Renewable Energy in Ukraine

STEM Capital develops investment projects in the field of renewable energy

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General overview of the sector

As of early 2022, Ukraine’s energy sector was one of the most powerful in Europe. The installed capacity of power plants (PPs) was 56.1 GW by the end of 2021, and electricity production in 2021 was 155.7 TWh, with 70% of generation coming from low-carbon and renewable sources.

The share of renewable energy production in Ukraine is around 14%. Over the past three years, there has been a significant increase in the installed capacity of renewable energy, from 1.7 GW in 2018 to 8.1 GW in 2022. This was due to the introduction of the “green” tariff in the first quarter of 2019.

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The country has a total of 60.3 million hectares of land:

According to Forbes Ukraine in February 2023, a hectare of land cost $977 on average. For comparison prices in the European Union countries are displayed below:

Ukraine

977$

Poland

15 000$

Germany

35 00$

Netherlands

80 000$

According to the Ministry of Agriculture, over the twenty months of the land market’s operation, 153,659 purchase and sale agreements were concluded for a total area of ​​344,061 hectares. A third of the agreements were concluded after the start of the full-scale war. Due to military operations, demand shifted to the western regions. Investors take into account the security factor, in particular, the distance from the border with the Russian Federation and Belarus and zones of active hostilities

The key reason for the increase in demand for land purchase is the expectation of an increase in value after legal entities will be able to join the land market in 2024..

The low cost of land becomes a significant advantage for the investor, as it affects the payback time of the project. STEM Capital specializes in developing renewable energy projects in safe territories of Western Ukraine, and also owns ready-made plots for construction. We conduct a thorough analysis of the payback of your investment and offer a full range of services for the construction of power plants.

STEM Capital develops projects in the area of renewable energy, please visit the page to review active projects

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Legal environment in Ukraine for renewable energy sources

General Provisions

Renewable energy sources (RES) are regulated by two main laws:

1. The Law of Ukraine “On the Electric Energy Market”.

2. Law of Ukraine “On Alternative Energy Sources”.

Possibilities of selling electricity from RES include:

    1. 1. Sale at the “green” tariff of the SE “Guaranteed buyer”.

2. Sale at the auction price of SE “Guaranteed Buyer”.
3. Sale in all segments of the electricity market.

“Green” tariff:

  • – The old scheme for supporting the development of RES.
  • – It is set by the regulator (NKREKP) depending on the technology and capacity of the equipment.
  • – Linked to the UAH/EUR exchange rate and recalculated every quarter.
  • – It is valid until the end of 2029, if there is a previous agreement with SE “Guaranteed Buyer”.

Auctions:

  • – Implemented since 2019.
  • – Limit prices: 9 euro cents (until 2024), 8 euro cents (after 2025).
  • – The state determines annual support quotas in MW for each type of RES.
  • – Auction participants compete for state support for 20 years.
  • – One participant can win up to 80% of the annual quota.

Opportunities

The country is attractive for investment with favorable conditions for land leases, a large territory, a preferential tariff and a target strategy on the way to 25% clean energy by 2035.

In the field of export development, from December 14, 2023, the Ukrainian system operator received full membership in the European network of electricity transmission system operators ENTSO-E. This will contribute to increasing the flexibility and reliability of the Ukrainian network and expanding cooperation with EU countries. ENTSO-E has already decided to increase the capacity for electricity imports from 1.2 GW to 1.7 GW from December 1, with an increase to 6 GW planned by 2032.

Since most of STEM SOLAR’s projects are located in the west of Ukraine, in particular in the Ivano-Frankivsk region, we have created a map showing the distances from the Ivano-Frankivsk region to neighboring countries in Europe.

It is worth noting that the distances to the capitals of Poland and Hungary are shorter than to the capital of Ukraine – Kyiv. This geographical position of the region provides an opportunity to effectively export electricity to the European Union at a favorable price.

War - risks and new opportunities

The need for a stable supply of electricity becomes especially important in conditions of military operations.

Schools, kindergartens, hospitals, large state-owned enterprises and commercial enterprises are actively looking for a stable source of electricity supply, especially during possible outages due to the loss of functioning of power substations.

Renewable energy technologies are becoming a reliable backup source of energy, ensuring independence from the main energy grid and ensuring stability in conditions of possible difficulties.

Regarding the recovery and development of the energy sector, private investment is a key factor.

According to the World Bank, Ukraine has high technical potential for the development of offshore wind energy in the Black Sea, with a theoretical potential of 250 GW.

In addition, the moderate continental climate and the presence of a sufficient number of hours of sunshine contribute to the high efficiency of solar panels, which can be translated into high production capacity of solar power plants.