The mechanism of state support for the production of electric energy from renewable sources (RES), better known as the “green” tariff, remains one of the most discussed topics in the Ukrainian energy industry, especially now – given the economic and energy difficulties of the last year. This discussion contributes, on the one hand, to the growth of awareness about alternative energy, and on the other hand, to the emergence of a large number of myths about RES, and in some places to the distortion of data with the intention of discrediting the industry.
Since improving energy efficiency and developing distributed generation (especially from RES) are important components of the country’s energy security, the formation of an energy system based on clean energy sources is inevitable, experts of the Association of Sustainable Development Experts (ASDE) believe.
There are two possible ways to achieve this goal:
– easy, on which the state and society make far-sighted strategic decisions based on global trends and the needs of a sustainable energy system,
– hard – with the delay of reforms and parallel physical wear and tear of the existing energy system, which loses its ability to respond to modern challenges.
Unfortunately, a full-scale invasion made scenario number two more likely.
“I hope that today’s event will help us to reduce this probability, to be systematic, to correctly assess risks and opportunities and to move forward, gradually understanding where we are going,” said Maxim Babayev, an expert in green energy, founder of the Ukrainian Energy Freedom Coalition and a member of the board of the Ecoaction – Center for Environmental Initiatives, starting the webinar within the Sustainability Recovery Guidance series, initiated by ASDE and aimed at forming an international platform for the interaction of business, experts and investors for the development of the economy based on the principles of sustainable development.
To what extent will the new draft law on Net Billing help accelerate the implementation of RES by enterprises? What payback can be expected from projects that will work according to such a mechanism? What is the reform of industrial pollution and do Ukrainian enterprises have the opportunity to attract investments and develop within the framework of these reforms? How can enterprises/businesses reduce costs by saving energy? And most importantly, how to ensure the stability of the sector during and after Ukraine’s victory?
We have collected the main theses-answers to these questions from the top speakers of the webinar.
Yaroslav Demchenkov, Deputy Minister of Energy of Ukraine for European Integration, spoke about the nuances of the new law: “2022 was extremely difficult for the energy industry. Our energy system is characterized by centralization. This makes it vulnerable to the challenges of living near a terrorist state. That is why the President of Ukraine announced a course to decentralize the energy system – this is correct, because it is about security of supply. We must combine basic capacity and other decentralized sources of supply in the future.
Businesses and enterprises have already felt significant pressure on their activities due to power outages. If such businesses had their own power generation using solar or wind, they would be more protected. But it is also a guarantee of their energy security in 2, 3 and 10 years. That is, it is also a long-term investment.
In addition, if you export some products to the EU, the carbon footprint in the production chain will affect the competitiveness of your products in the future.
Therefore, a clean green energy mix is the competitiveness of your products.
And the third. When stimulating the development of RES in Ukraine, we must take into account previous experience. Such a mechanism is needed, which would avoid increasing pressure on the tariff of the transmission system operator and, accordingly, the costs of all consumers.
Given the combination of all these factors, the adoption of the law on Net Billing is a much-needed mechanism for moving forward.
According to this model, a consumer who has installed a RES installation receives a cash deposit. Funds for excess energy released into the network (at the market price) will accumulate there. And then, with this money, you can pay for the consumed electric energy from the network of other producers, if necessary.
Among the advantages of such a scheme for enterprises is that the consumer will not pay network tariffs, since he consumes electricity from his own power plant. This saving is a good incentive to install your own power plants.
Moreover, the cost of own electric energy can be even lower than on the market.
According to the ministry’s estimates, the payback period for solar power plants installed by enterprises using the Net Billing model will be 5-7 years at current market prices for electricity.
Payback will primarily be provided through the consumption of own electricity. An additional source of income will be the release of excess electricity produced into the network. The more the enterprise replaces its own consumption, the shorter the payback period will be.
In the conditions of the war, the Ministry of Energy did everything possible to ensure the operation of existing renewable energy projects, taking into account their specifics. Last year, almost all debt owed to manufacturers for 2020-2021 wasrepaid.
At the same time, if we are talking about the cost of attracting funds for the construction of new green power plants, then a number of factors that do not depend on the Ministry of Energy play a role here. This includes the discount rate, which is approved by the NBU, and the risks associated with the military aggression of the Russian Federation, etc.
At the same time, the Ministry of Energy will continue to work within its powers to increase the investment attractiveness of the RES industry.”
Serhii Porovskyi, the chief expert on financing and energy efficiency policy, UNIDO, emphasized that from the point of view of technical assistance for the recovery of Ukraine, it would be important to direct it to the implementation of so-called integrated solutions: energy efficiency + renewable energy sources (various types + biomass to solve the problem of predictability and level the system) + storage systems (which further level this system) + smart grid.
The deficit that arose after October 2022 is connected with the theft of the largest Ukrainian nuclear power plant by Russia, as well as with the constant attacks of the aggressor on the energy distribution facilities.
Therefore, the first thing to pay attention to is energy efficiency.
In the short- and medium-term perspective, this is distributed generation – the creation of energy-generating capacity on the ground. Renewable energy sources can play an important role here, although they cannot cover all the needs of our energy system.
On the part of the state, it is important to provide support for the development of such integrated solutions; and regarding the development of renewable energy sources for own needs, including for small and medium-sized businesses, it is important to resolve the issue of connecting to networks, since for many consumers this is the main “headache” in the matter of switching to alternative energy.
The issue of professional training remains equally important.
It is very important to create working financial models so that people, communities, small, medium and large enterprises have the opportunity to create practical examples of effective technological models, in particular such as distributed generation.
UNIDO, directly the Department of Energy, is considering supporting the development of integrated solutions within the framework of the Industrial Deep Decarbonisation Initiative and emphasizes that the implementation of such programs will have a powerful effect not only on the energy sector, but also on the economy / sustainable business development, and the reduction of CO2 emissions / climate change prevention.
“We hope that our experience with the launch of guarantee instruments – the Loan Guarantee Fund for energy efficiency in enterprises – will be useful for increasing assistance to the real sector of the economy for the implementation of integrated solutions,” said Mr. Porovsky.
The full video of the event is available here: https://youtu.be/KpJzlcpasmc