Like so much in Ukraine, renewable energy has enormous potential. But while it is developing, it remains held back by insufficient investment.
In its 2014 national action plan, Ukraine set the target of producing 11 percent of its energy from renewable sources by 2020. However, barring a massive influx of investment, it is likely to miss this goal.
Renewables have attracted significant interest, but accounted for just 1.3 percent Ukraine’s energy production in 2016, with another 6.1 percent from large-scale hydroelectric plants.
Oleksiy Orzhel, the head of the Ukrainian Association of Renewable Energy, is optimistic, but conceded that the goal “will be rather tough.”
One issue is that the 11 percent target does not factor in the Russian occupation since 2014 of Crimea and parts of the eastern Donbas, a major setback.
Renewable energy producers benefit from high green tariffs, or so called feed-in tariffs, that make such sources more attractive financially to produce. Currently, state-owned Energorynok purchases renewable energy at green tariff rates, but new legislation liberalizing the market was adopted in April. Orzhel said the changes will not affect green tariff rates, as renewable energy producers will have “a guaranteed buyer that has to buy renewable energy at the feed-in tariffs.”
The tariffs will be in place until 2030, but they will decrease incrementally starting in 2020.
Alina Sviderska, founder of the Clean Energy Lab, said investors are rushing to set up operations to lock in current rates. “The green tariff is until 2030, but every five years it decreases,” she said. “Right now it’s very high, so most companies are trying to build their projects by 2019.”
Solar is hot
Solar projects have attracted attention. “There are a lot of new players on the solar market,” Orzhel said. Most, naturally, are in the country’s sunnier southern oblasts, in particular Kherson, Odesa and Mykolaiv.
The projects tend to be small with less than 10 megawatts of capacity.
“This decentralization is good, because solar isn’t a stable and depends on whether the sun is shining,” Orzhel said.
In 2016, the government floated the idea of turning part of the Chornobyl exclusion zone into a massive, 2-gigawatt solar park. This won interest from Chinese, French and German companies, but so far the project remains stuck by technical challenges and a lack of clarity, since the exclusion zone is managed by three government agencies.
Orzhel said the chief attraction is that high radiation makes the region useful for little else. An electricity transmission grid is in place, but it would require restoration after 30 years of disuse. Finally, creating something positive out of Chornobyl makes for good publicity.
Most recently, the French government commissioned Engie SA — one of France’s largest energy companies — to perform a feasibility study.
There has also been growth in the use of household solar panels.
Currently just 1,300 Ukrainian households have solar panels — compared, for example, with 1.3 million in Germany. But this number will grow as costs drop.
High green tariff rates compel most home solar stations owners to sell energy to the grid, although experts hope this will change as the green tariff rates move closer to market value.
“We hope that people will consume less,” Sviderska said. “It would be nice if people used energy wisely and just sold the leftovers to the grid.”
Hydro energy figures are muddled by the inclusion of large hydro in the 11 percent target.
“All hydro is considered renewable, but because of the ecological issues with large-scale hydro, they don’t get the green feed-in tariff,” Orzhel explained.
While there are small-scale investments, these account for 6 percent of renewable energy production. Small projects in the Carpathian Mountains have attracted interest.
Sviderska noted that there are 1,000 Soviet-era hydro-stations that could be restored. However, “small hydro is more technically challenging,” Sviderska said. “You need to find the right river flow, turbines and so on, and it can take half a year to find technically correct locations, while with solar you just need to talk to locals to get the land.”
Some projects ran into opposition.
“One project was great technically and from a business standpoint, but then the village council didn’t want it,” Sviderska said.
Despite challenges, Sviderska said hydro projects are economically attractive, with some showing a return of up to 40 percent.
Bioenergy, which is derived from organic materials, remains underdeveloped, and accounts for just 3.7 percent of renewable energy. It is primarily used in municipal heating.
But the potential is enormous.
According to a report by the International Renewable Energy Agency, 80 percent of Ukraine’s renewable energy potential is in biomass. Ozhel said most biomass operations are built by agricultural companies, such as a 5-megawatt project in Dnipropetrovsk Oblast operated by Mironovsky Bread Company.
“Other big agro-holdings are looking at biogas, but it is difficult and very resource-dependent,” Orzhel said. “It’s mostly just the owners of these resources who can consider such projects, because if you’re trying to start up without access to materials, you’re really dependent on the company providing you with this resource.”
After rapid growth from 2009 to 2014, the development of new wind power capacity has slowed.
But Andriy Konechenkov, chairman of the Ukrainian Wind Energy Association, says investor sentiment is up.
“In the past year-and-a-half the market has been at a standstill,” Konechenkov said. “But starting last year it livened up again, and we expect to add 70 megawatts of capacity in Kherson, Mykolaiv and Lviv oblasts before the end of this year.”
Wind industry also took a blow with Russia’s occupation of Crimea. But new projects are in the works, including two 100-megawatt projects from Rinat Akhmetov’s DTEK energy company in Zaporizhzhya Oblast.
Several others, including Stary Sambir 2, backed by the European Bank for Reconstruction and Development, will start up this year.
“There are two options,” Orzhel said. “Either we invest in traditional energy generation, or we make plans for renewables, and decide what the balance will be, and what the prices for final consumers will be. That’s because as renewable energy operators, we understand we have to look at it from the consumer’s point of view. For renewables to be competitive, the price has to be rather attractive.”
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