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Ukrainian solar market report 2011 eng

  1. 1. Stakeholders’Comments Development of Solar Energy Key 8 Stereotypes Modes of Facilitation Ukrainian Market: Key Steps towards 14 2 in the World and their for PV Barriers to Removing the 6 10 Refutation Development Development Barriers 12
  2. 2. «Sharp believes in the PV potential of Ukraine since it has very good environmental conditions and the “green” tariffs for PV are excellent.»Stakeholders’ Comments Barbara Rudek, Sergiy Orlenko, Manager of Strategy Head of the State & Governmental Environmental Policy Affairs, Sharp Investment Agency Energy Solution of Ukraine Europe I sincerely welcome the participants of this round table for development of solar energy market!Today its clearer than ever that the use of traditional energy We would also appreciate to see a clear rule of how and until whensources is becoming increasingly connected with various risks of a grid operator has to connect a PV system and who has to pay for it. While this segment of alternative energy is at the initial stage of Mykola Pashkevych,dramatic environmental character. Last year the world suffered Furthermore, the lack of practical experience in preparing technical Head of the State Agency development in the today’s Ukraine, this country sees favorablefrom unprecedented oil spill in the Gulf of Mexico, now Japan fights documentation for grid-connection of PV systems is an obstacle. “Red on Energy Efficiency and situation for expansion of solar energy sector.against outcomes of the recent technological disaster on the nuclear tape” is a topic as well as there are several permissions needed to start Energy Savingpower plant Fukushima and the world hold its breath. On the other system operation. This, in particular, is evidenced by “green” tariff for electricity producedhand, renewable energies demonstrate needed safety, sustainability by solar panels and tax preferences, which provide incentives for privateand economic output. We believe they will shape the whole energy From our point of view, it is not sure if the awareness and interest of the sector to implement this energy type.landscape of the world in the nearest future. population for renewable energies (especially for photovoltaic) is well developed and if the tariffs themselves are and will be promoted at all. The geography of Ukraine shows great potential for development ofSharp is one of the leading photovoltaic manufacturers in the world. We Therefore, Sharp recommends promotion campaigns for renewable Solar energy of one of the most perspective markets of renewable solar energy market and this potential shall be realized.observe carefully new developments and announcement in all countries energies and the green tariffs itself in Ukraine. energy. It is technically possible that the share of solar energy will reachand it was a pleasure to learn about the new Energy Strategy for Ukraine 10% of Ukraine’s energy balance till 2030. And though equipment for Beyond doubt, expansion of solar energy in Ukraine will favorably affectto 2030 and the adoption of a law on subsidized tariffs for electricity Sharp believes in the PV potential of Ukraine since it has very good generation of solar energy is still quite expensive, the world experiences the general trend towards reduction in greenhouse gas emissions,produced from non-conventional sources. environmental conditions and the “green” tariffs for PV are excellent. a trend of decreasing production costs of such equipment. In the last 7 which have already started showing positive developments. years, production costs of solar heaters have decreased threefold.However, we see some serious challenges for the development of PV The world chooses solar energy as an alternative to use of fossil fuel formarket in Ukraine. This equipment is becoming increasingly affordable, but the payback a reason and I am positive that, Ukraine will not remain aside of those period of solar power plants is still quite long. To support the progressive processes.Starting from January 1st, 2012, the share of materials and components development of solar energy at current stage, the Government ofof Ukrainian origin in solar modules that are used in a PV project is not Ukraine creates attractive conditions, among them - the feed-in tariff.less than thirty per cent. We understand that the intention of course is a When the “green” tariff will finish its force, we will have ready-to-usegood one, but from our point of view not fair against worldwide trade. energy sources. This will be one of the cheapest sources of energy forThat’s why we would like to ask the Ukrainian government to revise the future generations.local content rule as we believe it slows down market development inthis promising future PV market.2 3
  3. 3. «The Government of Ukraine creates attractive conditions, among them - the feed-in tariff. » «The new Tax Code of Ukraine specifies that equipment for production of energy from renewable sources shall be exempt from import duty and VAT.» Sergiy Maslichenko, Principal Business Development Manager, Energy Efficiency and Climate Change Team, EBRD Vitaliy Radchenko, Coordinator of Energy and ProjectsAvailability of well prepared projects is a priority condition precedent As for financial infrastructure, Ukrainian banks are not ready to support practice, CMSto market development. EBRD has been operating in Ukraine for long projects based on project finance schemes as they used to work with Cameron McKennatime and examined many projects. According to my observations, today the corporate sector, making available simple loans mostly secured bynot so many solar projects are submitted in general and even if they are, pledges. A project financing oriented towards future cash flow is non- With the adoption by the Verkhovna Rada of Ukraine of the Law “On draft the resolution to be made by the Cabinet of Ministers of Ukrainethose projects are unprepared. The barrier is lack of Western approach existent in Ukraine altogether. Some banks are only seeking to operate Introduction of the Amendments to the Law of Ukraine “On Electric on introduction of the relevant amendments into the List of Equipment,towards preparation of projects, understanding of all parameters: in this area; however, development remains a thing of the future. This is Energy” In Respect of the Incentives for Use of Alternative Sources of which shall be exempt from the import duty and VAT and on inclusioncash flow, NPV, payback period and general project management as why EBRD acted as the originator so that to exemplify how financing for Energy” on 1 April 2009, solar energy development in Ukraine should of an individual batch of such equipment (!) into such List and shall dulysuch. Many applications are based on unjustified, non-commercial such projects may be provided and to prove that their risk exposure is have already gained its momentum by this moment; however, in send the same for consideration to the Cabinet of Ministers of Ukraine,technologies. An additional problem is availability of own capital in not as high. practice, provisions of the mentioned law are not sufficient to make which shall then make its special resolution to that effect.investors. EBRD is ready to provide loans if an investor is able to invest investors interested to invest money in extremely capital-intensiveown funds in a project at the level of at least 30%. This, unfortunately, is We should understand that this is a new area, a new sector as only projects in solar energy. In addition to the above, I would like to underline the importance ofalso not the case frequently. Many come up with ideas and no money. two years have passed since the adoption of “green” tariff legislation. the issue of share of raw and other materials of Ukrainian origin in the Therefore, time is needed for banks and project managers to reach Legislative stability is the first and most important challenge our market production cost of solar modules (i.e., local content requirement, “LCR”).Many matters in the area of renewable energy are not regulated understanding of this market. is facing. Indeed, the Law “On Electric Energy” contains a declaration The Law specified that as of 2012, LCR shall amount to at least 30%.legislatively. Many normative acts in support of those projects that Ukraine shall guarantee that the incentives regime for production That notwithstanding, firstly, no clear procedure has been adoptedimplementation are only at a stage of drafting, in particular those on of electricity from alternative sources of energy is stable. However, with so far as to how exactly such LCR shall be calculated. Secondly, theorigin of energy certification, keeping of energy, connection to the grid Ukrainian political realities in mind, investors are concerned that such worldwide practice shows that before introduction of the LCR, theetc. At the moment, EBRD provides technical assistance to the NERC guarantee may be cancelled by Ukrainian Parliament as easy as it usually domestic environment shall meet two pre-conditions: availabilityin the said areas; however, a lot should be done yet so that renewable does. In addition, investors believe that neither the Government, nor of large and stable domestic market and functioning of clear andenergy market became sufficiently regulated and gained even more the market regulator (NERC) clearly understand how the “green” tariffs consistent legislation governing this sector, so that the investorsmomentum for further development. system would function in the environment of the bilateral agreements understand the rules of the game and know what to expect of the and balancing market, to which Ukraine has committed to transition by Government and its policy. Unfortunately, we have to note that Ukraine the end of 2014. Under such conditions, the question of: “How do we does not meet either of those pre-conditions. Thirdly, the requirement ensure that our investments pay back?” becomes extremely pressing to applicable to LCR for solar energy implies only photovoltaic technology, all investors. leaving aside concentrated solar power plants. If we are to add to all of these circumstances the fact that a clear procedure for connection So far, notwithstanding some illusion of production of solar panels and reimbursement of investors’ costs of the solar power plant in the territory of Ukraine, their import is still less expensive and, interconnection to the grid has not been adopted yet and the existing hence, a more profitable alternative. At the same time investors face problems with allocation of land plots - the prospects would not look to yet another problem here: customs clearance of the equipment for good. solar power plants, which is being imported to Ukraine. The new Tax Code of Ukraine specifies that equipment for production of energy On the bright side, however, extremely high investment appeal of from renewable sources shall be exempt from import duty and VAT; “green” tariffs for solar energy in Ukraine urges us and our clients however, for this to happen an importer should undergo the procedure anyway to seek solutions to those issues or, at least, to minimize their of import approval with the Ministry of Economic Development and negative effect and unpredictability on the economics of the solar Trade, which upon proposals of the central executive authorities (!) shall power projects so we are slightly, but successfully, progressing further.4 5
  4. 4. Top 10 Solar Cell Producers in the World (2009)Development of Solar Energy in the WorldConsumption of polycrystalline silicon for solar energy needs doubled in a matter of 2 years from 23,000 ton in 2006to 46,000 ton in 2008. The unprecedented demand for polysilicon even resulted in scarce supply of trichlorosilane (rawmaterial), which in 2007 amounted to 150,000 ton given the total global consumption of 460,000 ton. The situationsomewhat improved with the commissioning of new production capacities in 2009.Since 2003, the total production of photoelectric modules has grown approximately 10 times, yearly growth rates 1. 1,100 MW First Solarfluctuated from 40% to 80% and averaged at 90% a year for thin film technology (Source: European Commission). Theshare of thin film modules grew from 6% (2005) to 12-14% (2008) and 15% (2010).Investment in solar energy are second only to wind energy and in 2008 amounted to USD 33.5 bln. or 21.6% of total 2. 704 MW Suntech 3. 595 MW Sharpcapital investment in renewable energy. The corporate acquisitions reached USD 11 bln. participation of venture andprivate capital was USD 5.5 bln., and government investment accounted for 6.4 bln. USD (Source: UN Environment 4. 586 MW Q-CellsProgram).Most solar modules manufacturing companies are based in Asia: China, Taiwan, and Japan. In 2010,8 out of 12 market leaders were Chinese or Taiwanese producers. JASolar (China) was a leader in photocell supplies in 5. 525.3 MW YingliQuarter III, 2010. MotechIndustries, a large Taiwanese producer, showed the highest growth rates. According to theEuropean Commission, China’s share in the world market will grow from 11.9% in 2005 to nearly 32% in 2012. However, 6. 520 MW Ja Solarnotwithstanding this positive development, the country will continue exporting most their products (98% in 2007). 7. 400 MW KyoceraIn 2010, the total solar modules’ shipments grew by 80% and amounted to more than 13 GW. The demand was mainlyprovided by Germany (8000 MW), Italy (1500 MW), Japan (1000 MW), USA (800 MW), and Canada (250 MW). (Source: 8. 399 MW Trina SolarActiv Solar)European market accounts for the highest share of global solar energy market or nearly 9. 397 MW Sunpower70% of total installed capacity. As estimated by European Photovoltaic Industry Association (EPIA), over 3million households in the today’s Europe use electricity fully or partially produced by solar modules. In 2010, the total 10. 368 MW Gintech Source: Photon Internationalinstalled solar capacity in Europe grew to 16 GW while the world’s total capacity increased approximately to 40 GW.Just as investments in the industry, which amounted to over EUR 50 bln., the mentioned indicators exceeded the mostoptimistic forecasts. Installed PV capacity for the first time left behind wind plants and approached 22% of the totalgeneration capacities installed in 2010 in the EU.In futurE, solAr EnErgy wIll provIdE gEnErAtIon of up to 25% of globAlElEctrIcIty consuMptIonIn 2008-2013, the average annual growth rates of European photovoltaic industry will reach 32% or, under a lessoptimistic scenario, 17% (according to the EPIA forecast).In 2018, the core alternative energy technology market will expand approximately 3 times as compared to 2008 (64%growth). The growth will reach by 63% in solar energy market with 63% and 67% for wind energy and biofuel market,accordingly (according to AS Marketing).In a matter of 40 years, solar energy will generate approximately 9,000 TWh or 20-25% of the global electricityconsumption (according to the International Energy Agency).6 7
  5. 5. Average Household EnergyKey Stereotypes and Their refutation Consumption and Solar Panel Area Required to Meet the Demand (2010)Ukraine has not enough Solar Panels Payback Period In addition, cost of solar panels drops year to City, Country Annual consumption (kWh) Area for Solar Modules (m2)Sunny Days is Too Long year whereas the energy output, operation life and quality grow. In the last year alone, the Copenhagen, Denmark 4 400 33 average solar panel cost in Germany, Spain and Kuala Lumpur, Malaysia 3 700 15A low number of solar days never mean that The detailed estimates would prove that Italy reduced three times. According to EPIA,solar panels use is impossible. The core solar sometimes use of solar cells in Ukraine is the payback period for all types of photoelectric London, UK (2008) 3 300 24energy market in the European Union is less expensive compared to traditional Munich, Germany (2008) 4 000 25 panels ranges from 1 to 3 years while theirGermany, hardly a very sunny country. Czech method of electricity generation. average operation life is 25 years or longer. New York, USA 11 000 45Republic, where the number of solar days is While the cost of off-grid solar facilitiescomparable with Ukraine, was ranked third. is rather high, they do not require Owing to considerable reduction of the Rome, Italy 2 700 14 payment for connection, cable and board Seoul, South Korea 3 600 16 production costs and use of solar panelsSolar heat energy in Ukraine may fully provide installation. This takes no account of the for household needs, it’s expected that PV Sidney, Australia 8 000 30a house’s hot water demand in summer. In cost of electricity, which shall be paid installations in Europe will be booming in asautumn and spring, solar energy may provide every month and whose price has grown little as 5-7 years. Experts forecast highest rates Tokyo, Japan 3 500 20 Source: EPIA, IEA PVPSup to 30% of the heat energy consumption by one third in Ukraine since the year of solar energy use in southern Europe forand up to 60% of the hot water supply beginning. 2020-2025 and, for northern Europe, for theconsumption. 2030s (Source: EU Energy Institute). EuropeWorldwide and European Photovoltaic (5,6 GW) Toxic Agents are Used in Solar Panel ProductionMarkets (2009), MW World The level of pollution in production of photoelectric cells never exceeds the level allowable for microelectronic industry (7,2 GW) companies. While use of such agents, in particular cadmium, raises a question of due 1. 3,806 MW Germany utilization, such cells are not widespread and a suitable replacement has already been 2. 711 MW Italy found for cadmium compounds. 3. 411 MW Czech republic 1. 5,605 MW EU 4. 292 MW Belgium Last year IBM announced that they managed to produce a solar cell using only 2. 484 MW Japan 5. 185 MW France the materials available on Earth in large 3. 477 MW USa 6. 69 MW Spain quantities. A composite of copper, tin, zinc, 4. 168 MW South Korea 7. 63 MW rest of EU sulfur and selenium provides efficient energy 8. 36 MW Greece transformation at the level of 9.6% that is 5. 160 MW China 40% higher than the previous result for such 6. 143 MW rest of the World 9. 32 MW portugal materials. In addition, the invention enables 7. 70 MW Canadaа producing electricity at low cost that will allow using it broadly. 8. 66 MW australia 9. 30 MW India Source: The EPIA Global Market Outlook for Photovoltaics (PV) from 2010 to 20148 9
  6. 6. By 2012, the Korean government JAPAn. Japanese Recovery get of 100 GW installed capacity on income earned by owners of plans equipping 100,000 residen- Plan includes a specific project for 2030. solar cells from sales of surplus tial houses and 70,000 public/pri- to reach the status of world’s energy. Kibbutzim (collective vate buildings with photovoltaic leading nation in the area of iSrAeL. The country has a agricultural farms) enjoy pref- systems. Large projects may be photovoltaics and energy sav- feed-in tariff of EUR 0.40 per erences for land use provided qualified to receive Clean Devel- ing technologies. The plan kW, which is fixed for 20 years. that photoelectric modules are opment Mechanism units, which provides for steep acceleration Effective from 2011, the rate installed on a land parcel. may be traded within the frame- of generation capacity of solar will be reduced by 4% a year. In work of the Kyoto Protocol. energy by 2020. Japan set a tar- addition, Israel cancelled the taxModes of Facilitation for pV Development Photovoltaics Support Regimes in the EU Countries (2010)Advanced countries GermAny. Effective from 1999, the feed-in tariff is set to EUR 0.30 purchase a part of electricity fromsupport development a feed-in tariff of EUR 0.34-0.47 per per kW (EUR 0.40 per kW in over- renewable sources. The leader ofof renewable sources kW is in force, which is fixed for seas departments and Corsica), development is California, whoseof energy. In 2009, global 20 years, depends on a system’s which is fixed for 20 years. How- Solar Initiative program providesgovernment support of green type and capacity. No yearly limit ever, higher rate (EUR 0.45 per kW) for financial incentives of PVenergy and biofuel programs of installed capacity is specified. applies to commercial real estate; systems installation, so that tototaled USD 57 bln.; in particular, Due to the efficient “green” tariff no limit is set to capacity of roof- reach 1.75 GW installed capacityUSD 37 bln. were spent to system, over 80% of European PV top mounted facilities. In addition, by 2017. The government invest-research and development. By facilities are installed in Germany, 50% of the cost of solar modules ment is equally impressive at the2035, the total amount of funds where the insolation level is much installation in residential buildings federal level. In 2009, Presidentwill grow to 205 bln. USD, or lower than in Mediterranean (not more than EUR 8,000 for sin- Barack Obama signed American 50.17% of global GDP. Renewable countries. gles and EUR 16,000 for families) Reinvestment and Recovery Act,energy and biofuels will account shall be exempt from taxes; lower under which more than 467 mln.for 63% and 37% of those funds, SPAin. A preferential purchase 5.5% VAT shall be payable on ma- USD was spent to provide incen- 8accordingly (Source: International tariff of EUR 0.41-0.44 per kW is in terials and service costs. tives to development, installationEnergy Agency). force, which is fixed for 25 years; and use of geothermal and solar however, the rate has been re- chinA. The feed-in tariff in force energy. The Department of Energy 5“green” tariff is initiated ducing gradually since 2009. The is set according to the follow- will spend USD 117.6 mln. to raiseby European countries. yearly installed capacity is limited ing formula: cost + reasonable commercial appeal of PV technol-In early 1990s, they proposed a to 400 MW. Spain’s Renewable markup. Therefore, the Chinese ogy; USD 51.5 mln. will be spent 34 Energy Plan for 2005-2010 pro- Government seeks to support directly for development of PV 64preferential tariff for electricityproduced by wind generators. vides for 12.1% coverage of total domestic consumer market, espe- technology and USD 40.5 mln. 363 1Feed-in tariffs were in force in demand and 30.3% of electricity cially in remote provinces. At the for projects on removing non-14 countries in 2000 and in 37 consumption for the account of beginning of 2009, the Ministry technical barriers for expansion 24 465countries in 2005, not only in renewable sources. of Finance and the Ministry of of solar energy industry. On the 9,785Western countries, but also China, Housing and Urban-Rural Devel- last President’s Obama initiative,India, Brazil, South Korea. At the iTALy. The “green” tariff rates are opment of China announced a up to USD 2 bln. will be spent for 53 EUR 0.36-0.49 per kW, which are solar energy support program. At construction of several large solar 272 1moment, this mechanism is in use 8by over 50 nations. fixed for 20 years and vary with the time of the program launch, energy plants. 1 the system type and capacity. The tariff markup for photovoltaicrenewable Energy rates have been reducing by 2% plants was EUR 2.1 per kW. The SoUTh KoreA. The “green” 100 1,167support policy provides a year since 2009 and the annual document specifies no limits to in- tariff of EUR 0.46-0.48 per kW is 8for clear targets and time installed capacity is limited to stalled capacity either for individ- guaranteed for 15-20 years; the 3,386frames. G8 countries decided 1200 MW. ual projects or the entire market. rate depends on the installedto reduce global emission of In addition, the National Energy system capacity. Since 2009, thegreenhouse gases twice by 2050 SwiTzerLAnD. “Green” tariff is Administration set a EUR 0.115 per tariff has reduced by 4%. In ad-and the EU countries plan to lead in effect at the level of EUR 0.30- kW markup for electricity pro- dition, Korea provides grants to 56the share of renewable sources 0.56 per kW, which is fixed for 25 duced by using solar energy. finance project, up to 60% of theof energy in their energy balance years and also depends on type cost. The objective is to bringto 20% by 2020. In 2010, as many and capacity of installed systems. USA. Tax preferences are set at the share of renewable sources 2 3as 85 nations set their official the federal level (up to 30%) for in the energy balance to 4.3%targets, which specify the share FrAnce. By 2020, France plans installation of solar systems and (2015), 6.1% (2020), and 11%of renewable sources of energy in increasing photovoltaic capacity at the level of states for produc- (2030). Photovoltaics is to reach Feed-in tariff Green Certificate Trading Other (tax preferences, subsidies etc.) Installed PV capacity, MWthe total balance at the average 400 times, to reach 5.4 GW of in- ers of the relevant equipment. In 1.3 GW installed capacity in 2012 Source: EPIAlevel of 5-25% until 2020. stalled capacity. To meet this goal, most states, grid operators shall and 4 GW in 2020.10 11
  7. 7. more ‘howevers’: Absence of development and modernization of grids. According to NAER, 250 UAH mln. will be spent in 2011 for reconstruction of electricity grid to receive energy from small sources. At the same time, according to the Ministry of Energy and Coal Industry, every year Ukrainian power grid loses up to USD 460 mln. due to imperfection of technology and wear of fixed assets, and over USD 800 mln. due to wear of circuits and transformers. Local content requirement. Under the Law “on electric energy” (Art. 17-1), the share of raw and other materials, fixed assets, work and services of Ukrainian origin in the cost ofUkrainian Market: construction of power plants on renewable sources shall amount to 30% effective from 1 January 2012 and 50% effective from 1 January 2014. Moreover, solar energy is subject to a supplementary requirement:Key Barriers to Development starting from 1 January 2012, the green tariff may be accorded only to those facilities, which use modules, in the production cost of which the share of raw and other materials of Ukrainian origin is at least 30%. Today, no procedure is set for estimation of Ukrainian content. The decision, which is being drafted in NERC, will be based on the data of the State Customs Office and the project documentation.Feed-in Tariff Legislation. The relevant article 17-1 of however: this is complicated due to unavailability of consistent This way, Ukraine in fact closes the solar energy market for foreignthe Law “On electric energy” was adopted in spring of 2009. NERC procedure for connection and reimbursement of the investor’s costs of producers of not only silicon raw materials but also the equipment. IfResolution of 23 July 2009 No. 857 set fixed minimal “green” tariff rates construction (reconstruction) of those grid segments, which shall be this sector needs investment, advanced global expertise, technologiesfor solar power plants: UAH 5.0509 for ground level facilities; UAH 4.63 transferred to local operators (oblenergo) or NPC “Ukrenergo”. and purchase of the required production equipment, such protectionismfor up to 100 kW rooftop facilities and UAH 4.8404 for facilities with is unjustified and contradicts the obligations of Ukraine in the areacapacity more than 100 kW. investment programs. Along with the government support, of international trade. By way of example, Japan has already sought more and more international financial institutions provide funds to consultations from the WTO Dispute Settlement Body in respect ofHowever: companies face considerable difficulties with obtaining Ukraine. IFC announced its intent to invest nearly USD 500 mln. in the Ontario Green Energy Act adopted in Canada, asserting that theof “green” tariff due to cumbersome permit requirements (licenses, 2010 to support projects (including those applicable to energy sector). requirements applicable to local solar cells “contradict WTO regulationsstatements, certificates, extracts and the like) and underdeveloped or European Bank for Reconstruction and Development (EBRD) launched and form an act of protectionism”. The USA and the EU made a request toplainly non-existent secondary legislation. Ukraine Sustainable Energy Lending Facility (USELF), which provides join the consultations. for EUR 50 mln. in loan finance for Ukrainian companies, which investexempts for Solar energy Producers. Under the Tax in renewable sources of energy. The World Bank and NAER agreed on Low Public Awareness of the Prospects ofCode adopted in December 2010, profits from sales of electricity opening of long term USD 350 mln. loan facility. renewable Sources of energy and, in particular, PVproduced from renewable sources shall be exempt from the profit Technology. The interest of the customers is vital to the domestictax up to and including 2020. In addition, the Tax Code grants VAT however: Low liquidity of grid operators complicates access market development. The evidence for lack of demand for photovoltaicsexempt for imports of equipment and materials for production of to financial resources, which form a source of funds for investment in Ukraine is that over 90% of solar modules produced in Ukraine areenergy from such sources provided that the relevant products with programs. Therefore, according to “ECU” NJSC, “Krymenergo” OJSC exported to European countries, where such demand exists. Moreover,similar performance data are not manufactured in Ukraine. In July, the plans spending over UAH 115 mln. in 2010-2011 on operations for potential exists not only in large photoelectric project segment.parliament adopted the Law “On Land for Energy Facilities and Legal connection of three solar power plant sites. The sources of finance for According to FuelAlternative, 1120 small-sized off-grid solar facilities withRegime of Special Zones of Energy Objects”, under which the land rental the investment program include corporate profits and UAH 60 mln. a total capacity of 1.1-1.2 MW operate in Ukraine. In the recent 2 yearsfor renewable energy facilities is reduced by 70%. bank loan. They had to include the loan servicing costs in the electricity only, nearly 200 off-grid facilities based on solar modules have been tariff thus making any and all costs expenses payable by customers. installed.Under Art. 158 of the Tax Code, 50% of profits earned from energy This being said, according to the Autonomous Republic of Crimeaefficient operations and implementation of energy efficient projects Committee for Fuel, Energy and Innovation Policy, the grid load up toof companies included in the registry of the State Agency on Energy 2015 will grow by 250 MW.Efficiency and Energy Saving (NAER) shall be exempt from the profit tax.however: this procedure has been ineffective so far as theNAER’s list contains only 2 companies: Semiconductor Plant OJSC(Zaporizhzhya) and Kvazar PJSC (Kyiv). The producers shall invest thefunds saved on the exempt for target programs that is rather difficult tomonitor.Connection to Electric Grids. Under the Law “On Electric Energy” (inparticular, p. 3 Art. 18 and p. 7 Art. 24) and the Cabinet of MinistersDecree of 19 February 2009 No. 126, energy suppliers shall connect togrids the companies producing electricity from alternative sources ofenergy.12 13
  8. 8. Steps towards removing the Barriers Awareness campaigns on We should mention that in due time Germany, Removal of at least some of the mentioned renewable Sources of energy which is now among the leaders in installed barriers, movement towards more capacity of photoelectric systems, started liberalization and openness, rejection of and “Green” Tariff mechanism market development with a pilot government excessive protectionism in favor of flexible in Ukraine. Targeted and coordinated program for installation of solar modules on regulation, strengthening of competition and information policy with incentives for a total of 1,000 buildings. Ukraine has already incentives for domestic demand form the key solar energy shall be combined with the crossed this line and is prepared for mass priorities for young yet extremely dynamic government microlending program for deployment of photovoltaics in residential solar energy market in Ukraine. households, which would like to install sector, which is only possible with the photoelectric modules on the roof or grant government support. cancellation of Local content requirement. This of subsidies to those, who had already did so. would be the most market-oriented solution and would provide incentives for competition. However, such solutions as further prolongation of the requirements’ taking effect or reducing the local content to 5-10% are also possible. After all, the problem can be solved by adopting the detailed procedure of local content estimation drafted by NERC as early as in September 2010. Feed-In Tariffs for PV in Ukraine introduction of non-Discriminatory Preferential Treatment. This applies to not only tax and customs exempts but also government subsidies, lending. Equal participation of all companies (March 2011) in the market (Ukrainian and foreign alike) in tenders, competitionsAmendments and Supplements to the Feed-in and distribution of investment funds out of the state budget shall be Energy generating companies Feed-in tariffs net of VAT, kop./kWhTariff Legislation in Force. Reliable and long term rules of ensured. This would be made possible by civil scrutiny of drafting and compliance with legislative acts, incentives for market participants Manufacturers of energy produced from solar radiationthe game will enable investors to have their invested payback and willensure that customers receive high quality products. to follow best practices, streamlining of requirements applicable to Ground facilities submission of the relevant applications, easing of fiscal pressure, Crimea Solar 1 Ltd. 506,81 expansion and high quality keeping of state registries (in particular,Availability of “Green” Tariff for electricity Crimea Solar 2 Ltd. 506,81 NAER Registry), transparency and accountability of governmentProduced from Alternative Sources of energy for authorities’ proceedings. Crimea Solar 3 Ltd. 506,81All market Participants. This will require that the regulatorbe more flexible and simplify the permit procedures by reduction of Crimea Solar 4 Ltd. 506,81the list of documents to be submitted and requirements applicable to Crimea Solar 5 Ltd. 506,81documentation. Rooftop mounted facilities up to 100 kW and façade mounted facilities of any capacity Vinnytsia-Energoservis Ltd. 464,58Drafting and Adoption of consistent Procedurefor connection of PV Facilities to Grids, which shall Source: NERC Resolution of 24 February 2011 No. 269be based on the principle of priority and financial aspect of the matter.A specific term (20-25 years) shall be set for reimbursement of the gridoperators’ costs of connection. In approval of investment programsof oblenergos, NERC shall take into account the costs of solar energyfacilities’ connection to grids.14 15
  9. 9. © DiXi Group, 2011, Design and Layout: Taras Mosienko, Print: Syla LTD