Transcript of "Newletter draft law 10183 adopted eng"
November 20, 2012 The Ukrainian Parliament Adopted Draft Law No. 10183 Amending Feed-in Tariff Scheme of SupportPlease be informed that on November 20, 2012, the Ukrainian parliament adopted Draft Law ofUkraine On Introduction of Changes to Law of Ukraine “On Power Industry” (concerning incentivesfor production of electricity production from alternative energy sources) (Draft Law No. 10183).Draft Law No. 10183 was submitted by people’s deputies Romanyuk M.P, Lyovochkin Y.V., andMirosnichenko Y.R.. on 04.07.2012 and was several times heard by the parliament. Now Draft LawNo. 10183 shall be submitted for Presidential signature. It cannot be excluded that the law may bevetoed.If signed by the President of Ukraine, the law will enter into force on April 1, 2013, except forchanges concerning local content requirement (effective since July 1, 2013) and “green” tariff forhouseholds (effective since January 1, 2014The version of Draft Law No. 10183 prepared for the second hearing as of 19.11.2012 according tothe parliamentary website contemplates the following important changes.1. RATES OF “GREEN” TARIFF.Draft Law No. 10183 establishes fixed minimal “green” tariff (the “GT”) rate for electricityproduced from various renewable energy sources in EUR per kW/h as well as its digressiondepending on the year of respective power plants commissioning: Categories of Coefficient of GT for power plants commissioned power plants eligible to GT till from from from from 31.03.2013 01.04.2013 01.01.2015 01.01.2020 01.01.2025 inclusively till till till til 31.12.2014 31.12.2019 31.12.2024 31.12.2029 Electricity of wind farms with established 0,06462 - - - - capacity not more than 600 kW Electricity of wind farms with established 0,07539 - - - - capacity from 600 to 2000 kW Electricity of wind farms with established 0,11309 - - - - capacity more than
2000 kWElectricity of windfarms with turbines up - 0,06462 0,058158 0,0517 0,04523to 600 kWElectricity of windfarms with turbines - 0,07539 0,067851 0,06031 0,05277from 600 to 2000 kWElectricity of windfarms with turbines - 0,11309 0,101777 0,09047 0,079162000 kW and moreElectricity from 0,12386 0,12386 0,11147 0,09908 0,0867biomassElectricity from biogas - 0,12386 0,11147 0,09908 0,0867Electricity of solar 0,46526 0,33926 0,30533 0,2714 0,23748power plants on landsElectricity of solarpower plants installedon the roofs ofbuildings or installed 0,44588 0,34895 0,314053 0,27916 0,24426on facades ofconstructions withpower capacity morethan 100 kWElectricity of solarpower plants installedon the roofs ofbuildings or installed 0,42649 0,35864 0,322777 0,28691 0,25105on facades ofconstructions withpower capacity notmore than 100 kWElectricity of solarpower plants installedon the roofs ofbuildings or installed - 0,35864 0,322777 0,28691 0,25105on facades of privatehouseholds with powercapacity more than 10kWElectricity from micropower plants (up to 200 0,11632 0,19386 0,174474 0,15509 0,1357kW)Electricity from minipower plants (from 200 0,11632 0,15509 0,139579 0,12407 0,10856up to 1 mW)Electricity from smallpower plants (from 1 0,11632 0,11632 0,104684 0,09305 0,08142mW up to 10 mW)
2. LOCAL CONTENT REQUIREMENTS (the “LCR”)Under Draft Law No. 10183 GT scheme of support applies to electricity produced from alternativeenergy sources on power plants which construction started after January 1, 2012, is establishedsubject to compliance with local content requirement determined by Power Industry Law. Thisrequirement does not apply to micro-, mini- and small hydro power plants as well as privatehouseholds installations. If all other power plants fail to comply with local content requirements, GTis established at the level of wholesale price excluding any dotation certificates as of the previoussettlement period.Local content is determined as the share of elements determined by Power Industry Law ofUkrainian origin used in construction of the power plant.For solar, wind and biomass power plants which construction started in 2012 or later, there are thefollowing local content requirements for the use of Ukrainian equipment, materials, works andservices during construction: if commissioned after July 1, 2013– not less than 30%; if commissioned after July 1, 2014– not less than 50%.For biogas power plants which construction started in 2012 or later, there are the following localcontent requirements for the use of Ukrainian equipment, materials, works and services duringconstruction: if commissioned after January 1, 2014– not less than 30%; if commissioned after January 1, 2015– not less than 50%.The procedure on calculation of local content requirement shall be adopted by National EnergyRegulation Commission (the “NERC”). It appears that NERC for power plants commissioned afterJuly 1, 2013, will itself determine the share of local content taking account of the following fixedshares: for wind farms: Elements of local content Operations should be Fixed share, % taking in Ukraine Rotor blades manufacturing 15 Towers manufacturing 15 Nacelle assembling 30 Main frame manufacturing 5 Main hub manufacturing 5 Rotor manufacturing 5 (foundry) assembly 5
Construction works performance 20 Total 100; for solar power plants: Elements of local content Operations should be Fixed share, % taking in Ukraine Polysilicon manufacturing 32 Monocrystals, multicrystals and pseudo- manufacturing 13 mono-crystals Cells from monocrystals or multicrystals manufacturing 7 Photoelectric elements manufacturing 20 Photoelectric modules assembling 23 Construction works manufacturing 5 Total 100 for biomass power plants: Elements of local content Operations should Fixed share, % be taking in Ukraine Turbine manufacturing 25 Boiler manufacturing 35 Construction works performance 40 Total 100; for biogas power stations Elements of local content Operations should Fixed share, % be taking in Ukraine Bioreactor for hydrolysis manufacturing 35 Cogenerator manufacturing 35 Construction works performance 30 Total 100The wording of Draft Law No. 10183 regarding fixed shares leave uncertainty to which it applies: fixed shares (maximal shares) within respective 30% or 50% local content requirementswhich may be allocated for different types of elements of Ukrainian origin, for instance value ofbiogas power plant is EUR 1 000 000, 30% LCR – EUR 300 000, and the maximal value ofelements of Ukrainian origin which could attributed for compliance with the requiremento bioreactor – EUR 105 000;
o cogenerator – EUR 105 000;o construction – EUR 90 000 fixed shares (maximal shares) total value of the project and its any share may satisfy LCR, inthe foregoing requirement may satisfy 30% LCR; any other possible interpretation of NERC.Ukrainian origin of elements is determined by the place of carrying out of operations in the tablesbelow and shall be confirmed by Chamber of Comerce of Ukraine or its regional administrations orauthorized agency of a foreign state for imported goods. Ukrainian origin of construction works isdetermined by the registered address of contractor (general contractor).Probably, the changes of rules on LCR may most adversely affect the players in the market.According to comments from various sectors, it will be almost impossible to comply with them.3. Power Plant Construction Line and its Launching ComplexDraft Law No. 10183 introduces definition of a power plant construction line. It means group ofpower installations or a separate installation, equipment and construction located at one territory andfunctionally connected among each other and constitute one complex designated to produceelectricity which according to project documentation for construction constitutes a definite part of apower plant. The line may consist of launching complexes.Fixed minimal GT rates may be established not only for a whole power plant but also for its eachpower plant construction line (launching complex) if commissioning of a power plant is conductedline (complex) by line (complex). In the latter case GT is established after commissioning of eachline (complex). NERC may apply different GT for each line (complex) depending on itscommissioning provided that they are equipped by separate counters. Stabilization clause and stateguarantee of total purchase of electricity produced by power plants using alternative energy sourcesapply not only the whole power plant but also each line (complex) from the date of itscommissioning. Similar approach applies in case of calculating LCR and for other purposes. Itshould be noted that in sever places the legislator omitted the respective clauses and if this not curedin practice there could be certain issues with that.4. Special Regime for HouseholdsDraft Law No. 10183 cancels mandatory licensing for households selling electricity produced fromsolar power stations with power capacity not more than 10 kW. However, the procedure of sellingand counting such electricity and settlements for it shall be approved by NERC. Electricitydistributors at regulated tariffs are obliged to purchase electricity in the excess of monthlyconsumption of electricity.5. Definitions for Wind FarmsDraft Law No. 10183 establishes definitions of
wind power installation - power installation converting wind energy in electricity; and wind power plant - group of wind power installations or a separate wind power installation,equipment and constructions located in one territory, functionally connected and constituting onecomplex designated to produce electricity through conversion of wind energy in electrical.The introduction of these definitions resolves uncertainty whether the rate of GT for electricityproduced from wind energy depends on power capacity of the whole wind farm or each installation(turbine) and would refer to each installation (turbine) power capacity.6. Definitions for Biomass and BiogasBiomass is determined as non-fossil biologically renewable substances of organic origin in the formof agricultural waste (livestock and crop sectors), forestry waste and technologically relatedindustries which are subject to biodegrading as well as organic and industrial fraction of industrialand municipal waste. It means that electricity from biomass of either animal or plant origin iseligible to GT.Biogas is gas formed from biomass.We always follow the changes in Ukrainian legislation and will keep you timely updated thereon.Should you have any additional questions and comments, please, contact us:Maksym Sysoiev, Attorney-at-Law, LL.M., Senior Associate Emailmaksym.email@example.com