Experts: Development of “green” energy requires changing minds and market rules


Main challenge is predictable energy market; Ukraine intends to join the Statute of the International Renewable Energy Agency; with the measures in place Ukraine keeps in country almost USD 1.5 billion.

Major improvements in the development of “green” energy in 2016 are adoption in the first reading of draft law No. 4334 on facilitating development of heat production from alternative sources and preparation of a number of other legislative initiatives which are still pending Parliament’s consideration. This was stated by members of the parliament (MPs) and experts at a discussion held at Ukraine Crisis Media Center. It is necessary to submit them to the Parliament and approve next year and also see to it that the steps for the development of green energy were spelled out in the Energy Strategy 2035.

“We must realize that development of renewable energy and implementation of energy efficiency are the main trends in the global energy market, and Ukraine will move in line with these global trends. In addition, the cost per kilowatt of renewable energy has become competitive to conventional energy,” said Oleksandr Dombrovskyi, MP, first deputy chairman of the Parliamentary Committee on Fuel and Energy Complex, Nuclear Policy and Nuclear Safety.

Sergiy Savchuk, head of the State Agency for Energy Efficiency and Energy Saving of Ukraine, reminded that according to the National Action Plan, the market should receive 10,900 MW of renewable energy until 2020. The main challenge for Ukraine is to create competitive conditions in the market and make it predictable for investors. “Investors are primarily concerned whether they will return the investment and whether they can develop these projects. Ukrainian renewable energy market until 2020 is at least EUR 16 billion, and there is enough space for everyone here,” said Sergiy Savchuk. “We are ready to compete with the existing tariffs for gas, to win in this competition and get into networks, but we need fair rules of the game – changing the monopoly system into a competitive one,” said Georgiy Geletukha, head of the Bioenergy Association of Ukraine.

“To develop green energy, we need a change of mind and change of rules. If these two aspects work, it will move very quickly,” noted Tetyana Boyko, civil network “OPORA” coordinator for housing, communal services and energy programs.


2016 Achievements

Draft law No. 4334 was passed in the first reading. It aims at increasing competitiveness of the green energy market. In the framework of this draft law, local authorities will have the right to set tariffs for heat from renewable energy sources at 90 percent of the current tariff for heat produced from natural gas, for budgetary institutions and private households. “This is the guarantee that enables pre-calculating profitability and makes it possible to attract investments, both domestic and foreign. If this law is adopted in the second reading, three billion m³ gas will be additionally substituted in the field of heating in a few years,” said Mr. Savchuk.

Another achievement is that new “green” tariffs were set for manufacturers of wind, solar, biomass and biogas energy. “We believe that these rates are adequate today and establish fair rules of the game and the ability to attract foreign and domestic investment in the industry,” noted Oleksandr Dombrovskyi. This area has a huge potential. According to Mr. Savchuk, using 30 percent of available capacity will replace about 9.3 billion m³ gas. 20 billion m³ gas per year can be potentially replaced by growing energy crops.

The number of solar electric generating installations continues to increase after a “green” tariff was introduced in 2015. By the end of the third quarter of this year, the number of households that installed them had increased by 45.4 percent compared to the previous year.

“We have six million households that can install these panels. So, there is a huge potential,” noted Sergiy Savchuk. Currently, a draft law is developed that will allow them to be installed not only on the roof, but also in the yard. Green energy has also benefited from the refusal of Russian gas – USD 1.5 billion that Ukraine could pay to “Gazprom” remain in Ukraine and promotes investment in boiler facilities using alternative energy sources and job creation.

Sergiy Savchuk also noted that this year Ukraine has applied to join the Statute of the International Renewable Energy Agency (IRENA). The corresponding draft law to continue this process will soon be submitted for consideration to the government.


Our task for 2017 – to vote for the developed draft laws

Number one is draft law on electricity market. A separate unit in it applies to green energy and connection of its producers to the networks. Oleksandr Dombrovskyi noted that one of the provisions specifies that energy produced by solid waste incineration should be accounted for as green energy and sold at green tariff. “It will also attract more investment and promote solid waste recycling,” he added.

The State Agency for Energy Efficiency and Energy Saving of Ukraine has developed a draft law requiring that at least 10 percent of bioethanol and 3 percent of biodiesel be contained in the volume of sold motor fuel. This will allow about 350 tons of gasoline and 150 tons of diesel a year to be displaced. Besides, the Agency is preparing the draft law on the combined energy production, providing for the mandatory evaluation of the potential of cogeneration for the facilities of over 20 MW, and the draft law on limitation of technical conditions to 2 years with the possibility of extending them up to 5 years. The latter will reduce speculation on this issue and prevent a situation where investors reserve capacity for connection, but then do nothing. According to Sergiy Savchuk, now more than 3 GW are not used.


Reforms in related sectors are necessary for the development of green energy

Tetyana Boyko stressed that the success of green energy will largely depend on the success of reforms of housing and public utilities, heat supply system and monetization of subsidies, because existing rules of the game motivate neither district heat companies nor consumers receiving subsidies. The draft law on commercial accounting of heat approved in first reading, and the law on the classes of energy efficiency of buildings will be submitted for consideration to Parliament.

The expert added that it is important to inform people about first “success stories” of transition to green energy to show the benefits of innovations. Ivan Nadein, founder of “Ukrteplo” group of companies, head of the NGO “Committee for Energy Independence of Ukraine,”
said that their company can be an example of such a success story to investors. Despite the financial instability and the fact that the reforms just begin, now their company is heating about 1.5 million square meters of public sector, exporting equipment abroad and in the coming years plans to build a bioethanol plant of 30-50 thousand tons capacity in cooperation with European and American partners.

Sergiy Savchuk added that the Agency has created an interactive map of projects for the convenience of investors. “Any investor can visit the site and see which projects are working and what their commercial return is. They can contact the developer of the project, and discuss the possibility of joining this investment,” explained Sergiy Savchuk.