VINNYTSIA, Ukraine — The Ukrainian city famous for having the largest multimedia performance fountain in Europe now had something else to boast about.
Vinnytsia, a city of 370,800 people located 260 kilometers southwest of Kyiv, on Feb. 5 celebrated the opening by local energy company Kness of the biggest solar panel production plant in Ukraine. Kness invested 5 million euros into the 6,600-square-meter factory, which was built on the site of an abandoned car maintenance base.
The results are impressive. Today the plant has the annual capacity to turn out enough solar panels to generate 200 megawatts of electricity, but that will double by the end of this year after the launch of a planned second production line.
Since its founding to the time of opening the Vinnytsia plant, Kness has survived 10 years of economic and political ups and downs in the nation, according to its top management.
On Feb. 8, sitting in the company’s modern head office near the plant, Sergii Shakalov, CEO and co-owner of Kness, told the Kyiv Post about his brainchild and key points about the solar power business in Ukraine.
“It’s not easy to do business in Ukraine, and the market has a huge amount of difficulties. But here you can earn profits if you work hard,” Shakalov said.
The plant is located in a city considered to be a business hub for Ukrainian President Petro Poroshenko and Prime Minister Volodymyr Groysman.
The president’s confectionary business Roshen has one of its biggest plants in the city. Roshen is also the company that financed the city’s main landmark — the fountain — which also bears the name of Roshen. And Vinnytsia is also the hometown of Groysman, who was the mayor of Vinnytsia for eight consecutive years before becoming the speaker of the national parliament, and then prime minister.
But Shakalov says that he doesn’t find it any easier to do business in Vinnytsia than in any other part of the country.
For Shakalov it’s not so much about who is in charge of the city, or what its geographic location — the entrepreneur just has to be willing to work very hard.
He himself has gained a reputation among his staff as being a perfectionist and a workaholic.
Local to international
The factory itself is just the tip of an iceberg of work that went into its establishment.
Born in 2009 as a local company called Podilskyi EnergoConsulting, the company rebranded itself seven years later into something more easily readable — Kness — as foreign clients simply couldn’t pronounce its name.
From the very beginning, Kness was mainly focused on constructing power grids, as well as connecting industrial consumers to such grids, making inverter stations and other equipment. But its plans changed in 2011 when Kness got its first solar project as a subcontractor from Kyiv-based Rengy Development to build a five-megawatt solar power plant in Vinnytsia Oblast.
The project showed amazing opportunities of an at-that-time undiscovered niche in the Ukrainian energy market. Since then, Kness has been building solar power plants for clients, including a project in Kyiv Oblast with Spanish energy giant Acciona, following the growing trend for renewable projects in Ukraine fostered by favorable green tariffs.
“Starting from 2011–2012, we began to see ourselves as an international business that is located in Ukraine,” said Shakalov.
Kness has a total solar portfolio of 468 megawatts, and is the leader among Ukrainian solar power contractors. Its largest project, which is currently under construction, is a plant with a capacity of 91 megawatts in Ukraine’s central Kirovograd Oblast, according to Shakalov.
But the company is not stopping there.
Since 2018, Kness has also been building its own solar power plants. Its first three — with a total capacity of almost 40 megawatts — were financed by the European Bank for Reconstruction and Development, an cost 25.9 million euros altogether.
At the same time, the opening of the Vinnytsia plant is considered by Shakalov as his company taking a step closer to potentially exporting to such places as Kazakhstan, or African countries.
Moreover, Shakalov wants to build more factories, not only in Vinnytsia, as logistically it is not that convenient, he said.
“If we talk about export-oriented production, it is more beneficial to have it closer to the ports or borders,” Shakalov said, although he did not want to give more details.
Sergii Shakalov, CEO at Kness, speaks with the Kyiv Post about recently opening Ukraine’s largest solar production plant in Vinnytsia on Feb. 8, 2019. (Kostyantyn Chernichkin)
However, energy experts have some doubts regarding a new Kness plant.
Yuriy Podolyak, the commercial director of IK Net, an energy project management company in Ukraine, doesn’t believe that Ukrainian panels will be highly demanded abroad, as they are not well known.
But one of the other main goals of Kness is to promote itself as a contractor abroad.
Since Kness has already been financed by the EBRD, it can participate in official international tenders and offer its own equipment as a contractor to foreign countries, according to Podolyak.
Brain drain problem
The company still faces some major problems, however.
Although it employs around 2,500 workers in various positions, Kness has had trouble finding 150 specialists for its new plant. The reason: a big wave of skilled Ukrainians looking for jobs abroad, mainly due to Ukraine’s visa-free travel regime with the European Union, which came into force in 2017.
“Just to find a person to dig a trench, or someone who has basic knowledge of electrical engineering is a problem,” said Shakalov.
The company searched for three months just to fill one chemist’s position at its research and development center.
Shakalov doesn’t think that higher salaries have much to do with the migration of professionals to the West. In fact, he calls it nonsense.
“For Ukrainians to get rich in Poland is much more difficult than to get rich in Ukraine,” he said.
His proposed recipe is quite simple — one should work really hard.
“Are you ready to work 12 hours a day, seven days a week, not to sit on a chair or spit at the ceiling? If you don’t have such energy, such a desire, it’s difficult for you to be successful in any country,” he said.
Main internal risks
Kness’s Vinnytsia plant is a success story for Ukraine, but its technology still lags behind the global leaders in the renewables industry.
The global market for the production of solar panels is already switching to another much more efficient technology — bifacial solar modules. This could potentially undermine the company’s success.
“They built a factory, which in a year may be… useless,” said Podolyak.
Another great risk is the declining domestic demand for solar panels: The green tariff will be reduced by 25 percent in 2020 and, as a result, there will be a lack of interest from Ukrainian investors due to the low payback period of solar power projects, Podolyak said.
“Our investors will not be interested in such projects, while foreign ones won’t buy the panels,” said Podolyak.
