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Amid Fossil Fuel Troubles, Ukraine Gets Lift from Renewables

Ukraine’s traditional energy sector has been facing a major crisis due to a shortage of current assets. This is the result of the state’s socially oriented tariff policy as cash-strapped utilities are unable to settle mounting bills with Russian gas supplier Gazprom.

As the circle closes, immediate loosening of the tariffs and modernizing the energy infrastructure,  which requires some US$560 million (EUR 420 million), would help tackle problems long-term, but renewable energy has started to come to Ukraine’s rescue.

Rapid Growth

Wind and solar power production in Ukraine surged 125.5 percent during the first four months this year (its alternative energy plants are run privately). In 2012, the installed capacity of solar power plants in Ukraine operating on a feed-in tariff doubled, according to the National Commission for Energy Regulation (NCER).

According to NCER, all solar parks generated 333.6 million kWh of power last year, 11 times more year-over-year. The country’s wind farms produced 257.5 million kWh of electricity in 2012. Small hydropower capacity in 2012 rose by 2.7 MW to 73.5 MW. Hydropower output fell to 171.9 million kWh. In total, 780.7 million kWh of power in Ukraine came from renewable energy sources in 2012, equal to 0.45 percent of the country’s energy mix, according to NCER’s annual report.

Ukraine’s 10 wind power plants’ generation capacity in 2013 is 350 MW, up 50 MW from the beginning of year, said Vitalij Davij, president of Ukraine’s Alternative Energy and Heating Producers Association (UAEHPA). Meanwhile, the installed capacity of its 12 solar plants today is 470 MW, a 100-MW increase from last year, with 70 MW added this year alone.

Favorable Policy

Ironically, while public utilities suffer from low state-regulated tariffs, Ukraine’s alternative energy sector has been enjoying generous feed-in tariffs at US$0.53 (EUR 0.40) per 1 kWh for solar power and US$ 0.27 (EUR 0.20) per 1 kWh for wind power.

“The high green tariff has been the main driving force of the solar and wind capacity hike in Ukraine. It attracts foreign investors who see good business opportunities in Ukraine,” said  Davij.

Ukrainian lawmakers exempted green energy producers from profit tax until 2020 to spur alternative energy growth, said Zarubinskij, a member of the Ukrainian Parliament (Rada) and member of the parliamentary Heating, Energy, Nuclear Energy Policies and Nuclear Safety Committee. “That has boosted the growth significantly. The bigger renewable energy capacity we have, the less Ukraine is dependent on import, especially from Gazprom,” he emphasized.

“Ukraine’s biggest energy problem is the gaping difference between the price that we buy Russian gas and the price we sell it to the consumer. Alternative energy makes us partly less dependent on the gas,” said Zarubinskij.

Growing Fossil Fuel Rift

Ukraine currently pays about US$430 (EUR 322) per thousand cubic meters for Russian gas under a 10-year deal signed in 2009 by a preceding government. The present Kyiv government says the price is exorbitant, but it has so far failed to persuade Russia to bring it down. “Green energy helps us diversify our energy,” Zarubinskij said.

Tension between Ukraine and its main energy supplier has grown in recent years.  However, because of its geographic position, Ukraine does not have many affordable and accessible alternatives, concludes an International Energy Agency report. However, its location also plays a major role in securing Europe’s energy needs: 84 percent of Russian gas supplies to Europe transit through Ukraine via pipelines. 

Bogdan Ivanovich, energy expert from Ukraine’s Energy Program Center “Borisfen Intel,” said that the speedy development of Ukrainian RES should be attributed to three major factors.

“First, to the rising awareness of environmental issues, second, to the concordance of the interests of private business and state and, third, to the favorable green energy legislation in Ukraine,” he said. Ukrainian Renewable Energy Law went into effect in 2009 and additional legislative acts were passed in 2010 and 2011. 

But he disagrees with Zarubinskij on green energy becoming an alternative for traditional energy.

“It’s too early to speak of that. And the capacity is not up there like in most Western countries,” the expert noted.

Renewable Support Coming to a Halt?

But Ukraine’s alternative energy developers may soon see state put the brakes on the rampant growth.

“The tariffs will be decreasing soon. In fact, the process has begun already as the green tariff for solar power has gone down to 36 cents lately,” noted Vitalij Davij. This is not surprising, he said. 

“Following the footsteps of the West, Ukraine first boosts its renewables by helping private entrepreneurs get on their feet and then they will have to be on their own,” Davij said. “For example, 12 years ago, at the dawn of solar power development, Germany’s green tariff was ca US$ 0.67 (EUR 0.50) per 1 kWh.” Now it is only US$ 0.17 (EUR 0.11) per 1 kWh, explained Davij.

Ukraine’s next step in developing its solar sector, he said, will be focusing on building small-scale solar power plants in private housing complexes. “That is the way the old Europe had gone in the past,” he said.

Lead image: Kiev via Shutterstock

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