Paritet presentation gt_ renewable energy projects_nucc

Legal aspects of implementation of projects

under “green” tariff

NUCC MEETING19.01.2012

Borys Danevych, attorney-at-Law, Partner at PARITET law firm

Content

Incentives

Rates change/decrease in the future

Ukrainian content

Getting “green” tariff

Potential

NAER (the National Agency for Efficient Use of Energy Resources) estimate of the renewable energy potential

Types of renewable

energy sources

Annual energy potentialTheoretically

possible

Technically

achievable

billion

kWh

million 

tce

billion

kWh

million 

tce

Wind Power 270.0 97.2 41.7 15.0

Small Hydro Power 12.5 4.5 8.3 3.0

Biomass 407.0 50.0 162.8 20.0

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:8 companies operating 8 wind farms2 companies operating 2 biomass power plants17 companies operating 17 solar power plants31 companies operating 73 small hydro power

stations

1. Incentives for developmentof projects under GT

– exemption from import VAT and customs duties– exemption from corporate profit tax of profit derived from

sales of electricity produced from renewables till 2021– decrease of land tax for renewable energy power plants

by 75%– etc.

Tax incentives under the Tax Code

Feed-in tariff scheme or high “green” tariff (GT)

2. Minimal fixed GT rates

Type of energyPower station capacity and other factors

influencing the rate of GTRate of the

tariff (€ / kW)

Wind

less 600 kW* 0,0646

600-2000 kW* 0,0754

more 2000 kW* 0,1131

Solar energy  

Power plants on ground surface 0,4653

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

BiomassShould be at least partially of plant origin to be eligible

0,1239

Small hydropower plants

not more than 10000 kW 0,0775

2. Rates of “green” for otheralternative energy sources

Rates for all other alternative energy sources (including biomass with 100% of animal origin and biogas), are not legislatively established

NERC may approve rates of “green” tariff for them on the case by case basis based on economic substantiation

However, there are no actual examples of “green” tariff approved for such other alternative energy sources

2. Coverage of minimal fixed GT rate for biomass

Types of biomass (biogas)

Process of electricity generation

Eligibility to minimal fixed GT

Biomass of plant or at least partially of plant origin*

Steam turbine process Yes

Gasification and other processes where biomass is not used directly as a

fuel

No

Biomass of animal origin* Any processes No

Biogas, including landfill gas, waste gas similar biogases

Any processes No

*Under Draft Law No. 8028 of 28.01.2011 all types of biomass expected to have the same legal status in terms of eligibility but not biogas and gasification processes

2. Change/Decrease of GT in the future “Green” tariff is established until 2030 (grounds for

termination are also established by a Decree of NERC)

2014 – by 10%2019 – by 20%2024 – by 30%

Decrease of the current rates of “green” tariff for power plants commissioned (significantly upgraded) after:

GT rates are ≠ retail or average rates for producers of electricity

Fixed as of 01.01.2009 in EUR and linked to EUR/UAH exchange rate

Ukraine guarantees GT to commissioned power plants and purchase of all electricity produced by them

2. Change/Decrease of GT in the future

3. Ukrainian content requirement

The share (materials, works, services) in the total value of construction (if started after 2011) shall be at least:

• if commissioned till 2013 – 15 %• if commissioned till 2014 – 30% • if commissioned in 2014 and later – 50 %

For solar power projects value of Ukrainian materials in production of solar modules should be also at least

• since 2013 – 30% • since 2014 – 50 %

4. Approval of GT

NERC approves GT rates based on application and the package of documents regarding the constructed, commissioned and connected power plant

Terms for passing a decision by NERC:– Consideration of documents – 30 calendar days– Approval – 15 calendar days

GOOD NEWS! No Approval Fee

Conditions for Implementation of GT Projects

Set up a companyElectricity producer license Connection to the grid (compensation of

expenses related to grid connection)Participation in WEM and signing WEM

AgreementConclusion 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.)

Set up of a company

(charter shall provide that the

company produces

electricity)

Acquisition of rights in land Construction

Registration of ownership

Registration of leases

Registration of easements and

superficies

Change of designated purpose

License for electricity

production

Joining WEM and Signing WEM Agreement

Conclusion of agreement with Energorynok

GT approval by NERC

Sale of electricity at GT

Tax and customs duties breaks

Exemption from import VAT and customs duties

25% of required land tax

Maximal annual lease payments – 3% of appraisal value

Exemption from corporate profit tax till 2011

Receipt of initial data

Receipt of technical

conditions

Development of project

documentation

Examination of PD, if necessary

Registration of declaration re preparatory

works, if necessary

Registration of declaration re beginning of construction

Receipt of permission r e construction

works

Issue of Certificate on readiness for exploitation

Registration of declaration on

readiness

Registration of ownership

Connection to the grid

Connection of certain types of

wind farms

Connection of other power plants

Connection of cogeneration power plants

Conditions for Implementation of GT Projects

14 years in the Ukrainian market

Strong international focus

Actively involved into green energy legal environment for last 2 years

IFC expert on “green” tariff mapping in Ukraine

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Thank you for your attention!