Ukraine’s renewable energy giants are suffering losses as the government struggles to pay off $1 billion in debt it owes them for green power. But the crisis hasn’t taken a toll on Ukrainian families who produce clean energy at home — they still get paid.
Ukrainian households with solar panels keep benefiting from the generous feed-in tariff that allows selling the surplus of green energy they generate to the government at 0.16 euros for a kilowatt, one of Europe’s highest tariffs.
But even though Ukraine plans to require producers to sell electricity through auctions in 2021, to hopefully reduce the price, nothing will change for households with solar panels generating under 1 megawatt.
Ukraine keeps encouraging households to invest in green energy for environmental reasons. As households become energy-efficient, they use less power. Additionally, green energy is especially helpful to remote villages that suffer from more frequent blackouts.
As of today, there are over 27,500 households with a general capacity of 712 megawatts of green energy — a dramatic surge since 2014, when only 40 families relied on solar power, according to Yurii Shafarenko, deputy head of the Agency on Energy Efficiency.
Encouraged by favorable tariffs and affordable equipment prices, many Ukrainians have installed solar panels on their roofs or near their homes.
Thriving industry
Current legislation allows Ukrainians to install a private solar power station with a maximum capacity of 30 kilowatts. The owners of such stations can get a return on their investment in nearly four years by selling the surplus energy to the state.
With an average monthly consumption among Ukrainians of 400 kilowatt hours, a solar power station with a capacity of 30 kilowatts can bring over $3,700 of annual revenue if the feed-in tariff remains at 0.16 euros.
But these stations cost over $17,000 and take up nearly 200 square meters — almost the size of a tennis court, so Ukrainians usually choose smaller and cheaper alternatives.
Vitalii Shestak, for example, owns a small solar power station with a capacity of 5 kilowatts that brings him nearly $600 a year. Shestak was one of the first residents in Kyiv Oblast who installed solar panels near his house in 2015. The feed-in tariff was 0.19 euros back then.
Since then, nearly 180 families in Kyiv have installed private solar power stations, according to Yasno, a subsidiary of Ukraine’s largest energy firm, DTEK. In 2019, they brought these people over $230,000, feeding 1.6 million kilowatts of clean energy into the national grid.
The reason for this rising popularity, apart from favorable tariffs, is that the solar panels got cheaper, according to Shafarenko.
In Ukraine, foreign companies, including Chinese Jinko Solar, Trina Solar and JaSolar dominate the local market. Local manufacturers like Kness, InfoSvyaz and Kvazar try to compete with them.
And, according to Kness, Ukrainian households should order from local producers for two reasons: the panels won’t break while shipped and their owners can get an additional 10% increase to their tariff.
However, local manufacturers are struggle finding buyers for projects that take five to seven years to pay off.
Medium-sized investors
The country’s renewable energy market is set to reach 13% of total electricity generation in 2020, according to Shafarenko.
But unlike in many European countries, Ukraine’s renewable energy is dominated by large players like Rinat Akhmetov’s DTEK, which generated 1 gigawatt of green power and made $176.5 million in 2019.
For medium-sized investors, it’s harder to keep up.
“In Ukraine, it is the government that generates most of the problems,” said Andrij Zinchenko, head of Sun City, Ukraine’s first solar energy cooperative with a capacity of 200 kilowatts in Slavutych, a city of around 25,000 residents located 150 kilometers north of Kyiv.
In 2019, Slavutych crowdfunded over $142,000 in four months to build a photovoltaic power station which will power the city and earn profits for residents who are willing to invest in solar panels.
Zinchenko started the project when the renewable energy market was turbulent as the government announced it would cut the guaranteed price. “That’s why it was harder to raise investment,” Zinchenko said.
Now the owners of solar panels in Slavutych sell for a lower price and the state-owned Guaranteed Buyer owes the cooperative nearly $12,400.
Still, Zinchenko expects that the project, which is now worth over $207,000, will pay off in seven years. As of today, 97 small investors put money into it.
Slavutych is an example of how green energy can transform a city and attract money. According to Shafarenko, people benefit when solar panels are installed in places like rooftops that are usually not in use.
In November 2020, Ukraine’s DTEK and local enterprise Avrora Term, which provides services for multi-story buildings in Kyiv, opened a 330-kilowatt solar power plant in the Troieshchyna neighborhood.
To cover 4,000 square meters of the roof of an apartment building with solar panels, Avrora Term invested $330,000 and expects to return the investment in six years, according to company’s chief executive, Yuriy Ivko.
Although the residents cannot use the generated green energy, they get other benefits. Avrora Term rents the roof for $140 a month, money that can be used for upkeep and renovations of the building, according to Shafarenko.
Workers install solar panels on the roof of a 4,000-square-meter apartment building in the Troieshchyna district in Kyiv. Local firm Avrora Term has invested $330,000 in the solar panels on this roof and expects to return the investment in six years. (Yuriy Ivko)
Uncertain future
Ukrainians still rely on the feed-in tariff, even though it was reduced from 0.46 euros per kilowatt in 2009 to 0.16 euros in 2020.
But it is still not clear what will happen when the tariff expires at the end of 2029. The auction-based system is too complicated for small owners, Shafarenko said, but they still need incentives to install solar panels at home.
One possible solution is to increase the traditional electricity price that now stands at 5-euro cents per kilowatt, compared to 30 cents in Germany.
The more attractive price, plus the ecological benefits, would keep such investments attractive.
Oksana Aliieva, climate change and energy policy expert at the Heinrich Boell Foundation, for example, installed a 17-kilowatt solar power station at her home to reduce the negative impact of dirty energy on the environment. She also said that renewable energy helps people to gain independence from traditional energy suppliers.
“For my family, it is a matter of principle,” Aliieva said. “We try to be eco-conscious and that’s why we’re ready to invest in solar panels.”
