Not since windmills were first used to grind cereals has wind energy seen such robust interest in Ukraine.
Starting from a tiny base, wind power generation has surged in recent years, mainly due to a very attractive green tariff that has attracted the interest of investors.
However, unclear and unstable legislation is still holding back a large-scale boom in wind power that could bring the nation cleaner, less expensive energy. Hence, less than 0.2 percent of the nation’s energy needs come from wind power, although there are hopes it will supply 15 percent by 2030.
Domestic wind power capacity grew 73 percent to 151 megawatts in 2011, according to the Ukrainian Wind Energy Association.
This year should see similar growth, with 37 megawatts of new capacity already added in the first half of 2012 and over 60 megawatts expected in the second.
This rapid growth is driven by the green tariff, introduced in 2009, which guarantees attractive prices for producers selling electricity produced from renewable energy sources.
For wind power plants with a capacity of more than two megawatts, this tariff is 11.3 euro cents for one kilowatt per hour, two to four times higher than for traditional sources.
“Since the green tariff was introduced, many companies which were more or less involved in traditional energy business and faced difficulties importing traditional fossil fuels or other problems have taken interest in renewable energy sources, including wind,” said Andriy Konechenkov, head of the Ukrainian Wind Energy Association.
Prior to 2011, all new wind farms in Ukraine were installed under a government program and financed from the state budget. Now, the green tariff and other factors have tilted the balance toward private investment.
According to the association’s report, Ukraine’s three biggest wind parks were privately financed over past year. Wind Park Novoazovskiy (37.5 megawatts commissioned in 2011) in Donetsk Oblast and Wind Park Ochakivskiy (25 megawatts) in Mykolayiv Oblast were both developed by the Wind Parks of Ukraine group. Novorosiyskiy Wind Power Plant (3 megawatts) in Kherson Oblast was launched by Vindkraft.
This year, Wind Parks of Ukraine increased the capacity of Novoazovskiy to 57.5 megawatts, and began construction of a new ambitious project in Krasnodon, Luhansk Oblast. According to news agency Interfax-Ukraine, the plant will count 160 wind turbines for total capacity of 400 megawatts, costing nearly 700 million euros and occupying a land plot of 17,000 hectares. The first 10 turbines will be launched in the first half of 2013.
Also, as Interfax-Ukraine reported, three companies from Wind Parks of Ukraine group received permits from the Council of Ministers of Crimea to draft land-utilization projects to build four wind power plants in Crimea with an overall capacity of 237 megawatts.
To meet growing demand, Germany’s biggest turbine producer, Fuhrlander, opened a plant in Kramatorsk, Donetsk Oblast, earlier this month.
In 2011 the European Bank for Reconstruction and Development made its first investment in wind power generation in Ukraine, providing 13 million euros of debt financing to Eco-Optima.
The EBRD is in talks with Wind Parks of Ukraine to provide them with a 48.8 million euro loan, jointly with the Clean Technology Fund, to expand the already operational Novoazovskiy Wind Park.
“This is a part of the bank’s general renewable energy strategy aimed to decrease the country’s dependence on traditional energy sources,” said Anton Usov, senior adviser at the EBRD, adding that all projects financed by the bank also have a strong business component.
But the road ahead is still long.
“I would say Ukraine’s potential for renewables, including wind energy, is huge,” said Victor Kovalenko, head of climate change and sustainability services at international auditing giant Ernst & Young’s Ukraine office. There are two main factors which restrain its development, he added.
For one, local investors find the typical payback periods – typically 8 to 10 years – too long for their taste. Meanwhile, foreigners are put off by the poor business climate and unstable legislation. “Where is a guarantee for investors that new authorities won’t come and cancel the green tariff?” he asked rhetorically.
Konechenkov from Ukrainian Wind Energy Association said the main barrier for the industry is a so-called local component requirement. It demands that the share of Ukrainian raw materials, supplies and other costs is no less than 15 percent of total spending on wind projects.
It will go up to 30 percent starting 2013 and 50 percent from 2014.
“It’s a major barrier for two reasons,” Konechenkov explained. Ukraine lacks enough high quality equipment to meet the 30 percent threshold, he said. Procedures to obtain the green tariff for plants built after 2011 are unclear, he added, so none succeeded.
Kyiv Post staff writer Oksana Faryna can be reached at [email protected].
