Ukraine is blessed with abundant sources of fossil fuels; however, in the era of ‘green energy’, this fact has not always been a positive for the Eastern European nation.
The Chernobyl nuclear power disaster decades ago all but stopped nuclear power from being constructed, and the war in Donbass has cut off Kyiv from its most plentiful source of coal. So-called ‘green energy’, or renewables, has attempted to step into the void, urged on by the European Union and Western interests.
The problem with green energy is that it is not yet profitable, if left to market forces. It requires government financial support. Ukraine signed previous deals with gave this support in spades via ‘feed-in tariffs’, or in other words — subsidies.
Now the new government under newly-elected Volodymyr Zelenskiy wants to possible reduce those tariffs. ‘Green energy’ patrons are not happy.
“This constant changing of the tariff rules is a slap to foreign investors who have brought more than $3 billion to the sector over the last few years. Ukraine has a goal of producing 11% of its electricity from renewables by 2020 and is currently at 8%. The country also plans to increase to 25% renewables production by 2030. Foreign investors were promised that Ukraine is a safe place to invest and now are having the rules changed mid process. The effect on future foreign investment will be devastating if Ukraine slashes its green tariff before the planned reduction. While payments are currently being made only partially to renewable producers, the country is expecting $3 billion from the IMF this month which can be used to pay the deficits,” wrote one advocate.
The green energy winners are fighting hard to keep the current system in place, as Ukraine’s parliament mulls a bill that would change the rules of the game by introducing market-driven auctions in place of subsidies. It’s an issue that is unlikely to be resolved until the end of Ukraine’s ongoing presidential election, wrote Politico in early 2019.
Advocates for the tariffs fear that changing the subsidy regime will scare off foreign investment. Access to plentiful Russian gas is not a politically viable answer due to national security concerns.
Two renewable energy associations party to the dispute about changes to the support scheme in Ukraine have submitted an updated proposal to the government of Ukraine for the solution of the dispute, and the parties in the dispute should move faster and more substantially towards agreeing on a well-balanced set of mutual commitments, the [Ukrainian} Energy Community Secretariat has said, which is mediating the disagreement, reported Interfax.
The Secretariat also said that the ongoing mediation by the Energy Community has prepared the ground to build on and remains open for a fair, transparent and fast finalization.
A lot of money is at stake for those involved and look for this issue to be at the forefront of Ukrainian politics for some time.