The delay in adopting a law to reduce FIT will cost the Ukrainian almost UAH 1 billion – Buslavets

Acting Energy Minister Olha Buslavets emphasized that a further delay in the consideration of the government draft law No.3658 “On Improving the Conditions for Supporting the Production of Electric Energy from Alternative Energy Sources” will lead to higher FIT that continue to operate, and debts to renewable energy producers will grow.

After a month delay with the adoption of the draft law, consumers will already be forced to overpay more than UAH 900 million at an overestimated FIT. This was reported by the press service.

TheMministry noted that delaying the consideration of the draft law carries a number of other risks.

The terms of the Memorandum provide for the adoption of the law until August 1 of the current year. Otherwise, the compromises reached will lose their force. As a result, the rapid growth of debt to renewable energy producers will continue, which will lead to bankruptcy of enterprises and mass lawsuits against Guaranteed Buyer and the state as a whole. This will hit the image of Ukraine and lead to a loss of support for investors and international financial institutions. There will be a need for new negotiations with market participants without any guarantee of their successful completion, since investor confidence will be lost.

An updated electricity transmission tariff of 24 kopecks/kWh, which will come into force in August 2020, already takes into account the provisions of government draft law No.3658 to reduce FIT, as well as attracting credit facilities from international financial institutions on favorable terms to pay off the existing debt of NPC Ukrenergo. If the draft law is not adopted on time, favorable EBRD lending terms will be unavailable, and the transfer tariff should reasonably more than double.

“Today, our cooperation with the EBRD and other international financial institutions provides favorable conditions for granting loans – at 1-2%, with the possibility of deferred payment per year. This is about UAH 9 billion, which can balance the deficit of funds in the market without raising tariffs. If the law is not passed, we can completely forget about these loans. In this case, the transmission tariff will increase, and this will negatively affect the cost of electricity for industry, the housing sector, and therefore the cost of goods and services for the population,” explained the head of the Ministry.

Now consideration of the draft law, which the President of Ukraine has identified as urgent, is being delayed, in particular, due to the large number of amendments from people's deputies.

“The number of amendments to the draft law No.3658 submitted by people's deputies is measured in hundreds. Most will unbalance the document and level out the agreements reached and the professional achievements of the Ministry. This applies both to initiatives to further reduce FIT in excess of the indicators specified in the Memorandum, as well as proposals to reduce the tariff or extend its validity by another 2 years. Such a prolongation of FIT increases the total overpayment of consumers by about €1 billion for each additional year,” said the acting Minister.

Recall that the provisions of government draft law No.3658, which the President of Ukraine recognized as urgent, implements compromise agreements with investors in the renewable energy industry in accordance with the Memorandum of Understanding, which was concluded by the Government as a result of lengthy and complex negotiations.

The adoption of the draft law proposed by the Ministry of Energy will reduce FIT and, therefore, reduce the amount of payments to the amount of about UAH 6.4 billion annually, strengthen responsibility for the created imbalances, improve the auction support model, making it more flexible, adaptive and efficient.

According to the agreements reached by the Ministry of Energy, the draft law does not provide for an extension of the validity period of FIT, as a result it will reduce the total amount of payments by more than €2 billion. 

Tags: The Cabinet of Ministers, contracts, renewable energy, tariffs, solar energy, wind energy, court, legislation, feed-in tariff, electricity market, foreign affairs, Зеленский, Guaranteed buyer, debt, ВИЭ, The Verkhovna Rada, law, negotiations, investors, price, agreement, volumes, auctions, power system balance, infrastructure, electricity transmission, balancing restrictions, generation, crisis, Buslavets, The Ministry of Energy, economy, market, power grid, electricity consumption, supplier

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