Active development of solar energy in Ukraine

In recent years, investors in the whole world have begun to show a genuine interest in alternative energy, especially in the field of solar energy, and the industry itself has started to develop at an unprecedented pace. And Ukraine is not an exception. What is this phenomenon due to?

At the moment, alternative energy is a rapidly expanding industry worldwide. According to the research firm Ethical Markets Media’s estimates, the total amount of private investments, directed to “green” economy at the beginning of May 2012 composed $ 3.3 trillion and $ 0.9 trillion of them were invested in 2011. According to the forecasts made by Bloomberg New Energy Finance, by 2020 50% of output power in the domain of alternative energy will relate to solar energy. The International Energy Agency predicts that by 2050 solar energy will be able to provide about 20-25% of electricity worldwide. According to the Suntech Power Holdings’s forecasts by 2015 the cost of solar energy will be comparable to the cost of conventional energy. Active development of alternative energy is obvious.

The reason of such a sudden development of alternative energy in Ukraine is the implementation of “green” tariff. The definition of “green” tariff itself emerged in Ukraine in 1997 with the adoption of the Law of Ukraine “On Electricity”. “Green” tariff is defined as “a special rate at which electrical energy, manufactured at the facilities of electric power, which use alternative sources of energy, is purchased.” The next legislative act that develops this domain was the Law of Ukraine “On Amendments to the Law of Ukraine” On Electricity “and the Law of Ukraine” On alternative sources of energy” adopted in October 2008. Nevertheless in 2009 the mechanism by which the “green” tariff is formed was first determined. The amendments to the law “On Power” and “On Alternative Energy Sources”, adopted by the Verkhovna Rada, became a catalyst for investment activity in this area.

For the moment the “green” tariff is applied by approximately one hundred countries around the world, including leaders in the industry, such as China, Germany, USA, Italy, Brazil, Spain, France and Canada. It is estimated by IMF that from 2005 to 2010 the number of countries that have adopted “green” tariff has doubled.

The production cost of electricity from alternative sources is higher than the one from traditional fuel. So to attract investors to this sector a significant incentive is required. The value of “green” tariff, which exceeds the equivalent one in other countries such as Germany, Bulgaria, Austria, Britain, Spain and others, acts as such an incentive in Ukraine.

According to the National Commission that performs governmental regulation in the energy sector (NERC), as of January 2012 “green” tariff in Ukraine is used by 60 power generation companies: 8 – from wind power, 2 – from biomass, 18 – from solar radiation and 32 – from energy of water (small hydro).

Attractive conditions of “green” tariff is one of the reasons of “boom” of solar energy in Ukraine. The tariff is guaranteed by the government up to 2029. By investing in this industry now, investors are able to recoup the investments quickly. Payback period of power station ranges from 4 to 10 years, depending on its scale. Without “green” tariff !!the!! payback of similar projects would be delayed up to 20-30 years. The state plays an indispensable role in the development of alternative energy. And not only in Ukraine renewable energy requires government support. Worldwide, the industry is regulated to a greater extent by the state than the market environment, and without government support, even in developed countries it can not develop rapidly and be economically sound.

Doing concessions to business, the government has the right to apply measures aimed to support specific sectors and the national economy as a whole. In the case of alternative energy it is the provision of energy independence of Ukraine in the long term; increase !!of the number of!! fiscal charges to local and state budgets; creation of additional workplaces; increase of demand for highly skilled labor force; the development of related industries such as machinery, metallurgy; stimulating of science and education development.

Alternative Energy is a real opportunity to solve the problem of rapidly depleting energy resources, especially having such a sun and wind energy potential as Ukraine does.

Ukraine occupies the 32ndplace among 40 countries in the international ranking of the most attractive countries for alternative energy development, compiled by Ernst & Young. Solar energy is one of the most attractive types of renewable energy for development in Ukraine. Sun as a source of alternative energy has several advantages. First, it is inexhaustible. Supplies of traditional sources of energy such as oil and gas are will be enough for just about 50 years, and supplies of solar energy are unlimited. Solar power is Eco safe, which is a significant advantage regarding the tendency of increase of attention to environmental protection.

The attractiveness of Ukraine as a country to invest in alternative energy is caused by the fact that the market has just started to emerge, and the competition is still small compared to other countries.

However, the sector development has its own obstacles. First, these are bureaucracy and the lack of transparency of the system which are so typical for the Ukrainian economy. Building even of a small power station would require about a hundred of receipt of permits. For foreign investors this kind of doing business is often extremely difficult. So without the participation of Ukrainian consulting companies doing business in Ukraine is unsustainable for potential foreign investors.

Second, for the moment, many potential foreign investors interested in the sector of alternative energy, are afraid of the conditions according to which “green” tariff will be working from this year: starting from 01.01.2012 the ratio of raw materials, materials, equipment, works and services of Ukrainian descent in the cost of building of a corresponding object of electric power which generates electricity using alternative energy sources, should consist at least 15%;starting from 01.01.2013 – 30%, and from 01.01.2014 – 50%. [1] This restriction may seem very “inconvenient” for foreign investors. If foreign investors have nothing against of using local labor then regarding equipment production in Ukraine, especially the solar modules, foreign investors are cautious and prefer to import them.

However this limitation is not a big issue. The period of solar modules plan construction is about one year. Furthermore, it has a huge production capacity. Moreover, in the EU countries priority of using local resources compared to imported ones also exists, but its expression is different – if equipment for solar power is completely produced in the EU countries, the company gets additional 10% to the “green” tariff.

Since 2011 Ukraine can be proud of  the largest solar power plants in Central and Eastern Europe, as well as one of the most perspective markets for solar energy with a capacity of almost 300 MW. For the moment Ukraine has the largest in the world operating photovoltaic power station – the 105-megawatt park “Perovo”, investments in which amounted to 3.8 billion UAH. The Investor of the project is Australian company Activ Solar. Activ Solar Company in the total invested about 12.6 billion UAH in Ukrainian projects, including more than 8.1 billion UAH, which were directed into building solar power stations, one of the which is “Perovo.” The company also owns other large solar power stations.

The most powerful solar power stations in the world

Location of solar power station Peakpowerin MW
Perovo, Ukraine 100
Sarnia, Canada 97
MontaltodiCastro, Italy 84,2
SolarparkFinsterwalde III III, Germany 80,2
Ohotnikovo, Ukrine 80
Lopburi, Thailand 73
Turnow-Preilack, Germany 71
SanBellino, Italy 70,6

The company’s solar power stations, including “Perovo”, were designed by Ukrainian engineers, built using domestic technology, components, equipment and materials. Solar power stations are also served by Ukrainian specialists.

In early April of 2011 another object of Austrian company Activ Solar was set in operation – solar photovoltaic power plant “Mitiaevo”, named after the village in the Crimea where it is located. Capacity of  “Mitiaevo” is 31.55 MW. Output power is 40 000 MW/h of electricity per year, and there by meets the electricity needs of 8000 households.

Thus for 2011 the company Activ Solar has become one of the strongest players on the domestic solar energy market.

The most powerful solar power stations in Ukraine

The name of solar power station Power Area Production of electricity per year Reducing emissions of CO2 per year
Perovo 100 MW 200 hectares 132 500 MW/h 105 000 tonnes
Ohotnikovo 80 MW 160 hectares 100 000 MW/h 81 518 tonnes
Mitiaevo 31,55MW 59 hectares 40 000 MW/h 230 000 tonnes
Omao Solar 20 MW 40 hectares 25 000 MW/h 20 000 tonnes
Rodnikovoe 7,5 MW 15 hectares 9 000 MW/h 7 842 tonnes

In Ukraine, for the moment there are all conditions for the development of renewable energy, particularly solar power, “green” tariff for which is among the highest in the world. To achieve the greatest success and build effective business relevant investments, knowledge, working experience in the energy domain and ability to work in Ukraine are required. With the cooperation of foreign investors with relevant experience and qualifications, and national experts familiar with the market and business climate in Ukraine, development of business in the field of alternative energy becomes more real.