Memorandum of Understanding on the settlement of problematic issues in the field of renewable energy in Ukraine - June 2020 OR what’s waiting for us after the adoption of the “Law on agreement”?

State authorities of Ukraine and investors/RES producers concluded a Memorandum of compromise in June 2020.

Why is that necessary?

  • The rapid growth of RES facilities over the past year has led to a significant increase in payments to producers as per the “green” tariff. According to the Agreements and Article 65 of the Law of Ukraine "On the electrical energy market", the Guaranteed buyer is obliged to pay timely and fully for the electrical energy under the electrical energy sale and purchase agreements as per the "green" tariff, while the GB must ensure the availability of electrical energy for household consumers, i.e. cannot raise tariffs to the population. Thus, serious contradictions arose regarding possible changes in the legislative framework.
  • Today, the RES Manufacturers create imbalances that go to the expenses of the Guaranteed Buyer.
  • This Memorandum should also ensure the introduction of auctions for the allocation of RES support quotas and the further development of the area in Ukraine on a competitive basis.

Note: Memorandum is NOT an amendment to any Agreement or legal document. The memorandum retains the right to appeal to a court or arbitration to protect its rights and interests.

закон о договоренностях, новые тарифы

Mutual agreements

On the part of the state bodies of Ukraine

  • Until August 1, 2020 - The Law on agreement will be adopted.
  • Since August 2020 - full and timely current payment by the GB to the RES producers for e/e.
  • In the 4th quarter of 2020 - the GB will pay 40% of the debt to the Producers;

quarterly by 15% in 2021 - the GB will pay off 60% of the debt to the Producers.

  • Not later than one month after the Law will enter into force - will determine the procedure for compensation for non-generated e/e.
  • Will propose changes that will allow RES Producers to leave the balancing group of GB and sell electrical energy freely on the market.
  • Not later than one month after the Law will enter into force - will revise the tariff of PJSC NPC Ukrenergo for the service of electrical energy transfer.
  • Not later than one month after the Law will enter into force - will review the price limits for the GB on the "day-ahead" market.
  • Restructuring of the RES producer loans - together with the state-owned banks and the National Bank of Ukraine.
  • Will adopt regulatory legal acts on the introduction, operation and promotion of energy balancing and storage systems.
  • Until the end of 2020 - will approve annual support quotas and hold auctions for the quota distribution.

On the part of the RES Producers

The RES Producers accept the following conditions for restructuring the "green" tariffs:

  • The "green" tariff is reduced without extending the validity of the contracts, i.e. until 2030.
  • For the SPS from 1 MW and more, which were commissioned from July 1, 2015 till December 31, 2019 inclusive - 15%.
  • For the SPS up to 1 MW, which were commissioned from July 1, 2015 till December 31, 2019 inclusive - 10%.
  • For the WPS that were commissioned from July 1, 2015 till December 31, 2019 inclusive, and which consist of wind turbines with a unit installed capacity of 2000 kW or more - by 7.5%.
  • For the SPS and WPS commissioned from January 1, 2020 - by 2.5%.
  • For the SPS and WPS commissioned before July 1, 2015, the limit (maximum) "green" tariff is set as for the SPS over 10 MW commissioned before March 31, 2013 inclusive, reduced by 15%.
  • If the "green" tariffs for the electrical energy facilities, taking into account the above-mentioned restructuring conditions, exceed the limit "green" tariff, the "green" tariffs for such facilities are reduced to the level of the limit "green" tariff.
  • The penalty for all errors in forecasting the production of e/e is in the amount of 50% from January 1, 2021 and 100% is from January 1, 2022 and only if the corresponding forecast errors exceed more than 5% - for SPS and more than 10% - for WPS.
  • The RES producers accept conditions for limiting the deadlines for commissioning new SPS facilities as per the "green" tariff until July 31, 2020.
  • The fact that the construction of the RES facilities that won the auctions for the distribution of the support quotas is completed, is further confirmed by the act on the provision of services for connecting the transmission system or distribution system to the electrical grids of the operator.

General agreements

  • PJSC NPC Ukrenergo and the GB, together with the RES Producers, will analyze and agree on a plan for improving the technology for forecasting weather conditions and forecasting the production of RES e/e. The Ministry of Energy and Environmental Protection (or its legal successor) will study the possibility of financing this project by international financial institutions.
  • The Energy Community Secretariat will assist the state authorities of Ukraine and the RES producers in the implementation of the agreements set out in this memorandum. In case of any disputes in connection with or in the context of the implementation of this Memorandum, the Parties may submit the dispute for a peaceful resolution through mediation with the support of the Center for dispute resolution and negotiations of the Energy Community Secretariat. The initiation of mediation in accordance with this clause does not deprive any RES producer of the right to go to court or arbitration to protect their rights and interests.
  • After the Parties fulfill all the obligations provided for by this Memorandum, the state authorities of Ukraine undertake, within the limits of their competence, to take all necessary measures in order to prevent the adoption by the relevant state authorities of Ukraine of laws and other regulatory legal acts on deterioration of the conditions for carrying out business activity by RES Producers, in particular by introducing additional taxes, fees, fines, reducing the "green" tariff, and so forth.
  • The RES Producers and the state authorities of Ukraine will bear their own expenses associated with the implementation of this Agreement.
  • If the Law on agreement adopted by the Verkhovna Rada of Ukraine will contain provisions that contradict the provisions agreed by the Parties in this Memorandum, this Memorandum loses force, and the agreements specified in it are deemed to be not reached.
  • This Memorandum is public and open to accession by any producers of electrical energy from renewable energy sources and / or associations that unite them, by sending a letter of accession to the Memorandum to the Ministry of Energy and environmental protection of Ukraine (or its legal successor).
  • The terms of this Agreement do not apply to consumers of electrical energy, including energy cooperatives and private households, whose generating installations produce electrical energy from alternative energy sources and for which a "green" tariff is set on the date of signing this Agreement.
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