  in London further development of RES will be prioritised by Ukraine. By 2050, it is planned to increase electricity production from RES to 525 TWh. In order to achieve the above indicators, Ukraine plans to build up to: 

• 80 GW of new solar and 139 GW wind power plants to expand Ukraine’s export capacity; 
• 68+ GW of RES facilities for production of renewable hydrogen;  
• 2.4 GW of hydroelectric and pumped hydroelectric plants.  

The volume of future investments to build capacities described above is estimated at $262 billion 3 .  

In addition, according to the World Bank, Ukraine possesses some vast technical potential of offshore wind energy in the Black Sea (estimated at 250 GW). The hydrogen sector also has great potential, according to the EU Hydrogen strategy - Ukraine should play a central role as an energy exporter with 8 GW of green hydrogen capacity until 2030 4 . 

On 24 July 2023, the President signed Law No.3220-IX “On Amendments to Some Laws of Ukraine Regarding the Restoration and Green Transformation of the Energy System of Ukraine” (the “Law No. 3220”) 5 . Law No. 3220 establishes stability guarantees for facilities that had been granted a FIT and whose operations had been suspended. Thus, Law No. 3220 guarantees the preservation of the FIT at the level of its establishment for electric power facilities (including construction phases of a power plant (start-up complexes)), which undergoing reconstruction, restoration, overhaul, and technical re-equipment. This preservation of the FIT also applies to construction phases of a power plant (start-up complexes), during the period of martial law in Ukraine, without increasing of their installed capacity. In this case, FIT coefficient shall be set on the level before such reconstruction, restoration, overhaul. 

The Law No.3220 provides an opportunity for a producer of electricity from alternative energy sources to minimise the risks associated with price volatility in the electricity market. Thus, RES producers (who have left balancing group of the Guaranteed Buyer) may now conclude an agreement with a consumer, electricity supplier, or trader (“Counterparty under agreement”) – on ensuring stability of the price of electricity produced from alternative energy sources (in fact this is so called Contract for difference (the “CFD”)). The main idea of the CFD is, as said above, that the parties may fix reference price in CFD and possible fluctuations thereof. According to the provisions of the Law No.3220, if market price for electricity is lower than minimum threshold level of the fixed reference price under CFD, Counterparty under agreement pays the RES producer the difference in price. If the market price for electricity is higher than maximum threshold level of the fixed reference price under CFD, the RES producer shall pay the Counterparty under agreement the difference in price. The minimum term of such a contract is 1 year, and the maximum term is not fixed. 

The Law No.3220 introduced new alternative payment system for renewable energy projects called feed-in premium (“FIP”). FIP is used for renewable energy projects that had been awarded FIT or had been guaranteed a PPA price at an auction. In this way, the guaranteed buyer is supposed to pay the difference between the estimated market price and the project’s FIT or auction PPA price.  

The Law No.3220 establishes a notion of Guarantee of Origin («GoO») for electricity produced from renewable energy sources. Ownership title to GoO can be transferred separately from that of the underlying electricity. 

GoO is basically a proven and transparent mechanism for tracking and proving the origin of generated and consumed energy from renewable sources. According to the law, GoO will be provided by virtue of the registry. The information contained in the register of GoO of electricity produced from RES will be public, unless otherwise is provided by law.  

GoO confirms the amount of electricity supplied to the grid or generated and used for own consumption and is issued for a quantity of 1 MWh.  

It is not allowed to form more than one GoO for the same quantity of electricity. 

GoO shall be valid for 12 months from the date of the underlying electricity was produced. After this period, GoO shall not be subject to further circulation. 

GO confirms the origin of electricity from RES produced by:  

• a business entity that generates electricity from RES;  
• a consumer who has installed a generating facility for their consumption; or 
• an active consumer. 

On 10 June 2023, Parliament adopted the Law of Ukraine "On Amendments to Certain Laws of Ukraine on Prevention of Abuse in Wholesale Energy Markets" No.3141- IX (“Law on REMIT”). The Law implements EU Regulation (EU) No 1227/2011 on Wholesale Energy Market Integrity and Transparency (REMIT), a set of European rules and practices aimed at preventing abuse in the energy market, into national legislation.  

Due to the russian aggression, the renewable energy companies faced the challenge of the expiring deadlines for commissioning of those power plants (except for solar power plants) for which preliminary Power Purchase Agreements («pre-PPA») were concluded before 31 December 2019. Thus, the Law on REMIT allows renewable energy investors to extend the term of their pre-PPA`s explicitly until 31 December 2023. The term of validity of the Technical Conditions for connecting to the network is extended until 31 December, 2024 (instead of 31 December, 2022). 

Ukraine continues to develop and build new renewable energy projects, despite the constant missile attacks on critical electricity facilities. 

Ukraine has the potential to become one of the largest biomethane producers, as it has significant potential to export biomethane to Europe. According to the Bioenergy Association of Ukraine, the technically achievable biomethane production potential is 9.7 billion m3/year, which is about 80% of annual natural gas imports 6 .  

To achieve the indicators above, the total biomethane production in Ukraine could reach 1 billion m3/year in 2030. Today, more than 10 agricultural holdings are considering entering the biomethane market and plan to build more than 30 biomethane plants with a total production capacity of more than 220 million m3 per year 7.  

Ukraine's first biomethane plant was opened in Chernihiv region, owned by the Gals Agro agricultural holding (please see Picture 1. Biomethane plant in Chernihiv region) 8 . The plant will produce about 3 million cubic metres of gas per year, which will be consumed by about 1,500 customers, including households and industry. On 12 April 2023, the first cubic metres of biomethane gas were supplied to the Ukrainian gas transmission system. In the second half of 2023, the investors plan to install another biomethane production module of the same capacity in Kyiv region. In 2022, Regional Gas Company signed a memorandum with STX, a European biomethane trader that controls 15% of the European market, to buy biomethane from Ukraine.

Picture 1. Biomethane plant in Chernihiv region 

Picture source: https://ubn.news 

Although the biomethane sector is being actively promoted and has huge potential, there are some legislative barriers that slow down the development of biomethane market in Ukraine.  

The legislation does not explicitly allow export of biomethane from Ukraine to Europe.  

There is also no clearly specified customs clearance 9  procedure for biomethane. 

However, the Government of Ukraine is aware of the existing barriers and is actively trying to resolve them. 

The Draft Law No. 9456 10 proposes amendments to the Customs Code of Ukraine (Article 232) that provide for a (previously absent) clarification that the customs control and customs clearance of biomethane transported by pipeline across the customs border of Ukraine under foreign economic agreements (contracts) should now be carried out as per the same procedure, which is already established for natural gas.  

Another positive amendment has been recently introduced by the mentioned below Law No.3220, which provides that the Ministry of Finance of Ukraine («MFU») must ensure that the legislative acts are amended to include biomethane to the list of goods for which customs clearance is carried out. According to the above, MFU will have an opportunity to set a separate quota (if any) for biomethane exports that will not depend on natural gas. In this scenario, it will be possible to export biomethane, even if the zero export quota for natural gas is maintained. 

Thus, the unblocking of biomethane exports from Ukraine to the EU will give a strong boost to the development of biomethane production in Ukraine and attraction of foreign investors. 

Before russian invasion, power generation from renewable energy sources made up 14% of the total generation capacity in Ukraine, with 20% of RES capacities coming from wind 11 . Despite the constant missile attacks on electricity facilities, renewable electricity projects continue to develop. 

On 15 May 2023, DTEK (largest commercial energy operator in Ukraine) launched a new wind farm in Mykolaiv region. It is the world's first wind farm built during the war. The first phase of Tiligulska Wind Farm, which is located just 100 km from the russian-occupied territory in Mykolaiv region, is already generating green electricity. The wind farm's 19 turbines have an installed capacity of 114 MW and produce up to 390,000 kWh, enough to supply electricity to 200,000 households a year. It is one of the first projects to install 6 MW EnVentus turbines from Danish manufacturer Vestas.  

DTEK has already laid the foundations for the installation of 64 more turbines for the second stage of Tiligul wind farm. The 500 MW (83 turbines) facility will make it the largest wind farm in Eastern Europe and will additionally provide clean energy to homes and businesses in southern Ukraine, which are affected by power outages due to shelling of energy infrastructure. 

DTEK's plans to expand Tiligul wind farm to achieve zero carbon emissions by 2040 and help Ukraine become a clean energy exporter to the EU- remain dependent on additional financing of €450 million (from foreign investors and international financial institutions). It is expected, that Tiligul wind farm will reduce CO2 emission by 400,000 tonnes annually. 

A new SPP with a capacity of 996 kW has been put into operation in the Kamianka-Buzka community in the Lviv region (occupy 6 hectares) 12 . It started producing electricity at the end of December 2022. The Vinnytsia-based Energoinvest company is the owner of the new solar energy system. The company has constructed eight SPPs with a combined capacity of 24.5 MW in the Vinnytsia and Odesa areas over the previous nine years. The company also operates 12 small hydroelectric power plants in four regions with a total capacity of 14.2 MW. 

On 19 May 2023 Polish company HYnfra, Japanese Tsubame BHB and Ukrainian UTEM signed Memorandum of Understanding to construct the Green Industrial Zone in the city Bucha of Ukraine (please see Picture 2. Bucha`s green industrial zone plan) 13 . Bucha is a city in Kyiv region, that was taken by Russian troops in 2022 and has since become a symbol of Russian terrorism against civilians. The aim of this project is to ensure energy independence, through producing hydrogen and ammonia from solar and wind, and used further as electricity, fuel and fertilizers. 

Picture 2. Bucha`s green industrial zone plan 

Picture source: https://www.hynfra.pl