The state will support Green Energy after auctioning

The state will support Green Energy after auctioning. The corresponding Bill No. 8449 “On Amendments to Certain Laws of Ukraine Concerning Ensuring Competitive Conditions for Production of Electric Energy from Alternative Energy Sources” was adopted as a basis on December 20.

The draft law proposes the creation of the competitive principles for the provision of state support to the projects for the construction of medium and large renewable energy facilities and to achieve a balance between the interests of society and consumers of electric energy and other market participants, while ensuring further development of renewable energy and reducing the price burden on the price of electric energy.

The project proposes to make changes to the laws of Ukraine “On Alternative Energy Sources”, “On the Electricity Market”, “On the National Commission Implementing State Regulation in the Fields of Energy and Utilities”, which provides: starting from July 1, 2019 to introduce a new procedure for granting state support to electric power facilities that produceelectricity  from solar or wind energy; for SES  – installed capacity more than 10 MW, for WPPs more than 20 MW. Such objects are entitled to state support at an auction for the distribution of quotas of state support.

The project proposes that government support is a guaranteed buyout from producers of the entire amount of supplied electricity  and a compensation for the difference in the price of electrical energy. The redemption of electric energy is carried out by a guaranteed buyer at the price formed on the “day ahead” market, under the relevant contract of sale of electric energy, which is concluded with the auction winner within 10 days from the date of its holding.

Compensation is the difference between the auction price, which is determined by the results of the auction, and the sale price of such electric energy in the market “a day ahead.” The compensation is provided by a guaranteed buyer under the relevant agreement on price difference, which is also concluded with the auction winner within 10 days from the date of its holding.

Compensation for the difference in the price of electricity is included in the service to ensure an increase in the part of the production of electricity from alternative sources, which is provided by the guaranteed buyer to the transmission system operator. The tariff of the transmission system operator is a source for reimbursement of expenses of the guaranteed buyer for the provision of this service.

The term of state support is 20 years.

The project proposes that auctions are held to determine the business entities entitled to state support, and the size of state support. The quota of state support for the relevant year is distributed at the auction (the volume of power of the VIS facilities, within which business entities may acquire the right to a state support based on the results of the auction). The quota is national and itdefines a part of each renewable energy source and may include special (regional) quotas. The size of the national quota is determined by taking into consideration the target indicators for the development of renewable energy set by the international obligations of Ukraine, the Energy Strategy of Ukraine, and taking into account the development plan for the transmission system.

The first auction (auctions) is being held for the distribution of the year  2020 nationwide quota.

To ensure a competitive procedure for the distribution of state support quotas, the draft law provides for:

• the distribution of quotas for the lots of different sizes with the limitation of the maximum size of a lot (for objects producing electrical energy from solar energy the maximum lot size cannot exceed the amount of 10 MW, and for the facilities producing electrical energy from wind energy, cannot exceed the amount of  20 MW);
• limiting the maximum amount of lots that can be acquired by one participant independently or together with other participants with whom it has a common final beneficial owner (no more than 25% of the total quota size);
• limiting the conduct of an auction in cases where, prior to the start of an auction, it is established that there is no competition at such an auction.

To ensure proper competitive behavior of the auction participants, the draft law provides for the participants to submit an irrevocable bank guarantee in the amount of 50 thousand US dollars per 1 MW of capacity, which distribution such a participant intends to take part in with the corresponding lot (s) at the auction.

According to the results of the auction, the irrevocable bank guarantee of the auction winner is provided by the guaranteed buyer as a guarantee of the fulfillment of obligations under contracts concluded with the auction winner. In other cases, the warranty is returned.

The project also proposes that the winner is the participant who offered the lowest price of electricity, at which this participant is ready to produce electricity from alternative energy sources and sell it to the power grid (auction price).

In this case, the draft law establishes the maximum size of the auction price at the level of the “green” tariff established by law for a renewable energy facility of the relevant category.

The auction price is fixed in euros  the date of the auction at the official exchange rate of the National Bank on that date.

According to the draft, the auction winner undertakes to build and to introduce a renewable energy facility into operation within 3 years from the date of signing the contracts concluded as a result of the auction. If the facility has not been commissioned and does not supply electricity to the energy system within the established period, the contracts concluded as a result of the auction expire, and the obligations of an irrevocable bank guarantee are fulfilled in favor of the guaranteed buyer.