Ukraine is experiencing a real boom in renewable energy. The number of green facilities in the country is growing rapidly, especially solar and wind power plants. This is not just a global environmental trend, but also a local peculiarity – Ukraine boasts the highest green energy tariff in Europe. It allows you to return your investment and start making big ducks in 3-4 years.
Everyone from small consumers to oligarchs is trying to cash in. Local folk are installing solar panels on the roofs of their shaky houses, multimillionaires are building huge energy parks. Investment in renewable energy is already in the billions. Equipment manufacturers, including the Chinese, are seeking to maximize profits.
At the end of 2019, the Norwegian company NBT AS, which has already implemented several large-scale energy projects in Ukraine, signed several contracts with China Electric Power Equipment and Technology Co., Ltd. (CET), a subsidiary of the State Grid Corporation of China in Beijing. The partners will design, purchase equipment and build two wind farms in the Zaporizhia region in southeastern Ukraine. Zofia II and Zofia III with a 300 MW and 450 MW output will become the largest terrestrial wind farm in Europe.
Chinese banks, the Industrial Commercial Bank of China (ICBC), Export-Import Bank of China (Exim Bank of China) and China Construction Bank (CCB), will finance the project. The loan amount will be EUR 500 million.
The Norwegian company has noted that investments in the Zofia Wind Farm will total over EURO 1 billion, which is approximately 1% of Ukraine’s current GDP.
During the construction phase, the project will guarantee more than 500 jobs, and upon completion it will be able to provide energy to about 340,000 homes, and jobs to 150-200 people.
Jia Zhichiang, Chairman of CET, stated: “Since Ukraine is in the Belt and Road Initiative, we are delighted that we can enter Ukraine with this large construction project. With our strengths in international EPC projects, project management, technology, building world class transmission lines including ultra-high voltage transmission lines, we will bring unparalleled excellence to successfully complete the Zophia wind farms. We are thrilled to enter the Ukrainian market and hope to conduct more business such as helping the Government of Ukraine upgrade its grid infrastructure and building more top-notch power projects.”
The reason for such increased foreign investor interest in the Ukrainian renewable energy market is clear. In 2009, the country introduced the so-called “green” tariff. This is a government-guaranteed subsidy for electricity from renewable energy sources. The tariff is pegged to the euro and is several times higher than the tariffs applicable for traditional energy sources. In Ukraine, these are mainly NPPs, TPPs and hydro power plants. This tariff is also the highest in Europe – for example, three times that in Germany. The green tariff will be valid until 2030. The state is obliged to fully buy out all of this “alternative” energy.
In 2018, the existing legislation was amended. Starting in 2020, green tariffs for 5 MW solar and 1 MW wind farms will be auctioned. Because of this, those who wish to gain a foothold in the market are in a hurry.
Touted as an incentive for the development of alternative energy sources, the green tariff has always been used by different groups of influence – ranging from Andriy Klyuyev, a close ally of former President Viktor Yaukovych, who in 2009 lobbied the Ukrainian law on Alternative Energy Sources, to Ukrainian oligarch Rinat Akhmetov, whose companies actively used tax preferences – to bring in equipment for SEP and wind farms into the country (see our story).
Despite the government’s reasonable plans to bring the percentage of renewable energy in the country’s energy balance to 70% by 2050, the high cost of green energy is already having a detrimental effect on Ukraine’s energy system and energy market, and is overburdening the country’s budget. Generating only 3% of electricity in Ukraine, in January-September 2019 alternative energy companies received 9% of the market’s income, gradually displacing the cheaper product of their NPP competitors and provoking an increase in electricity prices for consumers.
In October 2019, during his press marathon, Ukrainian President Volodymyr Zelensky declared the need to reduce the “green” tariff. In response, the big “players” are proposing a gradual reduction, but only for newly built facilities.
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