Compensation for electricity restriction to renewables: legal aspects

According to the law, renewable energy producers are entitled to compensation for the limitation of generation. However, getting the promised funds is becoming increasingly difficult: both society and the state are against of it. Adviser of the law firm Hillmont Partners, lawyer, LL.M, Tetiana Mylenka analyzed the situation in the column for Kosatka.Media.

The first restrictions of renewable generation took place in November 2019. Over the past few months, such restrictions have been applied more and more often, since a significant surplus of electricity was added to the existing problems in the power system, caused by a drop in electricity consumption due to the COVID-19 pandemic. However, renewable energy producers do not receive compensation for the limitation of generation, although the right for compensation is expressly provided in article No.68 of the Law “On the Electricity Market”. The cost of electricity not generated by the producer must be reimbursed at FIT established.

Repeated restrictions and the absence of refunds led to the fact that in early April of this year 18 renewable electricity producers did not reduce generation despite the commands of the dispatcher of the national energy company Ukrenergo. The response of NPC Ukrenergo was an appeal to NEURC with the requirement to conduct unscheduled inspections of these renewable energy producers. The realization of the right to receive compensation for the limitation of generation is associated with the legislative uncertainty of the responsible entity and the lack of an established procedure for the implementation of such compensation. Several concepts are currently being considered regarding the possible implementation of a reimbursement mechanism.

One of them was developed by NPC Ukrenergo and provides for the assignment of obligations for reimbursement of funds to Guaranteed Buyer SE through its balancing group. NPC Ukrenergo sent relevant proposals to NEURC. It is proposed to amend a number of regulatory legal acts: Market Rules, Transmission System Code, Code for the Commercial Accounting of Electricity and the Procedure for Purchasing of Electric Energy Generated from Alternative Energy Sources Guaranteed Buyers. It is proposed to supplement the Code for the commercial accounting of electric energy with the Methodology for calculating the volume of electricity not supplied. This mechanism provides that the reimbursement will be carried out by Guaranteed Buyer SE under contracts with the renewables to resolve unbalances. Thus, a renewable energy producer will receive funds only if the cost of compensation for the settlement of unbalances is lower than the cost of compensation for limiting generation.

Another concept provides for the reimbursement of responsibility to NPC Ukrenergo. It is actively discussed among stakeholders. According to this concept, the source of compensation may be a tariff for dispatching services or a tariff for electricity transmission services. Olha Buslavets, acting Minister of Energy and Environmental Protection, noted that the one who restricts should be the responsible – the system operator. It will have to make a refund from his transfer tariff.

When renewables will be compensated for the limitation of generation – this issue remains open, and requires, in addition to expert discussion, political will in making decisions. The key aspects, obviously, is the determination of the responsible entity for the implementation of the compensation and the determination of the source of such compensation.

Tags: The Minystry of Energy and Coal Mining, Ukrenergo, feed-in tariff, ВИЭ, balancing restrictions

Read also

How and who will be affected by the increase in the electricity transmission tariff
How to install a gas meter: FAQ
Switching to gas metering in energy units: how is it going to be?