July 21, 2020 / 10:58 AM / 14 days ago

Ukraine approves cuts to green energy tariffs

KYIV (Reuters) - Ukrainian parliament adopted on Tuesday a law significantly reducing tariffs for renewable energy, eliminating the problem of mass non-payments in the energy sector, criticised by investors and Western partners.

Ukraine set up special tariffs for renewable energy companies several years ago to expand the green power production and pledged to buy all the energy produced.

But these high tariffs have become a burden for the state, which faces recession caused by coronavirus epidemic. The government expects the economy to shrink 10% in the second quarter after a 1.3% drop in the first quarter.

In June, the government and some companies signed a memorandum on reducing tariffs by 15% for solar generation and by 7.5% for wind generation, and lawmakers say the adopted law will allow the government to implement this document.

Prime Minister Denys Shmygal said in a tweet that the legislation would help reduce prices for solar and wind energy, as well as achieve green goals and protect international investors.

The law contains the same level of cuts as the memorandum and if the law is signed by the president, the tariffs will be reduced from July 1 while Ukraine will provide investors with guarantees that the adopted legislations will not change in the future.

“This law is to provide the government with the necessary tools to implement the memorandum and we hope to end this issue on the crisis of non-payments in green energy,” said David Arakhamia, the leader of the pro-presidential majority in parliament.

The state’s debt to green energy companies for electricity supplied since the beginning of the year amounted to 14 billion hryvnia ($526 million) as of early June, the energy ministry said.

Investors say energy producers have not been paid in full since March, where the average level of payment has been 5% to 10% of its obligations.

In a joint statement, published by the American Chamber of Commerce, they urged Ukraine “to ensure that any amendments shall in no way result in negative consequences for renewable investors.”

“This is a prerequisite to avoid numerous arbitrations and for international financial institutions to provide financing to stabilize the market situation in energy sector,” they said.

Reporting by Pavel Polityuk, editing by Louise Heavens and Chizu Nomiyama

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