As a “green” tariff will affect the cost of light

Как «зеленый» тариф отразится на стоимости света

The Verkhovna Rada has cut tariffs for producers of alternative energy, now they will earn less. How exactly, and what this impact will have on the industry.

The Verkhovna Rada this week cut tariffs for producers of alternative energy, now they will earn less. The adopted law represents a compromise between the government and manufacturers.

It is intended to resolve the crisis in the market, but many investors left them dissatisfied. In addition, the reduction of “green” tariff will be able to stop the rising cost of electricity for the population. Корреспондент.net tells details.

That changes the law

Over the past year in the energy sector, especially alternative, many events occurred that led to misunderstandings that resulted in the crisis in the energy market.

The attractiveness of the alternative energy market from investors and the opportunity to obtain “green” tariff without auction led to the fact that the share of producers of electricity from renewable sources of energy in Ukraine has grown considerably.

While at the state level funding of payments on the “green” tariff was not provided in the required quantities. That led to billions of dollars in debt. To his pay from August 1 raised the tariff for the transmission of electricity.

The main mission of the bill is the reduction of “green” tariff, according to which the national company Ukrenergo buys electricity produced from renewable sources.

The energy Ministry has calculated that this year the amount of payments to producers at the “green” tariff will be more than 52 billion. The volume of additional allowances such producers to the market price for electricity in 2020 will exceed 33 billion.

In this connection it is projected a significant shortfall of state-owned enterprises Guaranteed buyer, which is responsible for payments to the producers at the “green” tariff. It is about 26 billion.

“We can’t in a country where this level of poverty, have the most expensive in Europe “green” energy. There can not be such that the country loses, the budget loses, and we pay a higher price for green power”, — said the Prime Minister Denis Shmyhal.

How the law trims rates:

  • for solar power plants of over 1 MW, running by 2020, the rate is proposed to cut by 15 percent; capacity up to 1MW — ten percent
  • for wind farms, running until 2020, with a capacity of less than 1 MW — 7.5 percent
  • the installation launched in 2020 and later, receive another 2.5 percent to a decline rate

In addition, in 2022, the producers of “green stuff” agree to be financially responsible for the imbalance of their actual and forecast schedules of electricity production.

The Cabinet shall before the end of 2021 to repay existing debts to producers of alternative energy, which is 16 billion.

Investors unhappy

Dirk Bushle, Deputy Director of Energy community Secretariat, on behalf of the international organizations which member is Ukraine, acts as a mediator in the negotiations between the Ukrainian government and investors in green energy.

Bosle said that the adoption of the law in Europe was positive, but the market crisis is still possible as not all investors were willing to compromise.

“They say that they can’t afford to lower the final yield projects. Therefore, they require that the period of guaranteed payments was extended for another two years. The government does not agree to this and negotiations is not. Thus, a compromise is reached not with all investors, but only about half. On the other half, nothing has been decided”, — he told DW Ukraine.

If the negotiations do not continue, the state will begin to file lawsuits in international arbitration that will lead to a crisis of investor confidence that will severely harm Ukraine, says the expert.

“The overall situation of the Ukrainian energy sector is not too good. And the law does not solve this problem. After all, the reason for the insolvency of the buyer is Guaranteed not only in the rates, and structural problems. But the political will to solve them systematically yet. And all this smacks of selective satisfaction of the interests of individual investors,” he said.

Director of energy programmes of the Razumkov Centre Volodymyr Omelchenko believes that the change in rules on renewable energy market in 2-3 years will suspend the investment in this sphere in Ukraine.

To remedy the situation need to adjust the energy market, to develop a system of auctions in which quotas for new capacity will be provided to those producers who offer the lowest acceptable rate, he said.

Tariffs for the population

The government estimates that the new tariffs will reduce the financial burden on consumers six billion hryvnias annually or two billion euros for all the duration of the “green” tariff until the end of 2029.

In General, the industry obviously, under certain circumstances, can expect to reduce costs, because companies already pay for electricity market price.

However, the population still receives electricity at lower than market price.

And view of “green” tariffs — only one of several steps that government needs to do to solve the crisis in the power sector, burdened by mutual debts.

The government program to stimulate the economy refers to “the revision of the electricity tariffs for the population.” We are talking about raising rates to market levels.

Although Smigel argues that the Cabinet not only will not raise tariffs for the population this year, but will not even discuss this issue. However, experts believe that sooner or later the government will have to revisit this issue.