In 2014, Ukraine set itself the target of generating 11 percent of its energy from renewable sources by 2020.
With only three years left to deadline, Ukraine is not even halfway to that goal, even though experts say there has been promising development in the sector.
Renewable energy in the electricity sector accounts for only 1.22 percent of the generating mix. In total, renewables account for around 4.8 percent of the energy generating sector.
While the Ukrainian Association of Renewable Energy says foreign interest is there, the European Bank for Reconstruction and Development believes the current investor climate needs improvement if Ukraine is to have any chance of hitting the 11 percent mark.
Oleksiy Orzhel, head of the Ukrainian Association of Renewable Energy, said that in the past year the association has met with potential Lithuanian, Armenian, Spanish and German investors interested in hydro and wind energy projects.
Crimea a big loss
Some of the talks were promising, Orzhel said, but the annexation of Crimea, which had vast wind and solar resources, has somewhat reduced Ukraine’s renewable energy potential. The 2014 plans, he said, had failed to account for the annexation, and the 11 percent target has not been revised.
“Because Crimea is still Ukrainian territory… from a juridical point of view, we can’t even change the numbers,” he said.
At the same time, incentives for investors, such as green tariff rates to commission new projects in the renewable energy sector, are decreasing each year, Orzhel said.
The incentive has been responsible for attracting the interest of foreign investors, including Turkish venture Atlas Global Energy. The investment company plans to inject 20 million euros into a wind power plant in Lviv Oblast.
Enis Fakioglu, one of the Atlas Global Energy’s founding partners, said the appeal of the investment lay in the feed-in-tariff rates set for renewable energy investments in Ukraine, which will be paid until 2030.
The investment company expects to receive 10.14 eurocents per kWh.
“(That)… is (an) attractive amount, provided we have very good wind speeds at the Skole area,” Fakioglu said. “And the local administrations are supporting us quite well,”
Tariff incentives
Marina Petrov, deputy country director for Ukraine of the European Bank for Reconstruction and Development, said the number of investors in renewable projects in Ukraine could be much higher if three key changes were made.
She said the current tariff scheme, set until 2030, was among a number of issues that stand in the way of attracting more foreign investors. Petrov said although 2030 appeared to be a remote date, most upcoming projects will require 10 to 20 years.
The EBRD, which has invested more than 200 million euros in renewable energy projects in the country, is currently discussing with the Verkhovna Rada potential new regimes for future investors.
“In a nutshell, people who are looking at investing now, most probably will be looking at a regime that will replace the existing one,” Petrov said.
She said other issues include the energy market’s reluctance to sign long-term power purchase agreements and difficulty in obtaining land and connection approvals.
Although the wind and solar industry tends to be more attractive to foreign investors, the country’s bioenergy sector is currently the dominant one in terms of development.
Bioenergy to grow
Biomass was used in the heating of 13 percent of private housing in 2015, with that figure forecast to grow to 25 percent by 2020. For electricity production, however, it accounted for only 0.08 percent of the power generated in 2015.
Georgiy Geletukha, head of the Bioenergy Association of Ukraine, says the industry is primarily funded by domestic investors, but it accounts for more than 80 percent of the renewable energy sector.
Biomass is derived from organic materials, such as agricultural waste.
Geletukha said the use of biomass for electricity production in Ukraine is minuscule, with most of its potential being realized in the heating industry. He said that because of Ukraine’s rich agriculture industry, the country has a higher proportion of bioenergy production in renewables than in most EU countries.
Bioenergy production in Ukraine already stands at the equivalent of around three billion cubic meters. And data shows that the total primary energy supply from biofuels and waste is increasing by 26 percent a year.
Geletukha said that although figures for 2016 are yet to be released, he expects that actual development of biomass will exceed the forecast growth due to the previous year’s price increase on natural gas.
Geletukha agrees that the 2020 renewable energy target is unlikely to be reached, even at the current growth rate of biomass. But he believes that the resource could help the Ukrainian government stop importing natural gas – which would be vital in securing Ukraine’s overall energy security.
