Please find below information on recent legislative initiatives and updates that could be of interest for investors in renewable energy sources and energy projects in Ukraine. In particular, the changes described below impact renewable energy producers that have been awarded state support (RES Producers).

On January 24, 2024, the National Energy and Utilities Regulatory Commission (the Regulator) adopted Resolution No. 178 (the Resolution), which amends Resolution of the Regulator No. 641 dated April 26, 2019 On approval of regulatory acts governing the activities of the guaranteed buyers and the purchase of electricity at the “green tariff”—a feed-in tariff (FIT) scheme for electricity generated from renewable energy sources was introduced in Ukraine in 2009 (Green Tariff)—and at the auction price, bringing it in line with Law of Ukraine On Amendments to Certain Laws of Ukraine on Restoration and Green Transformation of the Energy System of Ukraine of June 30, 2023 No. 3220-IX (the Law).

The Resolution took effect on January 26, 2024.

New requirements for entering into PPAs

In order to sell electricity under the Green Tariff, RES Producers must enter into (i) a power purchase agreement (the PPA) with the guaranteed buyer (GB), on the basis of a new standard agreement approved by the Regulator, and (ii) a new standard agreement approved by the Regulator on participation in the GB’s balancing group (the BGA), as required by Law. Thus, all current RES Producers had until January 26, 2024 to sign amendments to their PPAs with the GB and enter into agreements on participation in the BGAs; otherwise, the GB’s obligations to acquire the produced electricity were suspended. At 23:59 on January 25, 2024, the GB entered into amendments to the power purchase agreements with 716 RES Producers and signed 712 of them. As of February 5, 2024, more than 100 RES Producers have yet to sign the amendment—the reason for this being that they have not yet complied (in the GB’s view) with the requirements for entering into PPAs and receiving payments under the Resolution. Thus, there is a legal gap related to whether and how the electricity produced in the absence of the required executed agreements can be paid.

The Resolution lays down new requirements for RES Producers entering into PPAs and receiving payments under the Green Tariff. For example, they must:

• Enter into an agreement with the transmission system operator on the service of reducing the load (if the capacity of any generation installation equals or exceeds 1 MW)—and apparently not all current RES producers entered into the respective agreements or equipped generation installations with the required telemetric installations; this will delay execution of the PPAs and BGAs for those installations
• Provide documents confirming the commissioning of the generation installations, including the passport for the distribution point (required from prosumers)
• Provide a copy of the certificate from the bank confirming the opening of a bank account
• Provide documents on the chosen tax system and VAT registration status

The GB must provide signed counterparts of the PPA and BGA within 10 business days following receipt of the application and all accompanying documents from the RES Producer.

New requirements for entering into agreements for the FIP

The procedure for the GB to acquire electricity from RES Producers expressly covers the feed-in premium mechanism (FIP) for both producers under the Green Tariff and auction winners. The procedure for entering into agreements on rendering services under the FIP is expected to be established by a respective procedure approved by the Cabinet of Ministers of Ukraine.

RES Producers under the Green Tariff that exclude their generation from the GB balancing group in order to enter into the FIP agreements must provide the following:

• The application
• A copy of the Regulator’s confirmation of awarding the Green Tariff and premium for it, if any
• A list of generation installations to be covered by the FIP
• Certain other documents if the PPA was terminated earlier by the RES Producer

The GB must provide signed counterparts of the FIP agreement within five business days following receipt of the application and all accompanying documents, and the RES Producer has three business days to sign the counterparts.

Calculating mechanism and settlements under the FIP

The Resolution envisages the mechanism for settlements under the FIP. The value of services is determined by the GB according to a rather complex formula on the basis of the following variables:

• The volume of electricity supplied by the RES Producer’s generating units under the FIP
• The volume of electricity sold and purchased under bilateral agreements, on the day-ahead market and on the intraday market
• The weighted average value of price indices under bilateral agreements concluded in accordance with paragraphs 6 and 61 of part two of Article 66 of the Law, except for agreements concluded to fulfill special obligations to ensure public interests in the functioning of the electricity market and electricity purchase and sale agreements concluded as a result of an electronic auction in the form of a special session for the base load period for the billing month and the month preceding
• The weighted average of the price indices on the day-ahead market for the base load period for the billing month and the month preceding
• The weighted average price on the day-ahead market for the relevant settlement hour of the billing month and the month preceding
• The amount of the auction price determined by the results of the auction for allocation of the support quota or Green Tariff and the premium for it at that generating unit.

For the purpose of calculating the FIP, if the auction price is fixed in EUR or at the Green Tariff, the GB uses the average official monthly exchange rate of the National Bank of Ukraine.

For each billing month, the GB must calculate the feed-in premium for each RES Producer and—no later than by the fifth day of the month following delivery of the services—must provide the RES Producer with the act of acceptance of the service for signing by the RES Producer as per established procedure. Payments for services rendered in each billing month must be made in full no later than the 25th day of the month following delivery of the service.

Procedures for being excluded or reincluded into the GB’s balancing group

The Resolution envisages a detailed procedure for excluding generation installations from the GB’s balancing group—either via suspension of the PPA or its termination. In this case, the RES Producer must file the respective application for suspension (termination) from the first day of the following month no later than 20 days before the first day of the month of the suspension (termination). The suspension or termination must be documented by the respective amendment to the PPA and does not affect the status of the awarded Green Tariff.

RES Producers that excluded their generation installations from the GB’s balancing group are entitled to include them in the GB’s balancing group by filing an application on resumption of the PPA, or by entering into a new one from the first day of the applicable month. This filing must be done at least 60 days before such date.

Liability for imbalances from September 8, 2022

The Law establishes that its provisions retroactively regulate the compensation to be made by RES Producers for imbalances arisen from September 8, 2022. The Regulation sets forth the formulas and calculations as per the Law as well as an envisaged timeline for calculation by the GB and other involved parties of the value of imbalances by April 1, 2024. Thus, we can expect that RES Producers will receive invoices for the respective imbalances before that time.

This information does not constitute legal advice and is merely the opinion of the author.