Over five years, investments in the green energy sector of Ukraine amounted to more than EUR 4 bln. This amount is growing

Green energy is not only about the global climate, but also about investment

The investment climate in Ukraine is not in the best condition. This is evidenced by world ratings. Among the best countries for doing business as per a Forbes list, we are ranked 77th, in the economic freedom rating — 147th. In the recent Doing Business-2020 rating, Ukraine was ranked 64th. The situation in other post-Soviet countries is better: Lithuania is ranked 11th; Estonia — 18th; Latvia — 19th; Kazakhstan — 25th; Russia — 28th; Moldova — 48th; and Belarus — 49th. One of the ways to improve the investment climate in Ukraine is to focus on successful practices that have proven their effectiveness and support them. Green energy is such a case.

Since 2015, when the “green tariff” was revised, local and foreign investors have been actively investing in Ukrainian “green energy”. So, from 2014 to 2017, the total capacity of biofuel plants, solar, wind and hydroelectric power plants increased from 967 to 1426 megawatts and from 2017 to 2018 — up to 2274 megawatts. In 2019, there was more than a twofold increase — the total capacity amounted to 4866 megawatts. According to the chairman of the State Agency for Energy Efficiency and Energy Saving of Ukraine Serhii Savchuk, over the past five years, more than EUR 4 bln has been invested in green energy. Most of this investment, EUR 3.3 bln, was spent on the establishment of 3,900 megawatts of new renewable energy capacities. Over EUR 2 bln have been invested in the 9 months of 2019.

Capacity growth of green energy facilities, in megawatts

Source: State Energy Efficiency and Preservation Agency of Ukraine

According to the State Agency for Energy Efficiency and Energy Saving, in order to increase the share of green energy to 25%, a total of EUR 30 bln needs to be attracted. Then Ukraine will be able to fulfill its international obligations and implement the energy strategy.

The success of investing in green energy depends on whether international business will invest in other sectors of Ukrainian energy. Such investments are badly needed. Back in 2013, experts warned that almost 90% of the power units at thermal power plants were past their service lives. They are critically worn out. The condition of the remaining power units is also deteriorating. Nuclear power plants are also aging. Most of them were developed in the 1970s by the Soviet Union and have already served their 30-year project resource. According to Irina Holovko, head of the energy department of the Ecodia non-governmental organization, the deterioration of nuclear power plants is dangerous. The situation can be corrected — it is necessary to modernize nuclear and fossil-fuelled plants. To do this, billions of dollars are needed. For this, the dynamics set by green energy should be preserved.

Investors from China, Spain, Norway, Canada and other countries invest in green energy in Ukraine

Most of all in Ukraine, the capacity of solar power plants is growing. Investments in this industry are the most ambitious. According to Novoye Vremya, at least eight of the eleven largest stations have arisen at least partially due to Chinese investment.

Eleven largest solar power plants in Ukraine

Source: Novoye Vremya, open data

However, China is not the only foreign player in the solar energy market. In recent years, the Spanish company Acciona Energia (EUR 53.7 mln for the construction of a power plant near Kyiv), the Norwegian Scatec Solar (EUR 24.5 mln for the construction of a power plant near Cherkasy), the Canadian TIU Canada (plan to invest USD 100 mln before the end of 2019), the French-Ukrainian Main Group Ukraine (EUR 90 mln for the construction of a power plant in Dnipro) and others have invested in Ukrainian solar energy. 

In January 2019, it became known that the French company Total-Eren, a subsidiary of the energy giant Total, was entering the Ukrainian wind power market. A framework agreement was signed on the construction of the Sivash wind farm along with Total-Eren and the Norwegian company NBT. The total project budget is more than EUR 350 mln. The project is also financed by the European Bank for Reconstruction and Development. Together with a consortium of banks, it grants EUR 150 mln for the project.

Sawdust is used as biofuel for thermal power plants
Photo:Yevhen Shchyshchatskyi, liga.net

In addition to solar and wind energy, investors invest in bio- and hydro energy. While there were only seven biogas stations in 2011 in Ukraine, in 2018, there were 28. By 2018, the capacity of power plants that extract electricity from biogas increased by almost a third. One of the successful projects is a biogas complex in a landfill in Khmelnytskyi. Its capacity is 659 kilowatts. UAH 34 mln was invested in the project. 

With regard to hydro energy, experts note that the potential for increasing the capacity of hydropower plants in Ukraine is not as significant as in other sectors. It is hampered by natural conditions. Nevertheless, it enjoys development too. At the end of 2018, Ukrgasbank agreed with Chinese investors to attract a loan of USD 500 mln for the construction of the Dnipro pumped storage power plant, the largest in Europe. In August 2019, the state-owned company Ukrhydroenergo signed a memorandum of cooperation on the construction of hydropower plants with the German company Inpec Engineering GmbH. It is, in particular, about the construction of the Kanivska hydroelectric power station, Kakhovska hydroelectric station-2, the construction of the third stage of the Dniester PSPP. 

This diverse set of projects demonstrates the main point — the scale and number of foreign players in the Ukrainian green energy market. Overall, the chairman of the State Agency for Energy Efficiency and Energy Saving of Ukraine Serhii Savchuk has announced 104 investment projects. One can view their details on the website, which accumulates information on projects in the areas of renewable energy and energy efficiency — UAmap. In September 2019, the European Bank for Reconstruction and Development announced that it plans to invest an additional EUR 200 mln in Ukrainian renewable energy.

Ordinary consumers are also switching to green energy — mainly home solar power

Investment conditions are not only “outward”. Ukrainians willingly invest in green energy. The smallest threshold of the “entrance” is the installation of solar panels on their homes and yards. This allows to be independent of external electricity supplies and sell the remaining energy at a “green tariff”.

To switch to green energy, the owner of a typical house needs to invest about USD 6,000. To maximize the opportunities of the “green tariff” — USD 22-25,000. In the first case, the average payback will be 10 years, in the second — about 4.5.

The total capacity of solar panels installed in private households increased from 0.1 megawatts in 2014 to 345 megawatts in the third quarter of 2019. The number of households that installed solar panels over this period increased from 21 to 14,790. The total investment in solar stations amounted to more than EUR 300 mln.

The growth in the number of solar power plants in private households

Source: State Energy Efficiency and Preservation Agency of Ukraine

Most households with solar power plants are in the Dnipropetrovsk (almost 2000), Ternopil (about 1370) and Kyiv (about 1350) oblasts. Demand for solar power plants is growing primarily because they save money — especially in combination with other energy-saving actions.