Green tariff for solar energy: practical legal aspects and legislative barriers ROUND TABLE «UKRAINIAN SOLAR ENERGY MARKET: REMOVING BARRIERS FOR GROWTH» March 29, 2011

Content Legislative incentives for development of solar energy in Ukraine Rates of “green” tariff for solar energy Rates change/decrease in the future Ukrainian component for “green” tariff projects Procedure and main requirements/conditions for getting “green” tariff Main legislative barriers and possible ways for their solution

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Incentives for development of solar energy in Ukraine Tax incentives under the Tax Code NEW! exemption of profit derived from sales of electricity produced from solar energy from CPT Possibility to use JI under Kyoto Protocol for solar power projects Feed-in tariff scheme or “green” tariff (GT)

Actual statistics In the middle of 2009 the core legislation on the current feed-in tariff scheme (GT) was enacted GT is currently approved for 6 companies operating solar power plants (SPPs) –5 companies operate SPPs on ground surface –1 company operates SPP on the roof of a building with power capacity of up to 100 kW Even though the legislation establishes quite good minimal rates for “green” tariff for SPPs in comparison with other RES power plants !?

Minimal fixed GT rates Type of energyPower station capacity and other factors influencing the rate of GT Rate of the tariff (€ / kW) Wind less 600 kW0, kW0,0754 more 2000 kW0,1131 Solar energy Power plants on ground surface0,4653 Power plants on the roofs of buildings with power capacity exceeding 100 kW 0,4459 Power plants on the roofs of buildings with power capacity of up to 100 kW 0,4265 Biomass Should be at least partially of plant origin to be eligible 0,1239 Small hydropower plants not more than kW0,0775

Change/Decrease of GT in the future GT is established until 2030 (grounds for termination are also established by a Decree of NERC) Its rates are not tied to retail rates or average rates for producers of electricity They are fixed as of January 1, 2009 in EUR and linked to EUR/UAH exchange rate (if more than ) The State guarantees GT application to commissioned SPPs Decrease of the current rates of “green” tariff for SPPs commissioned (significantly upgraded) after: –2014 – by 10% –2019 – by 20% –2024 – by 30%

Purchase of electricity at GT rates Wholesale Electricity Market of Ukraine (WEM) represented by State Enterprise “Energorynok” –Principle of purchase of all electricity produced under “green” tariff by SPPs Direct sales of electricity to consumers –Legislative limitations –Absence of economic and administrative incentives

Ukrainian component requirement The share of the Ukrainian component (materials, works, services) in the total value of SPP construction shall be at least –since 2012– 30 % –since 2014– 50 % For SPPs the Ukrainian component (materials) in production of solar modules must be at least 30 % since 2012 (additional requirement for SPPs) It is unclear whether the requirement is deemed to be fulfilled on the commissioning date or date of GT approval The procedure on determination of the share of the Ukrainian component is still absent

Approval of GT Rates of GT shall be approved by NERC for each producer after filling the application and the required package of documents regarding the constructed and commissioned SPP Term for passing a decision by NERC: – Consideration of documents package– 30 calendar days – Approval by NERC’s meeting– 15 calendar days Documentation of “green” tariff (stipulated by the respective NERC’s Decree) GOOD NEWS! Approval fee is absent

Conditions for Implementation of GT Projects Set up a company Electricity producer license Connection to the grid (compensation of expenses related to grid connection) Participation in WEM and signing WEM Agreement Conclusion of agreement for sales of electricity with State Enterprise “Energorynok” Execution of documentation for power plants construction (documents on the use of land plots, project documentation, commissioning etc.)

Legislative barriers Main legislative barriers for development of solar power projects under the GT –state guarantee –Ukrainian component requirement –connection to the grid

State guarantee Effective legislation State guarantees that the current feed-in tariff scheme will apply to SPPs only from the date of their commissioning Proposed changes Guarantee should apply either from 1.the date of the receipt of respective permissions for construction or commissioning whichever earlier occurs, or 2.the date of receiving approval from an authorized state agency

Ukrainian component Effective legislation 1. Ukrainian component (materials, equipment, works, services) in the construction of SPPs: since 2012 – 30% since 2014 – 50% 2. Ukrainian component in the value of materials for production of solar modules since % 3. The procedure on determination of the Ukrainian component is still absent Proposed changes Possible solutions: 1.Repeal the requirements 2. Decrease the shares or postpone dates of the entry into force of the requirements 3. Stipulate that the requirements are fulfilled on the date of commissioning rather than on the date of GT approval 4. Adopt the procedure on the calculation of the Ukrainian component

Connection to the grid Effective legislation 1.The unified procedure on connection to the grid is absent 2. The procedure on compensation of expenses for construction (upgrading) networks and other objects to be transferred to transmission and distribution grid operators is absent Suggested changes 1. Elaborate and adopt the procedure on connection to the grid and procedure on compensation of expenses 2. Establish for SPPs and other RES power plants the maximum reasonable term for compensation by law (according to the drafts of the procedure it is up to 25 years)

Thank you for your attention!

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