Excise tax for renewable energy sources, introduction of REMIT and regulation of storages: what decisions the power industry expects from the Verkhovna Rada

In September, the work of the sixth session of the Verkhovna Rada of Ukraine began. A number of energy initiatives await its solutions. And these decisions are important for both producers and consumers.
What does the energy industry expect from the Verkhovna Rada of Ukraine this fall? Nataliia Hutarevych, member of the Board of the APU Committee on Energy, Oil and Gas, senior lawyer Sayenko Kharenko told.

Excise Tax on Green Energy and CO2 Tax

Draft Law No.5600 provided on the abolition of excise tax exemptions for green energy. There were numerous appeals and arguments against the abolition of this privilege, including the appeal of the APU. The Committee on Finance, Tax and Customs Policy took into account the proposal and excluded the provisions on the abolition of the privilege (this is noted in the opinion of 20.09.2021 to the draft law for the second reading) from the draft law. 

Besides, the draft law proposes to set the tax rate on carbon dioxide (CO2) emissions at the level of UAH 30 per 1 ton (the current rate according to the Tax Code is UAH 10.00 per 1 ton).

The Committee recommended adopting draft law No.5600 in the second reading and as a whole as the Law of Ukraine.

Draft law status: awaiting second reading.

REMIT implementation

For the implementation of the Regulation of the European Parliament and of the Council (EU) No.1227/2011 of October 25, 2011, on virtue and transparency in the wholesale energy market (or REMIT), draft laws No.4503, 4503-1, 4503-r, 5322, 5322- 1. They are needed to fulfil Ukraine's international obligations and to deepen the transparency and integrity of Ukraine's energy markets following European standards.

The implementation of REMIT in Ukraine provides for:

• Registration of subjects of the natural gas market in the electricity market and their inclusion in the register of participants in the wholesale energy market.
• Defining the requirements for ensuring integrity and transparency in the wholesale energy market.
• Monitoring of market behaviour to detect and prevent abuses in the wholesale energy market.
• Identification of actions constituting manipulation or attempted manipulation in the wholesale energy market.
• Determination of requirements for the protection, provision, disclosure and disclosure of information in the wholesale energy market and the establishment of rules for handling insider information.
• Use of market surveillance systems, incl. actions of participants in the wholesale energy market.
• Investigation of violations/abuses in the wholesale energy market, incl. with the involvement of the Antimonopoly Committee of Ukraine and the National Commission for Securities and Stock Market.
• Responsibility for abuse in the wholesale energy market.

NEURC notes that it is preparing for the implementation of the REMIT Regulation, and by the end of the year the corresponding plans should be made public: together with the Ministry of Energy, a roadmap for the implementation of REMIT has already been developed, the Verkhovna Rada of Ukraine has registered draft law No.5322, which is most consistent with the requirements of the EU Agency for Energy Regulators Cooperation (ACER).

Draft law status: included in the agenda, pending consideration by the Verkhovna Rada.

Legislative regulation of the energy storage

Energy storage urgently requires regulation of their use in the electricity market. They became the subject of several draft laws (Nos.5436, 5436-1, 5436-2, 5436-r, the draft law of the Ministry of Energy "On Amendments to Certain Laws of Ukraine Concerning the Development of Energy Storage Systems", which was promulgated to provide comments and suggestions).

The Verkhovna Rada Committee on Energy, Housing and Utility Services considered the registered draft laws and decided to support draft law No.5436-d.

It provides for the following.

1. Energy storage activities are licensed.

2. A license is not required:

- for a manufacturer (including renewable energy sources), if, when using storages, the actual capacity with which electricity is supplied does not exceed the installed capacity in accordance with the production license;
- to the consumer, if he does not supply the previously accumulated energy to the UPS of Ukraine or to the network of other business entities.

The transmission system operator (TSO) will determine the optimal (previous) places (points) for connection of storages, taking into account the existing system restrictions and optimization of electrical energy losses, however, it does not limit the rights of the owners of storages to apply for connection at any other point.

TSO is granted the right to own, purchase, manage and operate storages in cases where they are fully integrated elements of the network and the regulator has given its consent to this, or if all the following conditions are met: other market participants;

- there are no storages in the market, sufficient for balancing the UES, belonging to other market participants;
- storages are necessary for the TSO to fulfill obligations for the efficient, reliable and safe operation of the transmission system, and they are not used for the purchase/sale of electricity in the electricity market, the provision of balancing services, ancillary services;
- procurement of storages is carried out in accordance with the rules of public procurement;
- the regulator confirmed the need to grant the TSO the right to own, purchase, manage and operate storages (which must be reported to the Secretariat of the Energy Community), checked and approved the relevant tender documents.

3. The right to own, operate and operate storages under the conditions described above is also granted to the operators of the distribution system for the efficient, reliable and safe operation of the distribution system.

4. Storage operator has the right to provide balancing services and additional services.

5. If the facility produces electrical energy from renewable energy sources, has storrages in its composition, then the volume of electricity not supplied by the OSP command, which must be paid for at the FIT, is reduced by the volume of electrical energy withdrawal from storages.

Draft law status: pending consideration by the Verkhovna Rada.

Innovations in the energy efficiency

Draft law No.4507 on energy efficiency, adopted in the first reading on March 4, 2021, requires a revision of the settlement framework and approximation to European standards.

On September 23, 2021, the Ministry of Energy reported that the Verkhovna Rada Committee on Energy and Housing and Utility Services supported the final version of the draft Law of Ukraine "On Energy Efficiency" (reg. No.4507) for adoption in the second reading.

The draft law prepared by the ministry for the second reading defines:

- specifics of setting National goals, formation and implementation of national action plans on energy efficiency;

- peculiarities of taking into account energy efficiency criteria when carrying out public procurement;

 - setting an annual target for energy efficiency in final energy consumption and measures to achieve it;

- fundamentals of energy audit and energy management;

- creation of the National Energy Efficiency Monitoring System;

- features of the implementation of intelligent accounting systems;

- stimulation of energy efficiency in the field of transmission and distribution of electrical energy, transportation and distribution of natural gas, in the field of heat supply, as well as the possibility of creating funds to stimulate energy efficiency;

- basic principles of energy service implementation.

Draft law status: a comparative table for the second reading has been provided, is awaiting consideration.