Ukraine’s parliament adopted legislation on 21 July 2020 reducing guaranteed tariffs paid to renewable-energy producers. The reform followed negotiations between the government and investors over mounting arrears in the electricity market.

Terms of the reform

The law implemented reductions previously outlined in a memorandum with parts of the industry, including larger cuts for solar generation than for wind power. Officials said the changes were necessary to reduce pressure on the state-backed buyer responsible for purchasing renewable electricity.

Investor concerns

Ukraine had used generous feed-in tariffs to accelerate clean-energy development, but the scheme produced financial obligations that became difficult to meet. Investors warned that abrupt changes could weaken confidence, while the government argued that a negotiated adjustment was preferable to prolonged non-payment.

Broader significance

The decision illustrated the challenge of sustaining an energy transition during recession and the COVID-19 shock. It also placed renewed importance on predictable regulation, grid reform and competitive auctions as Ukraine sought to align its electricity sector more closely with European markets.

Sources

• Reuters: parliament approves tariff reductions
• EBRD: renewable-energy memorandum in Ukraine

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