New Rules to Boost Competition in Renewable Energy
At the end of April, the Parliament registered Draft Law No. 13219 on amendments to certain laws of Ukraine on improving competitive conditions for producing electricity from alternative energy sources (the "Draft Law”).
The authors of the Draft Law note the low interest of investors based on the results of the pilot auctions held in 2024 and, accordingly, the need to improve the auction support scheme.
Moreover, the results of the auctions held in 2025 indicate the same thing.
However, the Draft Law contains amendments that go beyond the auctions. So, as always, you should read it carefully. In this publication, we have analysed the key amendments offered by the authors of the Draft Law for you.
Changes to the auction scheme of support for renewable energy producers
The Draft Law provides an explicit provision on the possibility of setting additional annual support quotas in the current year (when the auction schedule is already being implemented), given that the legislation already uses the term "additional annual quotas”. However, the mechanism for its establishment is not detailed.
The period during which the auctions are held has been extended. Currently, the period of auctions to support renewable energy sources (the "RES”) is limited as follows: the auctions shall be scheduled from 1 July 2019 until 31 December 2029, but the Draft Law proposes to extend this period to 31 December 2034.
The Draft Law reduces the minimum shares of different energy sources in the annual quota from 10 per cent to 5 per cent for all types of generation. However, for SPPs with storage facilities under certain conditions, the minimum quota share is 10 per cent. The maximum price offer for SPPs with storages is limited to 12 euro cents per 1 kWh (for SPPs without storages, the maximum price is 8 euro cents).
The Draft Law provides for the possibility of using financial security in addition to a bank guarantee, both for participation in the auction and for the performance of the agreement based on the auction results. The financial security is a transfer to a separate current account of the Guaranteed Buyer or an escrow account of the auction participant/winner opened in bank(s) designated by the Guaranteed Buyer.
The amount of the security for participation in the auction remains the same (EUR 5 per 1 kW of capacity), while for the performance of the agreement, it is reduced from EUR 15 to EUR 10 per 1 kW of capacity. When an auction winner requests a 12-month extension for construction and commissioning of the facility, the required security amount under the Draft Law decreases from EUR 30 to EUR 10 per 1 kW of capacity.
The statutory deadlines for the construction and commissioning of new facilities under the Draft Law should also include the connection of the facility to the grid. These deadlines are currently 18 months after execution of the agreement based on auction results for SPPs, and 36 months for other generation. However, for other generation (except for SPPs), extending this period to 42 months is proposed if the relevant agreement is executed during martial law.
The Draft Law proposes to cancel the requirement to provide documents on the right to a land plot/real estate for the construction of electricity facilities within six months from the agreement executed based on the auction results. Under the Draft Law, auction winners shall submit documents on connection (connection agreement or capacity reservation agreement) within 12 months after the conclusion of the agreement. If a reservation agreement is provided, the auction winner shall also provide a connection agreement before the reservation agreement is expired.
The Draft Law allows for a difference of up to 10 per cent between the contractual and actual capacity of the construction facility.
The Draft Law establishes a time and period limit for the obligation of the Guaranteed Buyer to purchase electricity based on the auction results using the market premium mechanism (applicable to any generation). In other words, the incentive mechanism shall apply only between 04:00 and 23:00 hours from 01 April to 31 October and between 06:00 and 21:00 hours from 01 November to 31 March (except for electricity supplied from the storages as part of the generation facility). At the same time, it should also be borne in mind that the Government may additionally define daily time intervals for support generation for a particular auction. The same restriction is proposed to be extended to a generation that has switched from the feed-in tariff to the market premium mechanism. A similar time and period limit is proposed to be applied to the Guaranteed Buyer’s obligation to purchase electricity at the feed-in tariff from SPPs.
Bilateral contracts for difference (when the difference between the indicative market price and the auction price is to be paid by the auction’s winner to the Guaranteed Buyer) have been postponed. This provision shall apply under the Draft Law to auctions held after 31 December 2029.
Guarantees of origin
It is proposed to limit the deadline for cancellation of guarantees of origin to 12 months (instead of 18 months).
To disclose information to consumers about energy sources in the balance of electricity purchased by an electricity supplier and produced at the consumer’s own generating facilities, the Residual Energy Mix shall be used. However, the Draft Law does not define the meaning of this term. The NEURC shall approve the methodology for the Residual Energy Mix calculation, shall calculate and publish it annually.
The Draft Law also clarifies that the NEURC has the right to refuse recognition of foreign guarantees of origin only if there are reasonable doubts about their authenticity, reliability or truthfulness.
Connection
The recently introduced mechanism for connecting electrical installations from any source, including storages, at one point (the "cable pooling” mechanism), is proposed to be limited to installations receiving state support if such connection leads to an increase in the installed capacity of facilities/stages or if the requirements of the Commercial Metering Code are violated.
Also, at the beginning of the year, the scheme in which RES producers supply their own consumption facilities and facilities of related parties was removed from the regulation of the direct line mechanism. The key requirement of this scheme is that the consumption facilities shall be located on the same land plot as the generation facility or adjacent land plots. The draft law proposes further exemption for electricity generation from biomass and biogas. In this case, the exemption from direct line regulation also applies to consumption facilities located on land plots separated from the generation by land plots of related parties and plots with linear constructions (railways, motorways and other roads, pipelines, electronic communication networks, power lines, etc.).
Conclusions
The Draft Law offers tools to increase investor interest in the auction scheme to stimulate RES generation. However, new restrictive safeguards have also been proposed regarding the time limits of support. The Draft Law also further regulates the instrument of guarantees of origin under the auspices of integrating the register of guarantees of origin for Ukraine’s RES electricity with the Energy Community and the European Union registers.
If you would like to discuss the issues raised in this paper in more detail, please contact the SK team.
Information contained in this legal alert is for general informational purposes only, does not constitute legal or other professional advice, and should not be relied upon as a substitute for specific professional advice adapted to the specific circumstances.