The Ukrainian parliament has voted to amend the feed-in tariff on renewable energy production, with 228 deputies voting in favor of the changes on July 21.
The vote marks a turning point in a long spat between investors, campaigners and the government. On June 10, the government agreed upon a memorandum on the voluntary restructuring of “green” tariffs enjoyed by private investors and companies. The memorandum was poorly received by many companies who demand that the government respect previous agreements.
This debacle has plagued the government for several years. As part of the agreement, energy providers are set to recoup Hr 14 billion ($505.8 million) in unpaid tariffs from the government. The government had been paying a preferential rate on renewable energy production, which led to a large surge of investment, both domestic and foreign. In a deal drafted by the government, energy companies agreed to a “voluntary” reduction in the tariff, in exchange for the settling of government debts.
The tariffs were first conceived in 2008 to boost renewable energy production. In 2015, the Ukrainian government stated that it wanted to have 25% of Ukraine’s energy production coming from renewable sources by 2035.
The tariff, which was higher than any other feed-in tariff in Europe, attracted investors from around the world. But while providing a profitable enterprise for investors, the government incurred huge losses, as the expensive renewable energy was sold for much less to Ukrainian consumers. The tariff also led to a large monopoly on solar energy. During the rule of ex-President Viktor Yanukovych, the tariff had allowed businessmen Serhiy and Andriy Klyuyev to control an 85% market share of solar energy produced in Ukraine. The brothers were close allies of the now ousted president.
The Rada’s support for the government changes to the tariff is not guaranteed to finally put this issue to rest. A group representing the interests of the solar energy market is also proposing an “alternative bill” to be put before the Rada.
Energy suppliers’ support for the government amendments were, in most cases, begrudgingly extracted. Alper Tuncer, managing partner at the Turkish solar company Emsolt, in a comment to the Kyiv Post, detailed that: “We need to be realistic…It’s not a perfect solution but, considering the risk of alternatives… I think this was a good beginning.”
Many companies refused to support the memorandum. Some large energy providers had stated that they were looking at international arbitration to recoup their debts. The March memorandum threatened non-compliant companies with 15-25% cuts, as opposed to a “voluntary” 12.5% cut. The final “voluntary” cut, passed by bill No. 3658, was agreed as 15% for solar plants commissioned between 2015 and 2019 and 7.5% for wind farms with 2000 kilowatt turbines.
Demonstrators, siding with the renewable energy industry, gathered outside the Rada today holding banners in support of green producers. Their banners read: “You’re Killing Us” and “Green Energy or New Chernobyl.” This is despite the American Chamber of Commerce’s call for the Rada to accept the changes to the “green” tariff to ensure a speedy resolution to the crisis and not further aggravate the crisis.
