Europe Invests in Ukrainian RES

Large investments are coming to the Ukrainian energy sector. At the economic forum in Davos, agreements were signed between the Norwegian NBT, the French Total and the European Bank for Reconstruction and Development (EBRD) on the implementation of the Sivash Wind Energy project. The amount of investment will be about EUR 150 million, and this is not the first project seeing foreigners invest in Ukrainian renewable energy sources (RES).

“The arrival in Ukraine of NBT and Total shows that Ukraine is now the second largest European market. NBT will have even more projects. Foreign investors are returning to Ukraine,” said Suma Chakrabarti, EBRD President, said during the signing of the agreement.

The decision to approve the project was made at the end of autumn 2018 when the EBRD approved a loan amounting to EUR 150 million for the construction, by SeverEnergia (a daughter of NBT), of a wind power plant (WPP) of installed capacity of 250 MW in the Kherson region. In total, the company plans to build about 700-800 MW of wind power in Ukraine.

“Ukraine has one of the world's highest green tariffs.,” says energy expert Dmitry Marunich. “So,, there’s nothing supernatural in such investments. Ukraine has made a commitment to increase the share of RES and is doing so. Renewable energy developed well in 2012-2013, then in 2014-2015 there was a failure due to the fall of the Hryvnia, there was a drop in the economy, and the green tariff retroactively made changes. However, now the trend has unfolded, and the conditions are such that 5-7-year investments in this sphere are paying off. Western banks lend well to such projects and investors are also in a hurry because the green tariff will decline over time. Therefore, the sooner you implement your project, the faster it will pay off.”

According to the expert, the share of RES in electricity generation last year was 2%.

“The consumer pays for it and the Western companies make a profit,” Marunich continues. “Such projects do not create many new jobs, so do not expect that it will have a strong impact on the economy of Ukraine.”

The expert noted other risks associated with green energy. “Unfortunately, wind does not always blow with the same force, and the sun does not shine constantly, so under RES you need to make a reserve with traditional capacities,” he explains. “In Ukraine, this comes mostly in the form of coal blocks of thermal power plants. But in recent years the share of shunting generation has reduced and no-one is investing in the modernization of equipment. There is a risk that in 5-7 years, when the share of RES grows to 4-5% of the total Ukrainian generation, they will have nothing in reserve.”

By Dimitri Dolaberidze

Image source: ukraine-economy.org