The launch of a new model of the market blocked the payments of the “green” tariff

Last Tuesday, the Verkhovna Rada Committee on the Fuel and Energy Complex Nuclear Policy and Nuclear Safety held a “farewell” round table on the first assessments of the operation of the new electricity market model. In addition to problems with debts, PSO and price increases on the market (which were previously disclosed, and even earlier), the issue of non-payment on the “green” tariff was announced.

“By June, there was a payments problem. And this problem needs to be solved”, Yevhen Mahlovanyi, a member of the National Energy and Utilities Regulatory Commission, said at the round table, adding that the situation recurs in July. According to him, the debt arose against the backdrop of the fact that “the tariff of NPC Ukrenergo, which provides compensation for renewable generation, is blocked”. The representative of the Regulator noted that the tariff application process will be unblocked on August 1, 2019.

There is a corresponding order of the National Regulatory Commission, in which new tariffs for NPC are adopted at the level of 312.14 UAH per MWh, which is 10% lower than the tariff that was approved before suspension of tariffs on June 7 of the current year –347.43 UAH per MWh. On the day of the launch of the new market, on July 1, the Kyiv District Administrative Court decided to suspend the decisions of the Regulator No.954 and No.955 dated June 7, 2019, which set tariffs for Ukrenergo for electricity transmission and dispatcher control services for the second half of the year. NPC said that the market cannot function in such conditions. Ukrenergo and The National regulatory Commission filed appeals against this court decision.

In general, all generating companies note a sharp boom in debt growth. But the “greens” stand apart. Their special status is enshrined in the law – electricity produced from renewable sources, the state must redeem first and foremost, and fully. Paying for it, of course.

“In the case of the “green” generation, it is not just a failure of payments, it is, in my opinion, already a violation of the law, which guarantees the “greens” a 100% payment for electricity produced during the reporting period”, said Yurii Hnatiuk, Director of SE Energorynok, which includes the enterprise Guaranteed Buyer, which is under these obligations.

The Chairman of the Bioenergy Association of Ukraine (UABio), Georgii Geletukha, told in details about the system of making payments for the reporting period according to the “green” tariff, which was violated in July.

According to him, the payment of the “green” tariff should be carried out once every 10 days (until the 5th, before the 15th and before the 25th of each month). Two payments have already been missed in July (while communicating with the Chairman of the Association).

“Problems are common to all sectors of renewable energy. For July, they have not paid anyone yet”, said Mr. Georgii.

There are 110 MW of (electric) bioenergy projects in Ukraine. So, in 10 days they should produce 26.400 MWh. The tariff for bioenergy is 123.9 €/MWh. To find out the amount of non-payment for 10 days, we multiply these figures (26,400 MWh x 123.9 MWh) and get €3.27 million, explains Mr. Geletukha.

Thus, as of July 25, the debt to biogeneration will already be €9.81 million.

Debt figures for solar generation, respectively, are higher, since the tariff is higher (150 - 163 €/MWh). Players in the solar market also confirm non-payment.

DTEK, for example, notes about “temporary debt for part of the electricity produced in June”, but says that Energorynok makes payments on a weekly basis:

“All market players understood that interruptions in payments could arise because the debts of the state enterprise Energorynok existed for many years in the previous model of the electricity market and were not resolved before the switching. However, SE Energorynok makes weekly payments to renewable energy producers, reducing debt. We see the interest of all parties to solve the situation with payments. We are sure that in the near future it will be settled”, the press service of DTEK informs.

The UDP Renewables company, which also builds solar stations, sees the reason for the debt of the “green” tariff in insufficient preparation for the electricity market reform:

“The entire renewable energy sector has felt the negative effects of market reform and certain turbulence. At present, SE Energorynok has debt to market participants at approximately 60% of the cost of electricity supplied in June. A debt of tens of millions UAH has arisen to the companies of our group”, the company commented.

Also, representatives of the “green” industry are concerned about the constant increase in the cost of electricity for industrial consumers:

“We assumed the possibility of such a scenario and, unfortunately, our fears came true. The reform was crude and untested. It led to a breach of contractual obligations to market participants and to an increase in prices”.

Possible consequences

Speaking about the consequences of such delays in paying the tariff, a number of players in the market note, first of all, the deterioration of the investment climate. UABio notes the possibility of stopping existing projects, which can have serious consequences for the economy and even for the country's environment.

“Investors will stop new projects. Old/working (projects – ed.) will be also stopped without payments. This will lead to the need for greater consumption of imported gas and coal. The dismissed people will go to the labor office... Biogas plants, generally, are still functioning as sewage treatment plants. Accordingly, manure drains will begin to flow into the environment without treatment”, Mr. Geletukha told his vision of the “pessimistic” scenario.

The non-payment crisis will cause indignation from international financial institutions, which are often participants in the implementation of renewable energy projects in the country (the EBRD, the World Bank, the International Finance Corporation).

“Of course, this situation will provoke an avalanche of lawsuits against Energorynok and other institutions responsible for this crisis”, UDP Renewables predicts the negative consequences.

“As a result, we witnessed a “classic” crisis situation, due to which investors consider Ukraine to be an unstable and unpredictable market with weak state institutions”, said Serhiy Evtushenko, Managing Partner of UDP Renewables.

DTEK, as one of the largest players in the “green” energy market in particular, is more optimistic. And notes that the company's plans to reach 1 GW of renewable energy capacities by 2020 will not be shaken due to “temporary” difficulties.

“All parties are interested in the efficient functioning of the market, since this will allow attracting investments for the sustainable development of the renewable energy industry”, the energy holding’s “green division” notes.



Tags: renewable energy, feed-in tariff, electricity market

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