There are few topics hotter from an environmental, investment and legal point of view than renewable energy in Ukraine.
That’s why the Kyiv Post and Integrites law firm in Kyiv are hosting a webinar on March 17 at 4 p.m. called “Renewable Energy: The Future of Ukraine.” The hour-long discussion will be live-streamed on the Kyiv Post website and Facebook page.
Ukraine has joined many nations in the world — including the European Union and the United States — pledging to fight climate change by going carbon-neutral to eliminate net greenhouse gas emissions by 2050. China, the world’s biggest polluter, plans to do so by 2060.
About 51 billion tons of greenhouse gases are emitted into the atmosphere yearly. If not stopped, global temperatures could rise 1 to 3 degrees Celsius this century, killing at least as many people yearly as the COVID-19 pandemic and causing severe economic damage, according to scientists.
Renewable energy sources, primarily wind and solar, are seen as the best, if not the only, way for the world to slow global warming.
But Ukraine can’t seem to get past its current financial crisis in the sector in which the government still owes renewable energy investors more than $600 million, raising questions about the sustainability of the nation’s commitment.
Future investment in the sector hinges on a successful solution to the problem. With the costs of renewable energy plummeting each year, Ukraine could miss out on the global boom if it scares off investors.
“By 2050 we will have to be green,” said Oleksiy Feliv, managing partner of Integrities law firm in Kyiv. “This is the future of the energy structure.”
Is your project green?
Ukraine, he said, has the potential to have not only enough renewable energy for domestic needs but also for export to the EU, which plans to raise taxes on carbon-emitting sources of electricity.
Moreover, investment funds, including pension fund managers, and international financial organizations are rapidly shifting their priorities and portfolios to investment in renewable energy.
Some of these same investors are turning away from coal and nuclear power, although conventional sources of energy are still expected to be needed in 2050.
Renewable energy still suffers from reliability questions – how to generate energy when the sun doesn’t shine or the wind doesn’t blow. Some of the current renewable electricity generated is not needed, and technological breakthroughs will have to be made to improve the storage capacity of wind and solar for when the energy is needed to power the electrical grids.
But if Ukraine doesn’t solve its current crisis over feed-in tariffs, the future could be bleak. “In the next 10 years, nobody will invest in the sector,” Feliv said, describing the stakes.
After investors sank billions of dollars into the renewable energy sector on the promise of guaranteed high prices, or feed-in tariffs, Ukraine’s government reneged on the financial commitments, calling them unaffordable.
Then, on June 10, 2020, the government signed a memorandum of agreement with renewable energy producers agreeing on tariff cuts in exchange for paying off the government’s debts to the producers.
Felix said the government has stayed current on payments since August. But he said it hasn’t cleared a backlog of 2020 debts, paying off only about $72 million out of $682 million to the industry, essentially reneging on its own compromise agreement.
Most investors have, thus far, held off on legal action, Feliv said, since litigation can take years to resolve and is “not good for anybody. Investors are looking for a positive outcome.”
Arbitration, if launched, could put Ukraine on investors’ blacklists for renewable energy. A number of investors have sent “trigger letters” – a preliminary step warning that legal action could come.
Maris Kunickis, CEO of DTEK Renewables, which has invested nearly $1.5 billion in the sector since 2008, agreed on the dangers ahead.
In remarks to a recent “Ukraine 30” conference on the future of green energy, Kunickis said that “irregular payments, frequent changes in the state’s position and other destabilizing factors have led to the suspension of interest in Ukraine by external investors.”
The solution, Kunickis said, is for Ukraine “to develop a long-term solution for the future development of the energy sector, namely green energy. As the economy continues to demonstrate, green energy can be the backbone for economic development. In 2020, the share of the renewable energy sector in the European Union’s power generation mix surpassed all other energy sources for the first time in history. In Ukraine, the market share of green electricity generation, including hydro, amounts to 14%. However, the country has a significant potential to increase this figure.”
DTEK, the largest private energy company in Ukraine, is fully committing to the green future, Kunickis told a recent “Ukraine 30” conference on renewable energy. “For our business, decarbonization is not a political slogan or a mere trend, but an essential condition for business development. That is why in our corporate strategy we are setting an ambitious goal for ourselves, which is to decarbonize our electricity production by 2040,” he said.
Big investment needs
Billions of dollars in private-sector investment will be needed to make the green future reality in Ukraine.
The most recent winter, Feliv said, showed the futility of Ukraine counting on aging nuclear power plants and thermal power plants as the backbones of its energy supply.
That’s why, he said, “respecting commitments on feed-in tariffs towards several dozen foreign investors and a dozen or two international financial institutions that co-financed renewable energy projects is the best way forward to engage them in financing of any new projects – either renewable energy or energy efficiency or hydrogen or storage or whatever.”
Top experts to speak
The Kyiv Post Legal Talk on March 17 at 4 p.m. will feature:
- Yuriy Vitrenko, acting energy minister and a former Naftogaz top executive, who outlined his views on the sector in an extensive interview with the Kyiv Post published on Jan. 11, 2021;
- Inna Sovsun, a member of parliament on the energy committee with the 20-member Holos party;
- Maris Kunickis, CEO of DTEK Renewables. During a recent Ukraine 30 forum on renewable energy, Kunickis outlined his views about the state of the sector;
- Magnus Johansen, vice president for NBT Ukraine, which views wind conditions in Ukraine as “perfect for clean energy generation”; and
- Adrien Fouchet, country manager of EuroCape.
