National Association of Regulatory Utility Commissioners Energy Regulatory Partnership Program with The National Commission for Energy State Regulation of Ukraine Renewable energy sources in Ukraine May 21, 2012 Kiev Alexey Orzhel The National Commission for Energy State Regulation of Ukraine

General Survey Ukraine: Territory is km² (45 th in the world); 7% of water surface; Population is people (28 th in the world); Density is 75,57 persons/km²; Currency: Ukrainian hrivna 2

General information. RES Potential in Ukraine 3

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RES Potential in Ukraine. Conclusion.  Total annual technically achievable energy potential of the main types of RES in Ukraine is equivalent to 81mln tons or 70 bln m3 of natural gas, which is about 40% of annual energy needs of Ukraine, the volume of its use may go up to 50% in The main types of RES and the most efficient ones at the moment and for the nearest future are: - wind energy, - solar energy, - bioenergy, - hydro energy, - geothermal energy. 7

The role of government in providing incentive for alternative energy  Setting transparent rules in the sphere of alternative energy  Reserve of budget funds for that achievement  Providing subsidies and loans  Tax exemption  Providing feed-in tariffs  Organizing quota for generation and consumption of energy produced from alternative sources  Information policy in the field of alternative energy  Branding of equipment and energy, generated from alternative sources  Setting technological standards and certification

The existing National legislation in the field of alternative energy (setting rules)  Law of Ukraine «On alternative sources of energy»  Law of Ukraine«On alternative types of fuel»  Law of Ukraine«On electricity»  Law of Ukraine«On energy saving»  Law of Ukraine«On combined generation of heat and electricity (co-generation) and use of waste energy potential»  Other normative legal documents State bodies of power in the field of alternative energy (setting of rules)  Cabinet of Ministers of Ukraine (CMU)  Ministry of Fuel and Energy of Ukraine (MFE)  National Electricity Regulatory Commission of Ukraine (NERC)  National Agency for Energy Efficiency (NAEE)  State Inspectorate on Power Plant and Network Operation (SIPPNO)

State Energy Strategies and Program (setting long-term goals)  Energy Strategy until 2030  Program of construction of wind power plants ( approved by Decree of CMU of February 3, 1997, No. 137 “On Comprehensive Program for Construction of Wind Power Plants “)  Energy Saving Program ( approved by Decree of CMU of February 5, 1997, No. 148 “On Comprehensive State Energy Saving Program of Ukraine”)  Programs for Support of Development of Small Hydro and Thermal Energy ( approved by Decree of CMU of December 31, 1997, No “On the Program of State Support to Development of Alternative and Renewable Energy Sources and Small Hydro and Thermal Energy”)  National Energy Program ( approved by Decree of SR of Ukraine of May 15, 1996, No. 191/ 96-ВРВР “On National Energy Program of Ukraine until 2010” )

Incentive Mechanisms Existing Today for Development of Alternative Energy  Setting “green” (feed-in) tariff for electricity generated from alternative energy sources  Legal obligation of the WEM to buy the whole volume of electricity generated from alternative energy sources  Formation of the state energy saving fund  Tax and customs benefits  Beneficial crediting  State subsidies Additional factors for development of alternative energy  Possibility to sell under direct agreements (prototype of “green” certificates) with consumers or at the WEM (obligatory purchase)  Obligation energy suppliers to connect generators of electricity from alternative energy sources to networks ( according to Decree of CMU No. 126 of February 19, 2009, on Specifics of Connecting Power Facilities that Generate Electricity Using Alternative Sources to Power Grid ”)

Formation of information space in the field of alternative energy  What are results of development of non-conventional energy?  Ukraine has large potential of renewable resources  Minimal or zero emissions of greenhouse gases to atmosphere  Inexhaustible stock (in most cases)  Growth of energy infrastructure and development of technologies But there are also problems…  High cost of technologies and construction  Constraining factors: planning of energy infrastructure, remoteness from networks, possible legal obstacles on the local level and other  The need of reserves  Technological development

Formation of information space in the field of alternative energy. What is the conclusion? Development of non-conventional energy ensures significant preferences:  Reduction of greenhouse gas emissions - improvement of environment - possibility to sell quotas for greenhouse gas emissions  Development and stability of the energy sector - reduced consumption of fossil resources - reduced import of natural gas - development of technologies  Opportunities for business - new jobs - attractive conditions for investments - formation of the new energy sub-sector

NERC Alternative Energy Regulation The main body that exercises the state regulation in the power sector of Ukraine is NERC Volume of authorities of NERC in the sphere of alternative energy is set by the Law of Ukraine on Electricity, Law of Ukraine on Combined Generation of Heat and Electricity (Co-generation) and Use of Waste Energy Potential and Decree of the President of April 21, 1998, No. 335/98 Issues of the National Electricity Regulatory Commission of Ukraine» On Supreme Rada of Ukraine adopted Law of Ukraine No VI on introducing Amendments in the Law of Ukraine on Electricity with respect to promotion of use of alternative sources of fuel according to which a model of differentiated (feed-in) tariffs for economic entities that generate electricity using alternative energy sources and for each power facility, they are valid until year Concerning implementation of the said Law of Ukraine, NERC Decree of No. 828 introduced changes in the Procedure for setting, reviewing and termination of validity of “green” tariffs for economic entities, approved by Decree of No. 32, brining it into compliance with the adopted Law

NERC Alternative Energy Regulation Main authorities of NERC in the field of alternative energy are:  Approval of the “green” tariff for electricity generated from alternative energy sources  Formation and maintenance of a registry of alternative energy facilities  Annual publication of information related to cost of connecting alternative energy facilities to power networks  Issuance of licenses for carrying out activities related to generation, transmission and supply of electricity, on generation of electricity and heat by means of co-generation units and approval of instructions, conditions and rules separately for each type of licensed activities in accordance with the Law of Ukraine on Electricity  Setting tariffs for electricity and heat generated at co-generation units  Setting rules for connecting co-generation units to power networks

NERC Alternative Energy Regulation The sequence of actions by the generator of electricity from alternative sources if there is a wish to work according to «green» tariff: The main practical conditions of setting «green» tariff:  Availability in ownership or usage of electricity generating equipment that operates on alternative sources of energy (getting license)  Availability of constructed energy generating facility connected to the network (in case of construction of a new facility) - evidence of compliance of the constructed energy facility that generates electricity on the basis of alternative sources of energy to project documents, the requirements of state standards, the construction standards and rules T T o apply to NERC for setting «green» tariff To apply to NERC for the license for electricity generation To become Ukrainian WEM WEM member

NERC Alternative Energy Regulation  Fixed minimal size of the “green” tariff for economic entities is set by means of converting into Euro the size of the “green” tariff calculated according to the Rules of the said Law, as of January 1, 2009 at the official foreign exchange rate of the National Bank of Ukraine as of the said date (Article 17-1, Law of Ukraine on Electricity)  The size of the "green" tariff cannot be less than the fixed minimal size of the “green” tariff, which at each date of setting retail tariffs for consumers is converted into the national currency at the official foreign exchange rate of the National Bank of Ukraine as of such date (Article 17-1 Law of Ukraine on Electricity if: >1, if: 1, =

NERC Alternative Energy Regulation  Decree of NERC of No. 857, the Commission set fixed minimal sizes of the “green” tariff (equivalents in the national currency): Fixed minimal size of the “green” tariff, kop./kWh For electricity generated from wind energy The size of installed capacity under 600 kW The size of installed capacity from 600 kW to 2000 kW The size of installed capacity more than 2000 kW 70,1581,84122,77 For electricity generated from biomass 134,46 For electricity generated from solar energy By ground facilities By units installed on roofs with capacity more than 100 kW By units installed on roofs with capacity under 100 kW 505,09484,05463,00 For electricity generated by small hydro power plants 84,18

NERC Alternative Energy Regulation. Results of operation. By the following applied to NERC and received «green tariff In the register of electricity facilities operating on alternative sources there are enterprises, among them: - 10 facilities using wind energy - 19 facilities using solar energy - 3 facilities using biomass - 2 facilities using waste potential of technological processes - 43 facilities using energy of small rivers - 1 facility using mining gas - 6 facilities using biogass Type of alternative source Number of economic agents- electricity generators * - electricity sector facilities SolarWindHydroBiomass 18(19)*834(88)*2

NERC Alternative Energy Regulation. Results of operation. 20 On output of 2012 actual data from the beginning of the year

NERC Alternative Energy Regulation. Results of operation. 21

NERC Alternative Energy Regulation. Results of operation. 22

NERC Alternative Energy Regulation. Results of operation. 23

NERC Alternative Energy Regulation Problematic issues of the Law of Ukraine “On electricity” related to promotion of alternative energy «Renewable sources of energy that include solar, wind, geothermal, waves and tides energy, hydro energy, biomass, organic waste gas, waste water gas, biogas and secondary energy resources, which include furnace and coking gases, methane gas from coal mines, transformation of waste energy potential of technological processes» (Law of Ukraine «On alternative energy sources») but… «green» tariff, set by the Law on Electricity is applied only to certain categoties of facilities on alternative sources, that is: generators of electricity from wind energy, biomass, solar and small hydro

НКРЭ в регулировании сферы альтернативной энергетики Problematic issues of the Law of Ukraine on electricity related to promotion of alternative energy «In this Law biomass are the products, that consist completely or partially of substances of plant origin, that could be used as fuel for transformation of energy contained in these» (Law of Ukraine «On electricity») «Biomass – biologically renewable substance of organic origin undergoing biological decomposition (agricultural waste (of plant growing and animal breeding), forestry and technologically connected with this spheres of industry and also organic part of industrial and household waste» (Law of Ukraine «On alternative types of fuel») «Alternative energy facilities – energy generation and other equipment generating electricity using alternative sources of energy, the share should be not less than 50% of installed capacity of all sources of energy used at the facility» (Law of Ukraine «On alternative sources of energy»)

НКРЭ в регулировании сферы альтернативной энергетики Problematic issues of the Law of Ukraine “On electricity” related to promotion of alternative energy  For the facilities the construction of which started after January 1, 2012 and put into operation before January 1, 2013 incentive with “green” tariff is applied on condition that the share of raw material, main assets, works and services of Ukrainian origin in the cost of construction of the corresponding facility generating electricity from alternative sources is not less than 15%, for the facilities the construction of which started after January 1, 2012 and put into operation after January 1, not less than 30 %, for the facilities construction of which started after January 1, 2012 and put into operation after January 1, 2014 –not less than 50%  Starting from January at solar facilities the share of materials and raw materials of Ukrainian origin in the cost of solar modules should be not less than 30% At present the order of defining the share of raw materials, other materials, main assets, works and services of Ukrainian origin in the cost of construction of generation facility and its components is developed but not agreed and not approved

NERC Alternative Energy Regulation Problematic issues of the Law of Ukraine “On electricity” related to promotion of alternative energy  In the law substantially modernized facilities, that generate electricity using alternative sources are the facilities the cost of modernization of energy equipment of which is more than 50% of the primary cost of such equipment  Primary cost of equipment - ?  How to define the primary cost of equipment of the facilities built at the time of the USSR (30s of 20 th century)?

NERC Alternative Energy Regulation  In case of using in the structure of fuel part of renewable (alternative) types of fuel Is the “green” tariff set for that part, for the whole volume or it is not set at all? At the moment the order is not covering economic agents that are involved in generation of electricity at facilities using alternative and traditional types of energy at the same time (NERC Statement of # 32 «On the order of setting, revising and cancelling the use of “green” tariff for economic agents»)

29 Thank you for attention