Ukraine’s renewable revolution appears to have stalled.
With the country’s energy regulator incapable of setting tariffs anywhere in the country, dozens of energy projects have been frozen, panelists said at the Renewables Revolution panel at the Kyiv Post’s annual Tiger Conference on Dec. 5.
Center for International and Strategic Studies Fellow Edward Chow moderated the discussion.
Ecology Minister Ostap Semerak, Renewable Energy Association Chief Olexiy Orzhel, Batkivschyna MP Olexiy Ryabchyn, North University professor Petter Nore, and KPMG Ukraine Energy Practice Chief Dmitry Aleev joined Chow on the panel.
But hanging over the entire discussion was the paralysis of Ukraine’s National Energy Regulatory Commission. The body, which sets energy tariffs around the country, has been unable to attain a quorum since early November when one of its members began calling in sick.
After President Petro Poroshenko failed to appoint a commissioner to replace one whose term on the commission had expired, the NERC has been left without a quorum, depriving it of the ability to make a single decision.
The impasse has left 140 megawatts in 35 separate renewable energy projects frozen, totaling 133 million euros in investment.
Political hostages
One of the panelists’ entrances may have illustrated the dysfunction better than anything else.
MP Ryabchyn was delayed in part by traffic and in part by the failed attempt by Ukrainian prosecutors to arrest former Odesa Oblast governor Mikheil Saakashvili, who was freed from his brief time in captivity by supporters in central Kyiv.
Ryabchyn set about criticizing government inaction on the NERC issue, saying that it’s “because of the president, (who is) willing to play a game with some oligarchs.”
“Even if you have the political will, even if it’s in your political party’s agenda, even if it’s in the law, it can be stopped by vested interests,” the MP added, referring to pro-renewable energy legislative efforts.
The NERC impasse has led to one large solar farm in Nikopol being frozen. That project was built by Canadian-owned firm TIU-Canada Ltd., the first investment to occur under the Ukraine-Canada free trade agreement.
“Since the energy market cannot count on generation, it’s therefore in danger of collapse,” Valentyna Beliakova, director of TIU-Canada, told the Kyiv Post after the panel.
According to Ukrainian law, it will be another 75 days until the government can appoint another regulator to the commission, giving it a quorum.
But Beliakova said that this was unacceptable.
“When a generating company and the oblenergos cannot receive income, then after a while they will be incapable of even paying for necessary resources for work,” she said. “So there’s no time, this will lead to a collapse. A decision must be made.”
Bad options all around
Ryabchyn argued that the options on the table for remedying the situation were mostly bad.
“The best thing for you to do is to wait for the nomination committee to appoint a new member of NERC,” he told Beliakova after she asked the panel a question about the situation. “You will have losses, but it’s the best option.
The deputy added that any of the quick fixes to the situation – ranging from decreasing NERC’s quorum to three from four as well as a proposal to remove the 75 day waiting period – would “set a dangerous precedent.”
“Unfortunately, the president is to blame,” Ryabchyn added.
Nore, the Norwegian professor, said that “political risk is really an important aspect of what’s going on.”
“The question is always what is the political risk – are state policies consistent, predictable,” he said. “And if they’re not, all boards in the world will put an extra rate of return on that investment, making it less competitive.”
Positive noises
Ecology Minister Semerak delivered a lengthy exegesis of Ukrainian government renewable energy policy, heaping praise on himself and his colleagues at the Cabinet of Ministers.
“A new climate policy is very important for me personally and for the cabinet,” Semerak said.
The minister then called for the business community to have a stronger presence, calling the voice of renewable energy investors “a little bit weak.”
Chow, the moderator, then pressed Semerak on the comment, asking if the sector was really a priority for the government and what should be done to demonstrate that it is a priority.
“The stronger and more organized the sector will be the more stable the situation will be in the future,” Semerak said, suggesting that the responsibility – and by extension, the blame – lies with the investors.
“About supporting the sector: I think we have to wait a little bit and to see the ongoing plan of implementation of energy plan, because the strategy is good, but after the strategy yet another plan should be adopted,” he droned interminably.
Orzhel, the renewable energy association chief, added at the end, “In Ukraine, it’s all about strategies and political decisions, but for investors its always really practical.”
“The investors want fewer risks.”
