Ukraine Photovoltaic Market Outlook 2012

UKRAINE PHOTOVOLTAIC MARKET

Outlook 2012

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UKRAINE PHOTOVOLTAIC MARKET: OUTLOOK 2012

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This market report offers an incisive and reliable overview of the photovoltaic sector of the

country. In view of recent cuts in FIT’s announced in Germany, Spain, France, UK, Czech

Republic, Slovakia, Italy and Bulgaria, Ukraine represents an interesting investment

opportunity amongst Central-East Europe and CIS countries with relatively good rules and

feed-in tariff support scheme. Cumulative installed PV capacity in the country was only 3

MWp in 2010, but grew up to 187 MWp in 2011 and is expected to triple to 580 MWp by

the end of 2012, making Ukraine one of the fastest growing photovoltaic markets in the

region. The report provides a complete picture of the market situation, dynamics, current

issues and future prospects. You will find more than 70 pages of valuable information in

this unique in-depth analysis of the Ukrainian photovoltaic market. With comprehensive

market data this report brings clear and concise insights, to help investors in their decision

making process. As 2011 was challenging year for photovoltaic industry, the time for taking

right decisions during 2012 is limited. Fast changing market environment with falling

module prices, requires relevant and accurate information. For your convenience we offer

opportunity for orders with customized report content. Highlights from this market report

are:

Brief overview of the Ukrainian political and economic environment Solar resource potential in Ukraine Overview of Ukrainian photovoltaic market development 2007 ÷ 2012 Grid connected photovoltaic installations for 2011/2012 Future market trends and planned photovoltaic projects for 2012/2013 Current market prices of fully permitted and operational photovoltaic projects Ukrainian legal and energy regulatory framework for renewable projects Key companies in photovoltaic sector Review of most relevant financing and supporting incentives SWOT Analysis

At next pages you will see the full table of content of this report. To order this report just fill in and send us the enclosed at the last page order form. If you have any other questions please do not hesitate to call us on ++359 887 342 475 or write an e-mail to [email protected]

UKRAINE PHOTOVOLTAIC MARKET: OUTLOOK 2012

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TABLE OF CONTENTS

TABLE OF CONTENTS ....................................................................................................... 3

FOREWORD .................................................................................................................... 7

1 Methodology and limitations ................................................................................ 9

Methodology ............................................................................................................. 9 1.1 Limitations ............................................................................................................... 10 1.2

2 EXECUTIVE SUMMARY ........................................................................................ 11

3 UKRAINE POLITICAL AND ECONOMIC ENVIRONMENT ......................................... 14

Basic country data ................................................................................................... 14 3.1 Government structure, Political Climate and Ruling Party ..................................... 18 3.2 GDP and Economic Growth ..................................................................................... 19 3.3 Electricity Imports and Exports. Electricity prices for business and households .... 23 3.4 Taxes ........................................................................................................................ 25 3.5

3.5.1 VAT ....................................................................................................................... 26 3.5.2 Income and Corporate Taxes ............................................................................... 26 3.5.3 Tax incentives for renewable energy investments .............................................. 27

4 UKRAINE PHOTOVOLTAIC ENERGY MARKET ........................................................ 28

General electricity market information ................................................................... 28 4.14.1.1 Electricity Consumption and Production ............................................................. 30 4.1.2 RES targets ........................................................................................................... 31 Photovoltaic market ................................................................................................ 32 4.2

4.2.1 Why invest in photovoltaic energy in Ukraine? ................................................... 33 4.2.2 Ukraine solar resource potential ......................................................................... 35 4.2.3 Overview of Ukraine photovoltaic market .......................................................... 36 4.2.4 Market prices for photovoltaic energy projects in Ukraine ................................ 40 4.2.5 Key development photovoltaic projects in Ukraine ............................................ 41

5 EUROPEAN RENEWABLE ENERGY POLICY LANDSCAPE ......................................... 45

RES Regulations and EU Directives .......................................................................... 45 5.15.1.1 Precedent EU regulations .................................................................................... 45 5.1.2 Most recent EU renewable energy policy developments.................................... 46

6 UKRAINE RES LEGAL AND REGULATORY FRAMEWORK ........................................ 47

Main laws and regulations ....................................................................................... 47 6.1 Applicability of the promotion system .................................................................... 48 6.2 Support scheme ....................................................................................................... 48 6.3 guarantees of origin (green certificates) ................................................................. 48 6.4 Zoning, planning and construction related authorizations ..................................... 49 6.5

6.5.1 Zoning plans procedure ....................................................................................... 49 6.5.2 Construction permit procedure ........................................................................... 50

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Environmental related authorizations .................................................................... 50 6.66.6.1 Natura 2000 Network .......................................................................................... 51 6.6.2 Clean Development Mechanism (CDM) and Joint Implementation (JI) .............. 51 Energy law authorizations ....................................................................................... 52 6.7

6.7.1 Power Generation Licensing ................................................................................ 52 6.7.2 Grid Interconnection ........................................................................................... 53 6.7.3 Power Off-Take and Power Purchase Agreement (PPA) ..................................... 54 6.7.4 Feed-in tarriff. Local manufacturing component ................................................ 55 Future market pricing mechanisms......................................................................... 57 6.8 Key Expected Changes in Ukrainian RES Law .......................................................... 57 6.9

Key Co-financing opportunities ............................................................................... 59 6.106.10.1 Ukraine Sustainable Energy Lending Facility (USELF) .......................................... 59 6.10.2 Ukraine Energy Efficiency Programme (UKEEP) .................................................. 62

7 KEY ORGANIZATIONS AND INSTITUTIONS ........................................................... 66

Government ............................................................................................................ 66 7.17.1.1 The Ministry of Energy and Coal Industry(MECI) ................................................ 66 7.1.2 Ministry of Economic Development and Trade (MEDT) ...................................... 66 7.1.3 Ukrainian National Energy Regulatory Commission (NERC) ............................... 66 7.1.4 State Agency For Energy Efficiency and Energy Conservation (SAEEEC) ............ 67 7.1.5 State Environmental Investment Agency (SEIA) .................................................. 67 7.1.6 Ministry of Ecology and Natural Resources (MENR) ........................................... 67 7.1.7 Ministry of Agriculture and Food (MAF) .............................................................. 68 Electricity generation and electricity distribution Companies ................................ 68 7.2

7.2.1 Capacity of the electricity network ..................................................................... 69 7.2.2 National Electricity Company Ukrenergo (TSO) .................................................. 70 7.2.3 Energorynok ......................................................................................................... 71 7.2.4 Distribution System Opeartors (Oblenergos) ...................................................... 72 7.2.5 DTEK ..................................................................................................................... 73 7.2.6 Energy Standard Group S.A. ................................................................................ 75 7.2.7 AES ....................................................................................................................... 75 7.2.8 VS Energy ............................................................................................................. 76 7.2.9 Privat Group ......................................................................................................... 76 Key photovoltaic companies operating on UKRAINE market ................................. 77 7.3

8 SWOT ANALYSIS ................................................................................................. 79

9 CONCLUSIONS .................................................................................................... 82

10 LIST OF ABBREVIATIONS ..................................................................................... 85

11 REFERENCES ....................................................................................................... 87

12 DISCLAIMER ........................................................................................................ 89

APPENDIX I. SOLAR MAPS OF EUROPE AND UKRAINE .................................................... 90

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LIST OF MAPS, CHARTS AND TABLES

Map 1: Where is Ukraine on the European map ................................................................... 14 Map 2: Ukrainian Road Network ............................................................................................ 15 Map 3: Ukraine regions administrative map .......................................................................... 17 MAP 4 Historical Regions of Ukraine...................................................................................... 18 Map 5: Solar resource map of Ukraine, GeoModel Solar s.r.o., 2012 ................................... 34 Map 6: Solar irradiation and solar electricity potential for optimally inclined photovoltaic modules in Ukraine, JRC PVGIS 2008 ..................................................................................... 35 Map 8: Electricity grids network of Ukraine .......................................................................... 71 Map 10: Distribution system operators in Ukraine by type of ownership ............................ 73 Map 9: Districts covered by NPP AES Kievoblenergo ............................................................. 75 Map 12: Solar irradiation and solar electricity potential for horizontally mounted photovoltaic modules in Ukraine, JRC PVGIS 2008 ................................................................ 90 Map 13: Solar irradiation and solar electricity potential for horizontally mounted photovoltaic modules in Ukraine, GeoModel Solar s.r.o. 2012 ............................................. 91 Map 14: Solar irradiation and solar electricity potential for optimally inclined photovoltaic modules in Europe, JRC PVGIS 2008 ................................................................. 92

Chart 1: Real GDP growth for the period 2000-2012 (including estimates) .......................... 20 Chart 2: Ukrainian GDP growth compared to EU-27 for the period 2002-2011 .................... 21 Chart 3: Electricity imports and exports for the period 2000-2011 (in million MWh) .......... 24 Chart 4: Corporate tax income in selected CEE and SEE countries ....................................... 26 Chart 5: Structure of Ukrainian electricity market ................................................................. 29 Chart 6: Share of renewables in gross final consumption of electricity 2011 ....................... 30 Chart 7: Ukrainian RES targets in % according to Energy Strategy of Ukraine up to 2030 .... 31 Chart 8: Cumulative developments of photovoltaic power plants in Ukraine in MWp from 2007 to 2013, including estimates ........................................................................................ 44 Chart 9: UKEEP Structure ....................................................................................................... 64 Chart 10: Market Shares by Sales of the Distribution System Operators in Ukraine in 2011 68 Chart 11: Market share of DTEK in electricity sales and distribution in 2011 ....................... 74

Table 1: Electricity prices for business and households ......................................................... 25 Table 2: Support schemes for RES generation in the EU countries and Ukraine ................... 33 Table 3: Market prices for photovoltaic projects in Ukraine for 2012 .................................. 41 Table 4: Selected operational, under construction and planned photovoltaic projects in Ukraine ................................................................................................................................... 43 Table 5: Feed-in tarrifs for electricity from renewable sources in Ukraine ........................... 56

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